Weekly News | 13th January to 31st January 2023

Codo Advisory keeps an eye for you on the latest events and trends in climate finance and corporate sustainability, in the world and in Japan. Here’s what caught our attention last week. 

World | S&P, UNEP launch methodology to measure companies biodiversity risk    

• Financial rating agency S&P and the UN Environment Programme (UNEP) launched the Nature Risk Profile, a new methodology designed to help companies and investors assess and analyze nature-related risks, such as biodiversity impacts and dependencies. 
• The new methodology comes as businesses and financial institutions place a greater emphasis on nature and biodiversity risk after COP15 Biodiversity Conference, and as global efforts to address environmental issues gain traction. 
• Companies are also under increasing pressure to assess and report on nature and biodiversity-related issues, with new disclosure systems such as the recommendations from the Taskforce on Nature-related Financial Disclosures (TNFD) in the works.  
• Read more about this story: ESG Today, UNEP 

Comment from Codo: With the Kunming-Montreal framework for biodiversity now adopted by 95% of countries signatories of the UN’s Convention for Biodiversity, the number of initiatives led by various stakeholders to support the alignment of finance and business with biodiversity preservation, as well as to facilitate the assessment of nature-related financial risks, is going to increase. Companies will be expected to engage in these new frameworks, the same way they have been pressured to engage in climate-related initiatives since the adoption of the Paris Agreement in 2015.

World | Banks keep funding fossil fuels despite net-zero pledges, study finds   

• The Glasgow Financial Alliance for Net Zero (GFANZ) initiative was presented as one of the main achievements of COP26 Climate Summit in 2021. However, research shows that banks and financial institutions that have made net zero pledges continue to invest heavily in fossil fuels, which has led to accusations that they are acting like “climate arsonists.” 
• The GFANZ is made up of many smaller groups that require members to reduce their use or support of fossil fuels. According to Reclaim Finance, an NGO headquartered in France, at least 56 of the largest banks in the net-zero banking alliance grouping (NZBA) have provided $270 billion to 102 fossil fuel companies for expansion through 134 loans and 215 underwriting arrangements. 
• Read more about this story: The Guardian, Reclaim Finance 

World | ISSB global sustainability reporting standards to be released in June 

• The International Sustainability Standards Board (ISSB) of the IFRS Foundation will release the finalized versions of the first global standards for sustainability and climate-related reporting in June of this year. 
• The ISSB was officially launched in November 2021 at COP26, with the goal of developing IFRS Sustainability Disclosure Standards to provide a global baseline of disclosure requirements that jurisdictions can use independently or as part of larger reporting frameworks. 
• According to IFRS Chair, the standard’s release is only the first step toward establishing a globally consistent and transparent reporting system, with regulators’ widespread endorsement and adoption required. Following adoption, the next step would be to provide assurance to auditors that companies are adhering to the standards. 
• Read more about this story: ESG Today, Bloomberg Tax  

Comment from Codo: In August last year, we were reporting about criticism expressed by some observers against the trajectory chosen by the IFRS for the definition of the ISSB standards: unlike the EU Green Taxonomy or the US SEC climate disclosure framework, the ISSB project does not include the principle of double materiality, and mainly considers the impacts of environmental changes (such as climate change) on business activities.  

Europe | European Commission unveils Green Deal Industrial Plan  

• European Commission President Ursula von der Leyen outlined a Green Deal Industrial Plan at the World Economic Forum in Davos to support the cleantech sector and compete with the rest of the world, particularly the US, and the EU Sovereignty Fund to balance the effects of any easing of state aid regulations within the EU. 
• The European Green Deal, which was introduced three years ago and aims to decarbonize Europe by 2050, remains unfulfilled. The EU still struggles to provide green financing at the local and regional levels, where effective decarbonization can and must begin.  
• In the US, regional banks are being used to deliver bottom-up funding as well as to fulfill social justice obligations through President Biden’s Inflation Reduction Act and other significant funding instruments. 
• Read more about this story: Energypost, The European Commission 

Europe | European Central Bank publishes new financed emissions and sustainable finance indicators to track climate risks 

• The European Central Bank (ECB) has released a set of new statistical indicators to assist in the analysis of climate-related risks in the financial sector and the tracking of the market for sustainable finance. 
• The new data sets are grouped into three categories: sustainable finance, financed emissions, and the impact of physical climate risks on loan and security portfolios. 
• The ECB noted that the indicators are a “work in progress,” with the sustainable finance indicators currently classified as “experimental” – meeting many but not all the quality requirements of official statistics – and the financed emissions and physical risk indicators classified as “analytical” – indicating lower data quality and some limitations. 
• Read more about this story: ESG Today, European Central Bank  

Japan | Japan to issue 20 trillion yen in bonds for its ‘green transformation’  

• To aid in the decarbonization of Japanese society, the government intends to issue new bonds and impose surcharges on fossil fuel importers. 
• From fiscal 2023, the government intends to issue approximately 20 trillion yen in bonds over a ten-year period, with the money going toward helping businesses transition to a low-carbon future. 
• Within two years of the green transformation promotion law’s adoption, the proposed legislation will mandate the establishment of a carbon pricing system. 
• Read more about this story: Asahi, Reuters