IASB proposes illustrative examples to improve reporting of climate-related and other uncertainties in financial statements

In response to strong demand from investors, a consultation document published by the International Accounting Standards Board (IASB) includes eight examples of how companies can apply IFRS¹ Accounting Standards when reporting the effects of climate-related and other uncertainties in their financial statements.

Investors have expressed concerns that information about climate-related uncertainties in financial statements are sometimes insufficient or are inconsistent with the information provided outside the financial statements.

The IASB’s examples, which were developed in collaboration with members of the International Sustainability Standards Board (ISSB), aim to improve the transparency of information in financial statements. They also aim to strengthen the connection between financial statements and other parts of a company’s reporting, such as sustainability disclosures.

GRI and TNFD release report showing alignment between standards for biodiversity reporting

The Global Reporting Initiative (GRI) and the Taskforce on Nature-related Financial Disclosures (TNFD) have published a joint interoperability mapping resource, which gives an overview of alignment between the TNFD disclosure recommendations and metrics, and the GRI standards.

The joint development of a guidance document and correspondence table should help GRI’s reporters align with the TNFD recommendations and assist TNFD adopters confirm that their sustainability reporting is in accordance with GRI standards.

The mapping underscores the high level of alignment achieved between the TNFD recommendations and metrics and the GRI standards reporting requirements and datapoints. This includes the use of consistent nature-related concepts and definitions, including the five direct drivers of nature and biodiversity loss, as defined by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES).

EU Commission publishes CSRD FAQ to help companies implement new sustainability reporting rules

The European Commission published a new set of frequently asked questions (FAQs) to support companies and other stakeholders in implementing the sustainability reporting requirements of the EU’s Corporate Sustainability Reporting Directive (CSRD).

The new FAQs intends to reduce the administrative burden on companies with the goal to facilitate the compliance of stakeholders with the regulatory requirements in a cost-effective way, whilst also ensuring the usability and comparability of the reported information on sustainability.

Key topics covered by the FAQs include the scope of the rules, determination of company size categories for compliance dates and exemptions, as well as auditing and assurance-related issues.

For more on sustainable policy and regulation, please check out our monthly Sustainable Finance Policy & Regulation Round-Up.

UK to propose law next year to regulate ESG raters

The Chancellor of the Exchequer, Rachel Reeves, has announced that a new UK law will be brought forward next year to regulate agencies that provide ratings that assess the environmental, social, and governance (ESG) performance of companies.

The law aims to improve the transparency behind ESG ratings, as ESG raters are currently only being asked to comply with a voluntary code of conduct in the UK.

The UK Sustainable Investment and Finance Association (UKSIF) has said the proposed regulation should help open a “black box” as it is not uncommon for different ESG raters to have vastly different ratings on the same company, causing confusion for investors.

The ministry has said the new law would be aligned with recommendations on ESG ratings from the International Organisation for Securities Commissions (IOSCO).

SBTi unveils framework to accelerate buildings sector’s alignment with net-zero targets

The Science Based Targets initiative (SBTi) has released the Buildings Sector Framework, a sector-specific criteria, and is calling for building companies and financial institutions to use the framework to align to net-zero.

The framework covers global 1.5°C pathways for upfront embodied emissions, including materials production and construction of new buildings.

The criteria focuses on four key actions: stop fossil fuel installations, reduce in-use operational emissions, reduce upfront embodied emissions, and retrofit inefficient buildings.

Sustainable bond issuance could grow to $1 trillion in 2023 despite sharp Q2 slowdown

Global issuance of sustainable bonds declined sharply in Q2-2024, as fewer new issuers entered the market and issuers contended with regulatory scrutiny– according to a report released by Moody’s Ratings.

However, Moody’s states that the sustainable bond market remains on track to reach $950bn in issuance this year, an increase on 2023 volumes.

Overall, for the quarter, sustainable bond issuance volumes were $234bn, down 20% over the same period last year and 19% lower than the strong performance in Q1 2024. At $146bn for the quarter, green bonds continue to account for the majority of sustainable bond issuance.

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UK businesses heavily relying on carbon credits to reach net-zero goals

Nearly two-thirds (63%) of sustainability targets set by large UK businesses are expected to be achieved through the purchase of carbon credits, with companies planning to spend an average of £20 million each, according to research by insurance broker Gallagher. The study found that 88% of large UK businesses have already bought carbon credits, spending an average of £2 million each, and 96% plan to purchase more, with one firm intending to invest £1.2 billion.

Robeco launches High-Income Green Bonds strategy

Asset manager Robeco has introduced its first strategy focused exclusively on green bonds from corporate issuers, named the High-Income Green Bonds strategy. This globally oriented strategy is benchmark-agnostic and currently manages approximately €10 million in assets, with Peter Kwaak and Joost Breeuwsma serving as fund managers.

Robeco will evaluate bond eligibility using a proprietary five-step green bond framework, ensuring compliance with the highest classification under the EU’s Sustainable Finance Disclosure Regulation (SFDR). The firm already manages two other green bond-focused funds, highlighting its commitment to sustainable investing in the growing green bond market.

Investor expectations set for banks to combat deforestation

The Finance Sector Deforestation Action initiative (FSDA) and the Institutional Investors Group on Climate Change (IIGCC) have released a groundbreaking set of investor expectations for commercial and investment banks, aimed at eliminating commodity-driven deforestation and associated human rights abuses in their lending practices. Developed by key figures from both organisations, the expectations highlight that deforestation contributes to approximately 11% of carbon emissions and poses significant financial risks to banks and investors.

NatWest’s “What ESG investors want webinar: Social Impact 2.0”

2021 marked an exceptional peak for the social debt market, driven by the urgent need to address social issues during the pandemic. Now, emerging themes in the social debt market include ‘just transition’ and the forthcoming Corporate Sustainability Reporting Directive (CSRD).

NatWest’s latest What ESG investors want webinar explored current social themes important to investors such as the challenges and opportunities in the social debt market, how to integrate ‘social’ into financial instruments, and exploring the intersection of policy regulation and social impact metrics.

NatWest publishes new report on accelerating energy efficiency in the built environment

A crucial step towards tackling climate change is increasing energy efficiency in the built environment. Making UK buildings more efficient means tackling low demand, insufficient and fragmented supply, misaligned incentives and standards, limited financial support for installation costs, and skills shortages.

Significant action from the public sector can enable the private sector to deliver change at scale, while greater ambition from the private sector can allow the public sector to implement regulations needed to increase energy efficiency.

A new report published by NatWest can help move the built environment closer to net zero, achieving not only sustainability goals, but social goals too.

Regular articles from us on market-moving themes, and updates on what we are doing to further our ESG commitment.

• NatWest funds multimillion-pound funding deal with North East’s believe housing
• Launchpad for growth as 468,000 new companies start up
• NatWest and UK Infrastructure Bank back Quickline to boost rural broadband connectivity across Northern England

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Or, for Corporates looking to discuss any of the above further, please reach out to our authors:

• Dr Arthur Krebbers, Head of Corporate Climate & ESG Capital Markets
• Gustavo Brianza, Head of Debt and ESG Advisory
• Rui Zu, ESG Advisory
• Thomas Gidman, ESG Advisory
• Daniel Bressler, Climate & ESG Capital Markets
• Jaspreet Singh, US Capital Markets
• Niceasia Mc Perry, Climate & ESG Capital Markets
• Isabella Crack, ESG Advisory

[1] IFRS - International Financial Reporting Standards