Upcoming COP28, CSDDD scope at risk, EU Taxonomy delegated acts published, and new reports on banking

Upcoming COP28 - what's on the agenda & what will the sticking points be?

As well as progress towards the existing Paris goals, COP28 will concentrate on:

• assessing progress towards the Paris Agreement goals,
• fast-tracking the transition to renewables/move to clean energy sources, to "slash" greenhouse gas emissions before 2030
• scaling up climate finance for developing nations & delivering money for climate action from richer to poorer countries, and working on a new deal for developing nations,
• enhancing climate adaptation measures,
• focusing on nature and people.
• making COP28 the "most inclusive" ever.

A good summary of "Who wants what out of COP28" is offered by Politico.

There will be themed days on issues including health, finance, food and nature. An extensive list of the finance-focused events is in the events section. Nuclear energy will also be discussed, as US, UK Lead Pledge to Triple Nuclear Power by 2050 at COP28 (Bloomberg).

Expected outcomes

The main expectation are that COP28 will 1) reaffirm the commitment to the Paris Agreement, 2) help update and strengthen national climate action plans, 3) create a clearer roadmap for mobilising climate finance, 4) create an agreement on concrete measures to accelerate climate adaptation and mitigation.

Potential sticking points

• Continuation of the use of fossil fuels - disagreement about the future of "unabated" fossil fuels (coal, oil and gas) which are burned without technologies to capture their emissions.
• Money: At COP27, a "loss and damage" fund was agreed for richer countries to pay poorer countries facing the effects of climate change. But exactly how this will work is still unclear. The US, for example, has ruled out paying climate reparations for its historical emissions. In 2009, developed countries committed to give $100bn (￡82bn) a year (by 2020) to developing countries to help them reduce emissions and prepare for climate change. The target was missed but is expected to be reached in 2023.

Informative notes on SFDR from European Securities and Markets Authority (ESMA)

On 22 November, ESMA published three publications providing summarised information about three key concepts from the EU sustainable finance regulatory framework.

• Definition of sustainable investments (across the EUTaxonomy Regulation and SFDR - Calculation of sustainable investments within the context of the Taxonomy and the PAB/CTB guidance).
• Application of the Do No Significant Harm or DNSH principle (also across the Taxonomy Regulation and SFDR) ? Disclosures on DNSH for financial products that make sustainable investments: Where a financial product makes sustainable investments, there is a requirement for disclosures in relation to DNSH checks. ? PAI disclosures at entity and financial product level for all investments.
• The use of estimates (across the EU Taxonomy Regulation, SFDR, and Benchmark Regulations).

As pointed out by Eurosif - The European Sustainable Investment Forum, ESMA emphasises that these informative notes are not intended to provide any form of regulatory guidance - their aim is to summarise the legal provisions of these concepts across EU regulations.

• A nice summary is offered by Nadia Humphreys in her LinkedIn post.

CSDDD impact & scope at risk

The EU's Corporate Sustainability Due Diligence Directive (CSDDD) mandates companies in the EU (regardless of their origin) to address the impacts of their operations and supply chains on human rights and the environment. Set for implementation by 2025 or 2026, ongoing trilogue negotiations are focused on this directive. Despite opposition from some EU members, the Council has revised its stance, proposing to exclude the financial sector from these regulations.

The Spanish EU Council Presidency leans toward this exclusion due to challenges in aligning with the European Parliament . France, supported by the EU Council, backs excluding finance, contrary to the Parliament's June 2023 vote in favor of its inclusion.

Various voices advocate for inclusion. Frank Elderson, Member of the Executive Board of the European Central Bank , believes the inclusion would help: "systematically integrate sustainability matters into their decision making and risk management practices. Not excluding the financial sector from the remit of the CSDDD can further help to create greater certainty around financial institutions’ obligations in this area and around climate- and environment-related litigation risks for the financial sector."

Additionally, support for inclusion comes from the Danish Institute for Human Rights and Storebrand . The Head of Biodiversity at ASN Bank, Roel Nozeman , notes the overdue nature of financial sector inclusion in CSDDD, citing available tools. Julia Symon , Head of Research and Advocacy at Finance Watch emphasises the need for robust due diligence and transition plans for meaningful sustainability progress within CSDDD.

Eurosif - The European Sustainable Investment Forum insists that excluding the financial sector from these rules harms fair competition among EU companies. They argue for including financial institutions in a way that suits their unique nature while supporting existing laws. Eurosif stresses the importance of managing financial risks across value chains and cites widespread agreement among financial supervisors and actors on the need for the financial sector's inclusion in these regulations. Eurosif partnered with 荷兰銀行 for a podcast, sharing practical approaches to implement due diligence policies across the value chain. They also joined forces with UN PRI, IAHR, and other supporters to endorse a strong and effective CSDDD in a statement released in November 2022.

EU Taxonomy?Environmental Delegated Act?and?Climate Delegated Act

On 21 November, the?EU Taxonomy?Environmental Delegated Act?and?Climate Delegated Act?in the Official Journal of the EU!?? Environmental Delegated Act: https://lnkd.in/dfjA8RcB?? Climate Delegated Act: https://lnkd.in/dDYswQkx

In the news

Financial Times: UN predicts 9% rise in greenhouse gas emissions by 2030

Financial Times: Investors pile into Brazil’s first sustainable bond

Financial Times: Global warming on track for 2.9C as greenhouse gases keep rising, UN says

Financial Times: Oil producers accused of stalling progress on plastics pollution treaty

CNBC: Coal use needs to be slashed seven times faster to meet emissions target, analysis finds

Euractiv: Cleantech divide looms in Europe

Euronews: Flooded cities, price hikes and record temperatures: What does El Ni?o have in store for 2024?

The Guardian: EU criminalises environmental damage ‘comparable to ecocide’

The Guardian: EU agrees to ban exports of waste plastic to poor countries

Reuters: Top companies' lobbying undermines their climate pledges, study finds

Harward Business Review: Let Corporate Purpose Guide You Through ESG Turbulence

Responsible Investor: ISSB looks to drum up support for global climate baseline ahead of COP28

Responsible Investor: GFANZ set to announce work on incorporating nature in transition plans

REP: Baine: execs ‘increasingly allergic’ to simplistic, overly-positive vision of sustainability?

Project Syndicate: The New Industrial Policy and Its Critics

United Nations Climate Change News: New Analysis of National Climate Plans: Insufficient Progress Made, COP28 Must Set Stage for Immediate Action

The Guardian: World facing ‘hellish’ 3C of climate heating, UN warns before Cop28

Recommended readings

State of Corporate ESG, At the crossroads of data, regulations, and digital solutions: a new report by Thomson Reuters Institute focuses on how companies tackle ESG challenges using third-party solutions and showcases impactful examples driving ESG initiatives forward. Nicoletta Ferro shared the report with a concise summary of key findings.

ShareAction published its latest report on the banking sector, arguing that Europe’s top 20 banks need to be clearer, cleaner and greener. According to the research, Europe’s largest banks’ green finance targets and reporting risk misleading customers and investors - open to allegations of greenwashing.

The Production Gap: Phasing down or phasing up? Top fossil fuel producers plan even more extraction despite climate promises. The report by SEI — Stockholm Environment Institute , Climate Analytics , E3G , International Institute for Sustainable Development and UN Environment Programme tracks the mismatch between governments' fossil fuel plans and climate goals, involving research from global experts and assessing 20 major producing countries' strategies.

ESMA published an analysis report focused on issuers’ potential benefits from an ESG pricing effect. ESMA shows that issuance of sustainable-labelled debt has been increasing due to the growing investor interest in financial products with sustainability credentials. The market size of sustainable debt by issuers domiciled in the European Economic Area has grown 130% in two years and has reached EUR 1.7 trillion in the first half of 2023. However, it is important to note that there is no evidence of a systematic and consistent pricing advantage for any ESG bond category. The most common drivers for bond prices and yields remain credit risk, maturity and liquidity risk. A LinkedIn post by Mathieu Joubrel asks pertinent questions regarding the need for more granular and additional reserach.

Visualising All the World’s Carbon Emissions by Country: The intensified greenhouse effect from fossil fuel burning alters climate. A chart by Visual Capitalist sourced from the Global Carbon Atlas displays CO? emissions across various countries, highlighting their contributions. The world’s top polluters are China, India, and the U.S., which accounted for 52% of the world’s CO? in 2021.

Learning skillful medium-range global weather forecasting: The Authors introduce “GraphCast,” a machine learning-based method trained directly from reanalysis data. GraphCast predicts over 10 days of weather variables globally at 0.25° resolution in under a minute, outperforming 90% of 1380 verification targets. See model schematic:

Response to FCA Consultation Paper CP23/20 Diversity and Inclusion in the Financial Sector – Working Together To Drive Change: Alex Edmans ' response to the paper acknowledges its intent to enhance customer welfare but raises concerns about relying on demographic metrics, their link to real equity, inclusion, and their impact on the financial sector's customer welfare.

The Zero Emissions Commitment and climate stabilisation: New research on net-zero CO2 emissions suggests warming might persist beyond, emphasising ongoing climate action, preparation for impacts, and sustained CO2 management. Joeri Rogelj in his post summarised the policy implications.

Special Report: Alternative Fixed Income: A report by HedgeNordic highlights diverse viewpoints on alternative fixed income strategies, exploring higher yields and shifts in investor interest amid changing market dynamics.

Applying the Energy Efficiency First principle in sustainable finance: The Energy Efficiency Financial Institutions Group’s (EEFIG) report by Peter Sweatman and Dr. Steven Fawkes urges financial institutions to emphasise "energy efficiency first," crucial for swift, cost-effective, and sustainable energy savings. Read a LinkedIn Article about this milestone written by one of the authors, Dr. Steven Fawkes .

Investing in climate solutions: listed equity and corporate fixed income: Institutional Investors Group on Climate Change (IIGCC) released Climate Solutions Guidance, aiding investors in categorising and quantifying climate solution allocations, crucial for the net-zero transition. It complements Net Zero Investment Framework and provides a four step approach for investors calculating green revenue and green capex metrics. Read more in the Article or a Mahesh Roy's Linkedin Post.

2023 Corporate Human Rights Benchmark: The World Benchmarking Alliance 's report tracks corporate human rights progress and persisting gaps. While some show transformation, overall improvement is sluggish. Many companies lack meaningful engagement with rights holders. The report delves into 5 key findings:

2023 Gender Benchmark: The results of the second publication by World Benchmarking Alliance show that we still have a long way to go. At the same time, some companies are heading the right direction. They are ensuring that women are seen, heard and able to participate equally in the workforce. See 5 key findings below:

Emissions Gap Report 2023: Report by UN Environment Programme predicts 2.9°C warming with unconditional NDCs and 2.5°C with all conditional ones, emphasising the divide between commitments and actual actions, echoing past climate agreement failures.

State of Climate Action 2023: Report by Climate Action Tracker assesses sectoral targets, evaluates progress toward 2030 goals, and highlights post-COP26 developments to mitigate climate change in alignment with the Paris Agreement.

Less than 25% of companies could qualify as sustainable investments under new S&P Global SFDR framework: An Article by S&P Global discusses the ongoing struggle of financial market participants in verifying sustainability claims of investments. They applied the S&P Global SFDR Framework to 12,000 companies, revealing that roughly 24% qualify as sustainable investments by this measure. Andreas Posavac provided a summary of the article in his LinkedIn post.

Chart: Clean energy attracting nearly twice as much investment as fossils. But for the world to meet its climate goals, the money needs to stop flowing to fossil fuels — and flow even faster into clean energy says Canary Media Inc.

Does Socially Responsible Investing Change Firm Behavior?: The paper published in the Review of Finance states that SRI funds select companies with good ES performance (e.g. lower pollution, more board diversity, higher employee satisfaction). But they don't cause future improvements in ES performance, nor do they reward companies for past improvements - they simply perform a static assessment. Even if SRI funds are not greenwashing (they are genuinely investing in high ES companies), they are impact washing - their actions have no impact. The authors Davidson Heath, Daniele Macciocchi, Roni Michaely and Matthew Ringgenberg use exogenous shock to SRI capital to demonstrate causality. Read the rest of the summary by Alex Edmans 's in his LinkedIn post.

Coming to Grips with Corporate Climate Risk: An Article by 波士顿谘询公司 reveals extreme weather's $200+ billion cost in 2022 affecting global businesses. Climate risks endanger annual profits; uncontrolled temperatures might cause an 18% GDP loss by 2050. Over 80% of UN parties prepare for risks. Firms emphasise resilience plans and compliance with evolving climate regulations. This prompts actionable solutions before COP28. Read more insights in Antonio Vizcaya Abdo 's Linkedin Post.

Online community insights

Linkedin Post: Hans van Dam provided a vital ESRS standards update, featuring the most recent corporate guidance and resources within his post, including links.

Linkedin Post: Ann Mettler condensed her speech at the European Commission's Raw Materials Conference, discussing how Europe can gain more control over essential materials. She suggested using Circular Economy, Diversification, and Substitution approaches.

Linkedin Post: In his post, Narendra Tiwari reflects on the Honeywell study, noting climate disasters' impact on environmental plans, prompting higher sustainability investment, emphasising energy, emissions reduction, and innovation for lasting change. Here are several discoveries from the study:

Linkedin Post: Fiona Reynolds delves into why the Sustainable Finance Strategy emphasises the significance of integrating SDG goals into corporate sustainability, net zero, and transition strategies. Read more in her Article in UN Global Compact Network Austria

Podcasts

CSRD spotlight: Hot topics in the EU's green taxonomy: Beyond the CSRD, the EU taxonomy requires additional disclosure of a company's "sustainable activities" by 2024. Tune in to the 普华永道 's recent ESG podcast with Dr. Martin W. Sch?nberger and Heather Horn for insights on navigating these new regulations.

The Pathway to Decarbonization for Public & Private Companies: Mark Fischel, Carbon Product Lead at Novata, and Mark Kroese, General Manager of Sustainability Solutions at Microsoft, recently joined Paul Ellis on The Sustainable Finance Podcast to break down carbon accounting and explore the pathway to decarbonization for public and private markets.

Events

Budapest, Hungary: On 4 December, the Budapest Climate Summit will take place at Hotel Marriott.

Warsaw, Poland: Warsaw Stock Exchange (GPW) will host the launch of its Knowledge Hub together with its event partners, The World Federation of Exchanges and International Sustainable Finance Centre (ISFC) . The event will see interventions by @

Dubai, UAE: The Climate Action Innovation Zone at COP28 will be held from 4- 8 December 2023. It will incorporate multiple events such as The Sustainable Finance Forum on 6 December, hosted by Climate Action, Principles for Responsible Investment and UN Environment Programme (UNEP FI).

Dubai, UAE: From 30 November to 12 December 2023 UN Environment Programme 's engagement at the COP28 will focus on climate finance, adaptation, loss and damage, climate technology, equitable transitions, and support UAE Presidency on diverse climate topics. technology, justice, and support the UAE Presidency on various issues. The complete schedule is available on the website.

Online: On 13 December will take place Sustainable Finance Outlook 2024 organised by Sustainable Fitch discussing key insights and trends to look out for in 2024. More information on the website.

Online: RICS will host a free webinar focused on the 2023 RICS Sustainability Report: Global challenges and opportunities for real estate & construction. Registration and information is available on the event website.

Online: EIOPA's 7th Sustainable Finance Conference that will take place on 14 December, will gather regulators, industry and stakeholders to critically assess efforts in delivering on sustainability goals.

Luxembourg: The European Investment Bank (EIB) Group Forum 2024 will take place on?7-8 February in Luxembourg. The event brings together key voices from the public and private sector to discuss a range of issues, including social inequality, economic stability, digitalisation and the green transition. More information on the event website.

Prague, Czechia 2024: The CEE Sustainable Finance Summit will return to Prague from 27 until 29 May 2024. The agenda will include deep dives into ESG reporting, implementation of ESRS, CSRD, SFDR, CSDDD, and biodiversity indicators. Register for updates on the event website or email [email protected] for more information.

COP28 Sustainable Finance Events

• European Reporting Sustainability Standards – 4 December, 10:00 – 11:00, Brussels?

This event seeks to discuss and present the latest developments in corporate sustainability reporting and its role in supporting the overarching goals of COP28. 2023 has seen significant developments in the realm of corporate sustainability reporting, with the adoption of the European Sustainability Reporting Standards (ESRS)by the European Commission in July and the standards by the International Sustainability Standards Board in June, showcasing tangible commitments to action and new mandatory rules.??

Link to the event website: https://www.cop28eusideevents.eu/e/programme?session=1837444?

• Monitoring green financial flows – 4 December, 10:00 – 11:00, Online Only?

At the event, subgroup rapporteurs will reveal their method for tracking sustainable investment flows and analysing progress. The Commission will showcase support for EU Member States in bolstering frameworks for sustainable investments, addressing greenwashing with the Technical Support Instrument. Discussions will focus on using science to create user-friendly indicators for countries and companies.?

Link to the event website: https://www.cop28eusideevents.eu/e/programme?session=1837450?

• The need for further transparency and integrity on ESG rating activities – 4 December, 11:30-12:30, Brussels?

The EU's push for sustainable finance highlights market challenges and concerns about ESG ratings. To enhance integrity, the Commission proposes additional measures inspired by November 2021 International Organization of Securities Commissions - IOSCO recommendations. This session aims to present the Commission’s proposal and to detail further the objectives and how it fits in the broader sustainable finance agenda and work ongoing at international level.?

Link to the event website: https://www.cop28eusideevents.eu/e/programme?session=1837445?

• Assessing climate-related financial risks – 4 December, 11:30-12:30, Online Only? The EC will detail climate risk work and Fit-For-55 stress tests. Afterwords a panel with EU supervisory bodies and academics will discuss challenges in measuring climate risks and potential solutions.?

Link to the event website: https://www.cop28eusideevents.eu/e/programme?session=1837451??

• International Platform on Sustainable Finance (IPSF) Annual Event - 4 December, 13:30-14:30, Online Only?

The event unites IPSF member jurisdictions and observers to present IPSF's 2023 efforts, emphasizing global collaboration in sustainable finance. It highlights the group's role in the G20 Sustainable Finance Working Group and discusses transition finance and recent social bond talks.? Link to the event website: https://www.cop28eusideevents.eu/e/programme?session=1837452?

• The EU Taxonomy: its uptake and practical uses for the market?- 4 December, 15:00-16:00, Brussels?

The event showcases EU Taxonomy progress and its adoption by corporates, investors, and financial institutions. It will allow market players to share challenges and opportunities in using it and meeting reporting obligations. Additionally, the EU Platform on Sustainable Finance presents its work on the framework's usability and Taxonomy developments.? Link to the event website: https://www.cop28eusideevents.eu/e/programme?session=1837447?

• Mobilising climate-nature finance in the international financing architecture?- 4 December, 15:00-16:00, Online Only?

At COP28, Cambridge Institute for Sustainability Leadership (CISL) aims to unite stakeholders for nature-climate financing, stressing collaboration between financial firms and policymakers. This effort seeks to drive sustainable investments, urging policy frameworks' alignment globally to incentivise private finance participation.? Link to the event website: https://www.cop28eusideevents.eu/e/programme?session=1837453?

• Financing the transition to a sustainable economy: current market practices, opportunities and challenges - 4 December, 16:30-17:30, Brussels?

The event offers a platform for financial and non-financial entities to share experiences in supporting sustainability transitions. It showcases the EU sustainable finance framework's tools for channelling investments in line with the EU's Recommendation on transition finance. Discussions focus on challenges and opportunities in raising transition finance and facilitating decarbonisation of the real economy.? Link to the event website: https://www.cop28eusideevents.eu/e/programme?session=1837448?

• InvestEU programme contributing to EU Net-Zero Industry investments - 4 December, 16:30-17:30, Online Only?

The side-event will be an opportunity to raise awareness about the InvestEU programme’s financial products that can support the Net-Zero Act objectives. Key message would be on how the InvestEU stimulates investment and crowds in additional public and private capital in this area.?

Link to the event website: https://www.cop28eusideevents.eu/e/programme?session=1837454?

Link to the full list of side events: https://www.cop28eusideevents.eu/e/programme?date=dec-01?

• The Sustainable Finance Forum?– 6 December?

The Sustainable Finance Forum, hosted by Climate Action, Principles for Responsible Investment , and United Nations Environment Programme Finance Initiative (UNEP FI) alongside COP28, is a significant event for the finance sector. With 400 participants, it aims to drive collaboration, set standards, and promote sustainable practices across portfolios. Discussions will cover decarbonisation, biodiversity, adaptation, Just Transition, and managing sustainability risks. The ultimate objective is to align finance with the real economy for a net-zero, nature-positive global transition. Notably, Blue Zone accreditation isn't necessary for this free event.?

Link to the event website: https://events.climateaction.org/sustainable-finance-forum/?

• Spanish Pavilion:?? Call to Action:? on carbon markets with DG CLIMA (December 4th at 11.30), Climate risks and the transition of the financial sector (December 4th 2.30 to 4 pm), Net Zero Policy (December 3rd 10 to 11 am), Climate Adaptation (December 2nd, 11.30 to 12.30 pm)?
• Transition Finance: From Implementation to Impact – 3 December, 11:00 – 12:30, Dubai?

Building a green economy demands financial tools and guidelines to allocate resources for sustainability. Senior experts discuss sustainable bonds, carbon markets, scaling credible transition plans, and addressing socio-economic impacts.?

Link to the event website: https://www.cop28eusideevents.eu/e/programme?session=1844567?

• Transformative pathways aligning finance with the Paris Agreement goals?– 3 December, 16:300 –18:00, Dubai?

To achieve eradication, countries need integrated policies. This event aims to share experiences on aligning finance with low emissions and climate resilience, fulfilling Paris Agreement goals.?

Link to the event website: https://www.cop28eusideevents.eu/e/programme?session=1837438?

世界银行 Group pavilion, 1-11 December?

• Fiscal Policies to Address Climate Change, 1 December, 16:00-16:45?

Join this session to learn about green fiscal instruments that can help governments strengthen climate resilience and incentivise transformation toward lower greenhouse-gas emissions. The session will draw on lessons from successful fiscal reforms supporting adaptation and mitigation and discuss the outlines of what future reforms could look like.?

• Scaling Climate Finance Through Innovative Capital Markets Solutions, 2 December, 14:00-14:45?

Sustainability-linked bonds, outcome bonds, catastrophe bonds, and MDB hybrid capital support the financing of climate, environmental and social outcomes. These innovative bonds can link private investor returns to specific project outcomes and transfer risks to capital markets, while MDB hybrid capital allows investors to support significantly increased MDB lending.?

Link to the full list of events: https://www.worldbank.org/en/programs/the-world-bank-at-cop28/pavilion-program?

EIB & BENELUX programme, 1-12 December?

• Importance of Regulations to Accelerate Climate Finance, 2 December, 9:30-11:00 ?
• Financing to Close the Circularity Gap, 4 December, 10:30-13:00?

This side event bridges the Circularity Exchange Network's work and urges national governments to lead global circular finance efforts. It focuses on overcoming silos and fostering collaboration between Environment, Finance, and Economic Affairs departments.?

Link to the full list of events: https://events.eib.org/event/4bcf2507-b6e0-4595-bde7-8a8282acff73/websitePage:9d6d23f5-8634-48e3-8c4b-76df9051f068?previewToken=682bc639663ec51b08439243e796b2e9?

Bloomberg Philanthropies and Bloomberg LP at COP28? - Link to the full list of events: https://bbgevent.app/cop28-bloomberg/#/?

Bloomberg Business Forum at COP28,?3 December, 8:30-14:00?

• Panel: Driving the Global Sustainable Finance Policy Agenda, 3 December, 11:40 - 12:15 ?

Policymakers and regulators globally are advancing efforts to develop a comprehensive policy framework for sustainable finance to help drive private capital towards more sustainable outcomes. This panel will examine how to deliver cross-border interoperability between initiatives such as taxonomies, transition planning, and disclosures, and what more is needed from the public and private sector to deliver effective outcomes.?

Speakers: ?

Emmanuel Faber (Chair, International Sustainability Standards Board, ISSB)

Nadia Humphreys, Head of Regulatory and Climate Solutions,?Bloomberg

Jean-Paul Servais, Chair,?IOSCO

Link to the full list of events: https://bbgevent.app/cop28-bloomberg/#/business_forum_cop28?

• Fund labelling: Connecting market practice with regulatory expectations, 3 December, 17:00-18:00?

With global sustainable finance policy looking to formally classify investment products, Bloomberg brings together policy leaders and the Investment community to debate the value of a globally harmonised approach to fund classification.?

Link to the event website: https://bbgevent.app/cop28-bloomberg/#/fund_labelling?