Breaking news – Sustainable Finance

What’s new in sustainable finance?

🇪🇺 The European Financial Reporting Advisory Group (EFRAG) released draft guidance to help companies prepare climate transition plans in line with EU regulations. The guidance advises companies on aligning targets with the Paris Agreement’s 1.5°C goal, detailing emissions reduction strategies, and linking plans to investment. It complements the European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD) and intersects with other EU regulation.
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🔍 The Network for Greening the Financial System (NGFS), a coalition of central banks and financial supervisors, has called for more ambitious climate policies as their latest "fifth vintage" of climate scenarios reveals greater potential economic impacts from climate change. These updated scenarios estimate that, by 2050, GDP losses could be 2-4 times higher than previous projections, ranging from 5-15% under "Current Policies" to 2-7% under the "Net Zero 2050" scenario.
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🌏 UN Secretary-General António Guterres has called for mandatory rules requiring corporates and financial institutions to create transition plans aligned with the 1.5°C climate target, as he warns that the goal of limiting global warming is “slipping away.” Speaking at the launch of the Net Zero Policy Matters report by the Taskforce on Net Zero Policy, Guterres stressed the need for a “massive global effort” to achieve net zero.
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🇪🇺  Christine Lagarde, President of the European Central Bank, warns that delaying action on climate change and biodiversity loss threatens economic stability, with costs rising sharply. To meet Paris Agreement goals, UNEP estimates that global annual investment in climate action must reach $11.7 trillion by 2035, yet current funding is insufficient, especially for vulnerable regions needing climate adaptation and disaster relief. Lagarde stresses that central banks, governments, and private investors must collaborate, removing barriers to green investment and supporting initiatives to accelerate the transition. She urges immediate action at COP29 to close the global climate finance gap and ensure a sustainable future.
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🇬🇧 The UK government has launched a consultation to assess the value of implementing a Green Taxonomy, aiming to combat greenwashing and support sustainable finance. This follows extensive work initiated in 2021, but questions remain about its prioritization amid the focus on transition finance initiatives. The consultation seeks input on the taxonomy’s usefulness, its interoperability with global standards, and alternative policies to meet sustainability goals. It also highlights the intention to consult on requiring major companies to disclose under UK Sustainability Reporting Standards aligned with ISSB frameworks, while addressing nuances in classifying activities across transition pathways.
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🌏  The IOSCO report highlights the need for clearer guidance and safeguards for climate transition plans to address liability risks and support transparency. It urges regulators to define what constitutes reasonable forward-looking information, helping preparers avoid legal issues tied to estimates and projections. IOSCO supports global standards, focusing on five key components: target-setting, decarbonization actions, governance, resource allocation, and financial implications. It also backs IFRS and ISSB efforts to develop disclosure frameworks and educational materials. Strengthening sustainability assurance frameworks is recommended to enhance credibility and address greenwashing concerns.
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