The top five climate risk and disclosure stories this week.
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UK companies urged to make transition plans
Financial institutions and real-economy companies in the UK should aim to publish credible transition plans this year, the government-backed Transition Plan Taskforce (TPT) has said.
The TPT put out the call to action at an event Monday, where it also laid out its focus areas for the rest of this year. The TPT was set up in April 2022 by the UK Treasury to develop a “gold standard” for climate transition plans.
“I hope in 2023 we will start to see transition plans at every level – with companies, countries and international institutions setting out their routes towards a net zero future,” said Amanda Blanc, co-chair of the TPT and CEO of insurance group Aviva.
The TPT has launched a Transition Plan Sandbox to bring developers of transition plan solutions together with companies preparing these plans. The intention is for the Sandbox to accelerate the development of tools, metrics, and datasets that support transition plan analysis. The deadline for interested parties to apply to the Sandbox is April 17.
Also on Monday, the TPT said it would address increased market demand for guidance on the interaction of transition plans with broader sustainability topics, such as nature, climate adaptation, and just transition. In addition, it will work on the use of transition plans in emerging markets and take steps to support small- and medium-sized enterprises develop their transition plans.
TCFD polls investors on climate reporting
The Task Force on Climate-related Financial Disclosures (TCFD) wants asset managers and asset owners to share information on their climate reporting practices.
In a survey launched this week, the group asks institutions to describe how they report climate information to clients, what factors drive their reporting, and how aligned their reports are with the 11 TCFD recommendations. The survey also asks institutions what climate reporting challenges they face. This could include things like lack of board and senior management support, the absence of methodologies to compute climate metrics, insufficient data, and concern over negative regulatory or regulatory scrutiny. The deadline for responding is April 3.
The results of the survey will be shared in the TCFD’s 2023 status report. Last year’s edition revealed 93% of asset managers and owners said they had implemented the TCFD recommendations or planned to in the future. Nearly half of asset managers and three-quarters of asset owners said they reported information aligned with at least five of the 11 recommended disclosures.
Canada issues climate reporting mandate for government suppliers
Major contractors to Canada’s federal government will have to disclose their greenhouse gas (GHG) emissions and set reduction targets from April 1 under new regulations announced Tuesday.
The disclosure requirements are part of Canada’s Greening Government initiative, which commits the federal government to achieve net-zero emissions by 2050 and climate-resilient property operations by 2050. Under the new ‘Standard on the Disclosure of Greenhouse Gas Emissions and the Setting of Reduction Targets’, suppliers with contracts over CAD$25mn in value will be compelled to disclose their GHG emissions and set targets aligned with Canada’s Net-Zero Challenge, a government-backed voluntary initiative that encourages firms to establish credible climate transition plans and targets. Alternatively, suppliers can set targets in line with some other internationally recognized program.
“This approach will not only ensure greener government operations, but it will also help Canada meet its targets as a country,” said Mona Fortier, President of the Treasury Board. “The government’s ongoing commitment to fight climate change and its leadership in the transition to a green economy is key to Canada’s success in reducing greenhouse gas emissions.” Fortier added that the federal government is one of the largest buyers for goods and services in the country, with more than 30,000 buildings and 40,000 vehicles in its portfolio.
Canada also put in place a ‘Standard on Embodied Carbon in Construction’ that went into effect on December 31. This forces all new large government construction projects to disclose and take steps to reduce their embodied carbon footprint. Embodied carbon refers to the emissions linked to the manufacturing, transportation, and installation processes that make up the lifecycle of a building or infrastructure project. This regulation will apply first to the concrete elements of these projects, which will be induced to use low-carbon concrete where available. This is so the overall GHG emissions linked with them are at least 10% lower than the regional average.
Top asset managers’ climate policies have gaps — report
Most large asset managers have “serious gaps” in their responsible investment policies and practices, research out of the nonprofit ShareAction claims.
In a report published Sunday, the group disclosed the findings of an analysis of 77 big asset managers, including Wall Street giants BlackRock, Vanguard, and Fidelity. The firms were assessed on the basis of their governance, stewardship, climate, biodiversity, and social policies and graded from AA to E.
Overall, two-thirds of the 77 managers — holding USD$60trn in assets — ranked CCC or below, meaning their action on environmental and social issues is lacking. On climate issues specifically, 22% of asset managers have specific climate-related investment policies in place, while one in 10 say climate is exclusively an investment consideration for funds or mandates with an environmental, social, governance (ESG) label.
Just over half of the managers have net-zero targets for 2050 at the latest, and around one-fifth have released a credible climate transition plan aligned with a science-based pathway. Twelve percent of managers say they do not yet intend to publish this type of plan.
“The impact of the decisions these asset managers make cannot be understated. As managers of tens of trillions of dollars, and investors in the biggest companies from many industries, their decisions have a vast impact all over the world,” said Claudia Gray, head of financial sector research at ShareAction.
“They should be considering their effects on our climate, the ecosystems providing our life-support systems, and human wellbeing worldwide. These problems create real risks for the big companies and their investors, but as our research has uncovered, there remains a lack of ambition to drive real-world improvements.”
EU finalizes Green Bond standard
European lawmakers reached an agreement Tuesday on a way to classify bonds that are issued to advance climate-friendly goals.
The European Union Green Bonds Standard (EUGBS) is intended to bring clarity to the myriad debt instruments that claim to benefit the environment. Companies that sell bonds under the standard will have to disclose how the proceeds will be used and how these align with their own climate transition plans. Specifically, EUGBS bond proceeds will have to invest predominantly in projects aligned with the bloc’s Sustainable Taxonomy, a rulebook that sets out what activities can be deemed environmentally friendly. Only 15% of the proceeds of a EUGBS instrument are allowed to be spent on activities that don’t currently fit with taxonomy criteria.
The EU will provide disclosure templates so companies can verify their green bonds meet the standard. These will also be available to companies issuing bonds that don’t meet all the EUGBS criteria but that want to be transparent about how they further environmental goals.
The EUGBS will not be made mandatory, meaning companies will continue to be allowed to issue bonds that they consider ‘green’ without having to apply the standard.
The standard now goes to the European Council and Parliament for final approval. It’s expected to go into effect next year.