Key news in this edition:
- COP29 in Azerbaijan: Between controversies and milestones.
- Canada and South Africa take steps to implement sustainable taxonomies.
- Impact Disclosure Taskforce releases Final Impact Disclosure Guidance aimed to boost UN Sustainable Development Goals.
editorial
As COP29 unfolds in Azerbaijan the same discussions as last year are being had on the integrity of global climate conferences hosted by fossil fuel-reliant nations with questionable human rights records. Despite these concerns, COP29 has already reached some important milestones in its first few days, with nations approving carbon credit rules for the creation of a UN-backed carbon market. While this agreement marks a significant development for carbon markets, allegations of greenwashing continue to shadow the sustainable investment sector, as evidenced by ClientEarth's complaint against BlackRock. This is just the latest in a series of greenwashing cases, which highlights the need for clearer definitions and stricter regulations to uphold investor trust.
Fortunately, positive strides are visible elsewhere. Canada and South Africa have introduced sustainability taxonomies tailored to their unique economic landscapes, demonstrating how nations can take meaningful, but different, steps toward net-zero targets. In a related move, the Impact Disclosure Taskforce’s new guidelines for UN Sustainable Development Goals (‘SDGs’)-linked investments promise greater impact transparency in financial markets. The framework offers investors clear metrics for monitoring and measuring the social and environmental impact of their investments, bringing greater accountability to investors and companies. Meanwhile, sector-focused initiatives emerged, in the beverage industry this time. The REfresh Alliance is a new sector-wide consortium that aims to tackle the carbon-heavy supply chain by connecting suppliers to renewable energy resources. And, separately, Suntory Holdings, a Japanese beverage company, presented Water Security Compass, a tool that provides precise data on global water scarcity risks to support sustainable decision-making across sectors developed in cooperation with the University of Tokyo.
Canada and South Africa take steps to implement sustainable taxonomies
On 9 October, the Canadian government announced its plan to develop a voluntary sustainable investment taxonomy, that will be used to categorise investments based on eligibility criteria, aligned with the country’s goal of net-zero emissions by 2050. The taxonomy will reportedly include a “green” category to encourage investment in low- or non-emitting activities, but will also include a “transition” category aimed at mobilising capital for activities that will enable the decarbonisation of Canada’s emissions-intensive sectors.
Taking a different approach towards the implementation of sustainability taxonomies, on 1 October, the Companies and Intellectual Property Commission (‘CIPC’), the South African companies regulator, released its own sustainability taxonomy, which is based on the IFRS S1 and S2 reporting standards. The CIPC has built the digital reporting infrastructure for companies to voluntarily begin using the taxonomy, and early adopters are able to tag their disclosures according to the IFRS sustainability taxonomies in the same manner as financial taxonomies are applied. This is the first technical implementation of the IFRS S1 and S2 digital taxonomies globally.
So what?
These examples highlight the different approaches countries are taking to developing sustainability taxonomies, but most importantly that national taxonomies are really gaining momentum globally. Canada, a country with extensive resources and a strong presence in high-emitting industries, has opted to develop its own taxonomy, promoting green investments while also protecting its ‘transitioning’ industries. South Africa, an emerging market with limited resources, has opted to adopt an existing framework in continuity with the wider African adoption of IFRS financial reporting standards, and in doing so has become a global leader in the implementation of IFRS sustainability taxonomies. Two very different countries with different net-zero journeys ahead of them, but both illustrating that ESG reporting criteria are a key piece of the sustainability puzzle, and are here to stay.
[Contributor: Emma Shewell]
COP29 in Azerbaijan: Between controversies and milestones
Between 11 and 22 November, Azerbaijan is hosting the UN Climate Change Conference (COP29) in Baku. The country has come under criticism from international media, NGOs, and many politicians for its ongoing investment in the oil and gas sector, as well as the domestic human rights situation. In October and November ahead of the conference, the police in Baku arrested journalists and activists who have criticised the Azerbaijani government. These arrests, which human rights NGO Amnesty International has called a “crackdown” on civil society activists and human rights, undermine Azerbaijan’s credibility as a host for the conference. Azerbaijan has also been accused of using COP29 as a tool to facilitate oil and gas deals and the expansion of its domestic industry.
Despite these controversies, COP29 has already reached some important milestones. Negotiating nations in Azerbaijan have agreed on carbon credit standards to operationalise Article 6.4 – a mechanism within Article 6 designed to establish a global carbon market, overseen by a United Nations entity known as the Article 6.4 Supervisory Body. The COP29 presidency states that “this will enable climate action by increasing demand for carbon credits and ensure that the international carbon market operates with integrity under the supervision of the United Nations”. The new standards are expected to reduce the risk of double-counting emissions and include stronger safeguards to protect human rights.
So what?
International Media and Human Rights organisations are calling into question the value of the UN Climate Conference as this marks the second year in which a country whose economy is widely dependent on oil and gas has hosted the conference. Both COP29, and COP28 which was hosted in Dubai in 2023, have allegedly been used as a platform to strike new deals and expand oil and gas exploration.
Meanwhile, the approval of rules to govern the trade of carbon credits demonstrates significant progress in finally breaking years-long deadlock over this contentious issue. It paves the way for a credible, UN-backed carbon market, raising standards for carbon credits and enhancing transparency and integrity amid the ongoing concerns surrounding the voluntary carbon market. Nevertheless, there remains some concern that the standards were not discussed sufficiently at this COP which could impede effective governance going forwards, and that ultimately not enough is being done to reduce emissions rather than just enable wealthier companies or governments to offset them.
[Contributors: Nickolas Bruetsch and Federico Ingretolli ]
A new platform to address water scarcity risks worldwide
In early October, Suntory Holdings, a multinational beverage company, and Nippon Koei, a Japanese engineering firm, in cooperation with the University of Tokyo, launched the Water Security Compass – an online platform which allows users to assess the risk of water scarcity globally.
The free-to-use tool predicts future water supply and demand by using advanced hydrological simulation models, which also estimate water supply vulnerability for different categories of water usage. Built upon a complex model simulating the entire global water cycle, the platform takes into account seasonal variations, the impact of infrastructure like dams, and other factors that influence regional water availability. Water Security Compass is based on the Research Initiative for Global Hydrologic Cycles, a framework established in 2022 to foster collaboration between industry and academia in the research and development of water sustainability technologies. This initiative also focuses on the social implementation of these technologies and the development of skilled professionals.
As demand for water continues to increase and the effects of climate change exacerbate water scarcity, organisations are increasingly focusing on water conservation efforts. The new platform is designed to assist these initiatives by providing high-accuracy data, enabling more informed decision-making for companies, governments, and other organisations. This in turn promotes more effective water resource management on a global scale. The data provided by the tool is expected to be useful not only for regional water conservation efforts but also for shaping global policies on water use and sustainability and a coordinated international response to the water crisis.
A formal release of the Water Security Compass is expected in the first months of 2025.
So what?
With water scarcity becoming an increasingly critical issue, businesses need reliable data to understand and mitigate their water risks, both in terms of operational sustainability and supply chain resilience. By using this platform, companies can make data-based decisions about resource management, identify high-risk regions for investment or operational changes, and contribute to global conservation efforts.
[Contributor: Dominik Wilk]
Impact Disclosure Taskforce releases Final Impact Disclosure Guidance aimed to boost UN Sustainable Development Goals
On 23 October, the Impact Disclosure Taskforce, a market-led initiative co-chaired by J.P. Morgan and Natixis Corporate & Investment Banking, released the final version of its voluntary Impact Disclosure Guidance. The Impact Disclosure Guidance is primarily designed to enhance the efforts of corporate and sovereign entities towards meeting the United Nations Sustainable Development Goals (‘SDGs’).
The Impact Disclosure Taskforce was first convened in April 2023 with the objective of increasing impact transparency to financial markets, in an effort to ensure that tangible actions are taken to reduce poverty and inequality in communities, whilst disseminating information to institutional investors looking for investments that offer financial and social benefits. Although various forms of ESG financing, such as green bonds or sustainability loans, have existing classification frameworks, there has been no prevailing framework to assess the influence of impact-driven investments on underserved communities and to attract more investors to fund development efforts.
Although voluntary, the newly finalised Impact Disclosure Guidance provides key principles of impact measurement and monitoring including: i) intentionality, explicitly specifying the impacts they aim to achieve and design adequate strategies for their pursuit; ii) measurability, identifying specific metrics to measure progress on socio-economic issues; iii) ambition, setting targets for the entity’s impact intentions; and iv) focusing on needs, prioritising the most acute development gaps as per empirical data. The guidance will assist organisations in producing an impact and monitoring framework for their business strategies or governments’ national development plans, in addition to establishing a mechanism to disseminate and analyse entity-level impact assessments for increased transparency and accountability. This will ultimately provide financial institutions with factual information in a market that has notoriously limited and inconsistent data.
So what?
The Impact Disclosure Guidance has the potential to offer a real turning point for ESG investing. Although many companies, and investors, use the SDGs as a framework to guide their sustainability programmes and demonstrate their ESG credentials, these often result in a lack of genuine policies with associated KPIs and translatable impact. For too long the SDGs have been viewed as simply the ‘easy’ way to demonstrate a commitment to sustainability, without actually having to back this up with any data. In the Impact Disclosure Guidance providing a standardised, step-by-step methodology, it is hoped that this will equip companies with the necessary tools to ensure that sustainability programmes are appropriately aligned with SDG principles and have real and lasting impacts.
[Contributor: Boitumelo Mogale]
ClientEarth files greenwashing complaint against BlackRock
In October, ClientEarth, an environmental nonprofit organisation, filed a complaint with the French financial regulator, Autorité des marchés financiers (AMF), against BlackRock, over alleged greenwashing practices. Using data from Reclaim Finance, the complaint alleges that BlackRock misled investors by labelling 18 of its actively managed retail investment funds as “sustainable,” despite these funds having substantial exposure – over USD 1 billion – to oil and gas companies such as ExxonMobil, Shell, TotalEnergies, Chevron, and BP. ClientEarth’s complaint also alleges that BlackRock’s practices are “inconsistent” with the European Securities and Markets Authority (ESMA) guidelines on using ESG and sustainability terms in fund names. ESMA’s recently released guidelines emphasise that investments in companies deriving substantial revenue from fossil fuels cannot be labelled as “sustainable”. The guidelines are set to apply to existing funds starting 21 May 2025. ClientEarth's ultimate objective is to urge the AMF to enforce actions requiring BlackRock either to rename the funds or adjust the funds’ portfolios to reflect their actual designation.
So what?
There is demand for genuinely sustainable investment products. Recent polls reveal that more than half of French citizens, for example, consider sustainability factors when selecting financial products. Exaggerating sustainability claims risks undermining this trend, eroding trust in the sustainable investment sector. ClientEarth’s complaint not only aims to push for clearer definitions and stricter regulations on what qualifies as sustainable investing, but also to safeguard investors who may choose ESG funds both to implement their own sustainability goals or mitigate climate-related financial risks. This is the latest in a series of greenwashing cases brought against investment companies globally as regulators crack down on misleading claims. Recent successful cases in Australia and the UK show that much closer attention is being paid to sustainability claims and regulators are prepared to pursue enforcement.
[Contributor: Federico Ingretolli]
REfresh Alliance launched to boost the decarbonisation of the drinks industry
In October, ten multinational beverage companies – including Bacardi, Carlsberg, Heineken, and the Coca-Cola Company – launched REfresh Alliance, an industry-wide consortium aimed at accelerating the adoption of renewable energy across its members’ supply chain.
The initiative is managed by Enel X, the advanced energy services division of Italy's Enel Group, which will connect suppliers with renewable energy providers to boost their decarbonisation. In 2021, the drinks industry was responsible for 3.8 percent of global carbon emissions, 90 percent of which was indirectly produced by beverage companies within their supply chains. Suppliers face numerous barriers to decarbonisation, ranging from the lack of capabilities to limited information on economically viable projects. The initiative aims to remove barriers to renewable energy adoption across the supply chain, provide dedicated educational platform on best market practices, and support the industry’s transition to net-zero through cost effective and targeted solutions. So far, REfresh has engaged with more than 300 suppliers to discuss their involvement in the initiative and their transition to net-zero emissions.
So what?
With growing regulatory scrutiny on the environmental and social impact of supply chains, the decarbonisation of suppliers is becoming one of the biggest challenges the drinks industry faces in delivering net-zero emissions. The consortium is looking to expand to other markets and to invite additional companies in the industry to pool and scale their resources to boost the supply chain’s adoption of renewable energy.
The new initiative highlights a crucial point: for companies in carbon-heavy sectors like beverages, reducing carbon footprints means addressing emissions within their supply chains, as solely focusing on internal operations is insufficient. It is also a signal to other industries that achieving meaningful sustainability requires empowering suppliers to overcome barriers to decarbonisation, rather than just mandating hard to achieve targets on small suppliers operating in often challenging geographies.
[Contributor: Anna Tonioli]
