ESG Roundup: EU Benchmarks, Disclosure Regs Get Final Rubber Stamp

Two of the three regulations making up the legislative part of the European Commission’s sustainable finance action plan will be officially published later this month after the EU Council today adopted the texts in question.

The step is purely procedural, because the political agreement on the regulatory proposals was reached earlier this year: February in the case of the now-finalised regulation to create new categories of climate-related benchmarks and require sustainability-related disclosures for all benchmarks, and March in the case of the regulation introducing disclosure obligations for institutional investors relating to environmental and social matters.

Today’s announcement by the body of EU member states comes after index provider MSCI announced it had created provisional climate indices designed to meet minimum standards for the two new EU climate benchmark categories: EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks.

The final requirements for the benchmark types are not yet known, but the index provider said it had decided to launch the provisional indices in order to help clients evaluate and test them.

Requirements for the two new types of EU climate benchmarks will be set out in delegated acts to be adopted by the European Commission following public consultation.

As for the disclosure regulation, the European supervisory authorities have been tasked to come up with more detailed rules and are aiming to consult on these next month or early next year.

PensionsEurope and other financial industry associations recently raised concerns about the application timeline for the new EU sustainable investment disclosure rules, which the Commission dismissed.

GPIF adds green bond partnership

Japan’s Government Pension Investment Fund (GPIF) has partnered with the European Bank for Reconstruction and Development (EBRD) to promote green and social bonds.

The move comes on the heels of a decision by the world’s largest pension fund to forge a similar initiative with the African Development Bank (AfDB) four weeks ago.

GPIF described the partnerships as central to its strategy to promote environmental, social and governance integration into fixed income investment.

Of the partnership with EBRD, Hiro Mizuno, GPIF’s executive managing director and chief investment officer, said the fund required its asset managers to integrate ESG into their investment processes from analysis through to the investment decision.

“We regard the purchase of green, social and sustainability bonds as one of the direct methods of ESG integration in fixed income investment,” he said.

Mizuno added that GPIF wanted to make green, social and sustainability bonds mainstream investment products, in order to ensure sustainable performance of the pension reserve fund for all generations.

EBRD’s green bonds and social bonds are issued in alignment with the Green Bond Principles and Social Bond Principles. These are administered by the International Capital Market Association (ICMA).

Paulo Sousa, EBRD’s acting vice president and chief financial officer, said: “Japan is a key and significant founding shareholder of the EBRD, whose mandate explicitly requires investments in environmentally sound and sustainable development, as well as in small and medium-sized enterprises.”

Sousa said such investments were the focus of projects underpinning EBRD’s issuance of green bonds and social bonds.

Akinwumi Ayodeji Adesina, AfDB’s president, described the arrangement as a “landmark strategic partnership”.

He said it would help catalyse investment capital, create more sustainable investments and help the bank achieve its ‘High 5’ priorities to fast-track Africa’s development.

Earlier this year GPIF launched its green and social bond partnerships with the Nordic Investment Bank (NIB) and the Asian Development Bank (ADB).