Majority of Asset Managers and Owners Follow TCFD Guides: Report

Most asset managers and owners are reporting their climate performance data in line with the disclosure framework that’s thought most likely to be adopted as a global standard.

The latest annual survey by the Taskforce for Climate-related Financial Disclosures (TCFD) found that 70 per cent of managers and 84 per cent of asset owners reported climate-related data to their stakeholders last year. Of the former, more than four fifths report in line with at least one of the TCFD’s 11 recommended disclosures, while half of asset owners followed the organisation’s guidelines.

The TCFD disclosures with which most asset managers were aligned were those covering the reporting of climate related metrics as well as risks and opportunities. Asset owners placed greater focus on risk management recommendations.

The materiality of climate-related risks to their business was given as the most common reason why both groups reported such data, while asset owners gave equal weight to regulatory requirements.

The annual report highlighted how TCFD has become the go-to reporting framework for financial institutions, a point underlined by the incorporation of its recommendations into the International Sustainability Standards Board’s (ISSB) own set of disclosure guidelines. The ISSB, which was created in 2021, is widely expected to form the backbone of any globally accepted standard on ESG disclosures.

Most Companies Unprepared for SR Disclosure Assurance

A large majority of companies are unprepared to fully comply with the European Union’s Corporate Sustainability Reporting Directive (CSRD) and other imminent sustainability reporting regulations, according to a new survey.

KPMG found that 75 per cent of 750 companies surveyed in its “Road to Readiness: KPMG ESG Assurance Maturity Index 2023” didn’t have the skills, policies or systems to meet the regulations’ disclosures assurance requirements.

The companies that are most ready are the larger firms and those that are already engaged on ESG issues. More than half said it was difficult to balance such demands against profitability expectations of shareholders, the report also found.

HKEX Plans to Widen Climate Disclosure Rules

Hong Kong’s financial regulator has said it will increase requirements for companies to disclose climate-related data as it seeks to better enable investors to direct capital to ESG-linked assets and companies. Hong Kong Exchanges and Clearing (HKEX) chair Laura Cha Shih May-lung said the plans would be introduced in pursuit of helping China reach its 2060 net-zero goals.

EU Considers Rewriting Sustainability Categorisations for Financial Products

The European Commission is reviewing parts of its flagship regulation covering financial institutions’ ESG performance reporting. In a consultation questionnaire on the Sustainable Finance Disclosure Regulation (SFDR) market participants are queried on the way sustainability products are categorised. This follows complains that the designation of products as Article 6, 8 or 9 – indicating increasing degrees of sustainability – is confusing. The consultation also indicates the EC is considering requiring ESG disclosures for all financial products, even those that make no sustainability claims.

Moody’s Analytics Wins Contract to Fight Financial Crime in European Union

Moody’s Analytics has won a framework contract worth up to €34 million from the European Commission to strengthen its anti-fraud, money laundering and financial crime effort. The four-year contract will be managed by the Commission’s European Anti-Fraud Office (OLAF) and will use the Orbis database operated by Bueau van Dijk, a Moody’s Analytics subsidiary, to access company data, information on connected individuals, and risk indicators.

Organisations working with the Orbis data will include the European Court of Auditors, European Banking Authority, European Public Prosecutor’s Office, Europol and up to 30 Directorate Generals of the EC. They will apply the data to form a comprehensive understanding of the increasing threat of fraud and financial crime in the EU.

Europe Adopts Reporting Standards for CSRD Disclosures

The European Commission has given assent to its own set of guidelines for the estimated 50,000 companies that will be required to report their ESG performance data under the Corporate Sustainable Reporting Directive (CSRD). The European Sustainability Reporting Directive considers frameworks established by the International Sustainability Standards Board and GRI and will be applicable when companies first report under CSRD in 2025.

GLEIF Signals Intent to Join Global Project Designed to Digitise ESG Credentials of MSMEs

The Global Legal Entity Identifier Foundation (GLEIF), United Nations Development Programme (UNDP), and Monetary Authority of Singapore (MAS) have signed a statement of intent to embark on a collaborative initiative to develop digital Environmental, Social and Governance (ESG) credentials for micro, small and medium-sized enterprises (MSMEs) worldwide.

The initiative, Project Savannah, hopes to lower the barriers to ESG reporting for MSMEs by establishing a common framework of ESG metrics to generate basic sustainability credentials and commence the journey towards meeting UN Sustainable Development Goals (SDGs). It will use digital initiatives, such as MAS’s Project Greenprint1, to generate ESG data credentials that can be housed in MSMEs’ LEI records. MSMEs will then be able to transmit verified entity information and key ESG data to their business partners.

Sustainable Fitch Launches Regulations Tracker

Clients of Sustainable Fitch can now access its ESG Regulations and Reporting Standards Tracker, which seeks to bring transparency to changes in the global sustainability disclosures space. The service is offered with Fitch Group, which provides the data backbone of the tracker, enabling companies to stay up to date with changes to compliance obligations.

FIX Protocol Includes Digital Token Identifier

The Digital Token Identifier (DTI) ISO standard has been added to the Financial Information eXchange (FIX) Protocol, the industry-standard messaging protocol for electronic communication. The addition means financial institutions will be able to use the FIX Protocol to send messages with DTIs both internally and externally.

The DTI standard is increasingly being used as it uniquely identifies digital ledgers, digital tokens and cryptocurrencies using publicly available information. It can also be used by regulators to monitor digital asset trades for anti-money laundering and combating terrorist financing requirements, and for monitoring systemic risks arising from trading of global stable-coins and other digital assets. The DTI has also been recommended by ESMA as a risk management measure under the DLT Pilot regime.

ISSB Calls for Feedback on Future Priorities

The International Sustainable Standards Board is asking the financial industry what its priorities for the next two years should be. The umbrella body for ESG disclosure standards organisations said it the four options were to focus on biodiversity, ecosystems and ecosystem services; human capital; human rights; and, integration in reporting.