ESG Watch is S-RM’s round-up of the latest regulatory and policy updates relating to ESG from around the globe.
Key news in this edition:
- EU Commission presents Green Deal Industrial Plan
- Hong Kong announces its establishment as an international green technology and finance centre
- UK investment funds and whether they can be considered greenwashing
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The European Commission approves EUR 2.08 billion measure to support offshore wind electricity production in France.
In February 2023, the European Commission approved a EUR 2.08 billion French measure to support offshore wind electricity production in France. The funds will specifically go towards the operation of a floating offshore wind farm off the south coast of Brittany, helping both the French government and the EU to meet their energy and environmental targets. The wind farm is expected to start operations in 2028 and the Commission’s aid will then run for a period of 20 years. This offshore wind farm is ultimately expected to generate 1 TWH of renewable energy per year for 35 years, allowing France to meet its renewable energy target of producing 33 percent of its energy from renewable sources by 2030.
EU Commission releases Green Deal Industrial Plan
On 1 February 2023, the European Commission released its Green Deal Industrial Plan, a document that outlines actions needed to boost the competitiveness of net-zero businesses in the EU’s industrial sector. The plan is designed to complement the implementation of two ongoing projects of the Commission: firstly The European Green Deal, a set of policy initiatives adopted in 2020 with the purpose of fast forwarding the EU’s transition to a green economy and achieve climate neutrality by 2050; and secondly the REPowerEU, a massive energy matrix transformation plan adopted in 2022 with the aim of reducing the bloc’s reliance on Russian fossil fuels. The Green Deal Industrial Plan is based on four pillars: a predictable and simplified regulatory environment that may include a bloc-wide net-zero industry act; speeding up access to financing of sustainable projects via public finance flows and a new European sovereignty fund; enhancing skills with the establishment of net-zero industry academies to train European professionals; and, opening trade for resilient supply chains, with the negotiation of free trade deals that ensure fair competition and facilitate the transition to a cleaner economy.
UK Parliament committee investigates greenwashing in ESG investment funds
On 22 February 2023, the UK Treasury Sub-Committee on Financial Services Regulations (‘FSR’), a sub-committee formed by UK members of parliament, held a formal meeting to scrutinise whether sustainable investment funds have been greenwashing. The committee saw evidence being submitted by representatives from the financial industry and the UK Financial Conduct Authority (‘FCA’) – the UK government financial regulator – who were expected to give their views on sustainable investment funds and tighter regulations on ESG investing. This hearing follows revelations that some ‘sustainable’-branded investment funds had exposure to major fossil fuel companies; with a recent correspondence from the FCA claiming that two-thirds of UK funds currently claiming to be sustainable would change their marketing – with one third failing to qualify, and the other third of the funds choosing to no longer use the sustainability label – if the FCA’s proposed sustainability standards were approved.
Colombia secures USD 70 million investment plan for clean energy integration
On 2 February, the governing board of the Climate Investment Funds (‘CIF’), the largest multilateral fund advancing climate action in developing countries, approved a USD 70 million investment plan which aims to transform Colombia’s power grid to enable integration of renewable energy sources. The investment is the first of its kind in South America and aims to support rural access to electricity and the expansion of electric vehicle infrastructure, as well as the financing of feasibility studies for potential green hydrogen projects. The CIF hopes the investment plan will mobilize an additional $280 million from public development banks and carbon finance markets to further Colombia’s clean energy transition.
Hong Kong announces plans to establish itself as an international green technology and financial centre
On 22 February, as part of the 2023-2024 Budget, Hong Kong’s Financial Secretary Paul Chan, announced plans to establish Hong Kong as an international green technology and financial centre. The Hong Kong Government will set up a new task force to draw up policies designed to formulate an action agenda to push its ambition on the green technology finance sector and create a new economic pillar to boost the city. The government currently envisions moving forward in five directions: attracting enterprises by building a green technology ecosystem and boosting demand for green technology by providing policy support; focusing on easing the process of obtaining finance for green projects; green certification which aligns with international standards; training for talents; and, enhancing cooperation with international markets and particularly the Guangdong-Hong Kong- Macao Greater Bay Area.
Securities and Exchange Board of India publishes updated guidelines on green bonds and proposes new ESG disclosure rules
On 6 February 2023, the Securities and Exchange Board of India (‘SEBI’), India’s securities and commodity markets regulator, published updated reporting guidelines for green debt securities that will come into force on 1 April 2023. Green bond issuers must disclose data about the social and environmental risks of the projects financed by any of the proposed green debt instruments and provide a mitigation plan for any potential negative impacts. Within two years, green bond issuers are also expected to appoint an independent third party reviewer for a green debt security, who will certify and review the management of the proceeds from the security and verify internal tracking and impact reporting. Through this update, the SEBI aims to align its green bond offering more closely with green bond principles set out by the International Organization of Securities Commissions, an international body composed of the world’s securities regulators.
Separately, on 20 February 2023, the SEBI published a consultation paper in which it proposed a new regulatory framework on ESG disclosures by listed entities, ESG ratings in the securities market and ESG investing by mutual funds. The changes are reportedly aimed at facilitating a balance between simplification, transparency and easing the way business is conducted in India. The proposal introduces a new set of KPIs for various E, S and G factors that need to be assured, with proposed mandatory assurance for the top 250 Indian companies beginning during the 2023 financial year, followed by the top 500 companies in 2024, and the top 1,000 in 2025. The consultation is open for public comments and suggestions until 6 March 2023.
Philippines released guidelines for the issuance of sustainability-linked bonds
On 2 February, the Securities and Exchange Commission of the Philippines (‘SECP’), the financial markets regulator of the Philippines, released the proposed guidelines for the issuance of sustainability-linked bonds (‘SLBs’) under the SLB standards of the Association of Southeast Asian Nations (‘ASEAN’), a political and economic union of Southeast Asian countries. These guidelines were published with the aim to provide additional guidance on the application of ASEAN’s SLBs and enhance uniformity and consistency. The guidelines list a series of pre-issuance and post-issuance disclosures, and indicate whether they are requirements or recommendations. Within the scope of these guidelines, bond issues are recommended to align the key performance indicators (‘KPI’) of their SLB’s with the UN Sustainable Development Goals, and are required to disclose their rationale on why a KPI has been selected and how it fits into the issuers overarching sustainability strategy.
World Bank and Nepal launch USD 100 million Water Sector Governance and Infrastructure Support Project
On 10 February, the Government of Nepal and the World Bank launched the Water Sector Governance and Infrastructure Support Project. The USD 100 million project will run for six years and promote the delivery of water and sanitation services to over 400,000 people in provinces across Nepal which have low access to water, and are typically more vulnerable to climate change. It further aims to promote integrated water resources management in the country. USD 80 million of the funds will be financed by the World Bank and USD 20 million will be raised by the Nepalese government. The project forms part of Nepal’s efforts to partner with development agencies and the private sector to promote green, resilient and inclusive service delivery while strengthening institutional capacities across municipalities.