ESG briefing: European asset owners urge SEC not to scrap climate disclosure rules

The US climate disclosure retreat has gathered pace, as the US Securities and Exchange Commission (SEC) moves towards scrapping its climate disclosure rules. 

Rescinding the rules would leave the US without a mandatory federal climate-specific reporting regime for corporates, although some states have introduced or proposed their own disclosure requirements.

A group of Europe’s largest asset owners have urged the US regulator not to rescind its climate disclosure rules for corporates, warning that rescinding the rules could make financially material information less comparable and more expensive for investors.

The notably pragmatic and somewhat cautious arguments were put forward during the SEC’s 60-day comment period, after the regulator formally proposed rescinding the Biden-era climate risk disclosure rule for corporates in May.

On the other side of the Atlantic, the UK government is being urged to scrap climate change disclosure rules for occupational pension schemes and instead direct pension funds towards transition planning.

Bobby Riddaway, managing director of professional trustee firm HS Trustees, said he would rather see pension schemes devote resources to financing the energy transition than to reporting on it.

In an op-ed circulated to UK pensions media outlets, Riddaway argued that the pensions industry sometimes operates on the assumption that sustainability expertise is readily available, when in practice it is a limited resource.

Meanwhile, negotiations on the EU Sustainable Finance Disclosure Regulation (SFDR) stalled last month, while the European Commission moved forward with plans to soften the bloc’s carbon pricing regime and proposed an indicative 2040 electrification target.

In a regular column for IPE, Frédéric Ducoulombier of EDHEC Climate Institute made the case for why a credible SFDR framework needs more than category criteria. 

In other news, suspicion about using financed emissions as a core metric is spreading among the asset owner community.

Speaking to IPE, Claire Curtin, head of sustainability at the Pension Protection Fund (PPF), said that five years ago, financed emissions were arguably one of the few tools available to investors seeking to understand and communicate portfolio emissions, but their limitations have since become increasingly apparent.

BlackRock has partnered with PCG Impact, the advisory arm of Amsterdam-founded impact investing specialist Phenix Capital Group, to expand its impact investing capabilities for institutional investors.

The collaboration will combine BlackRock’s portfolio construction, implementation, risk management and oversight capabilities with PCG Impact’s research covering more than 3,000 impact fund managers, alongside its advisory and reporting expertise.

Items to note:

• The International Sustainability Standards Board (ISSB) has proposed revisions to selected SASB Standards as part of its programme to improve industry-based sustainability disclosures for investors. Separately, the Institutional Investors Group on Climate Change (IIGCC) is working on how institutional investors can better translate nature considerations into their allocations. IPE will examine what this means for asset owners in an upcoming analysis.
• The Local Authority Pension Fund Forum (LAPFF) and Sarasin & Partners have publicly challenged the views of an academic amid an ongoing stewardship dispute over how investors expect banks to account for climate risk.
• Finally, the Principles for Responsible Investment (PRI) has created a team focused on real-economy policy insights and engagement.

Krystle Higgins  

Sustainable Finance Correspondent