Reeves takes inspiration from abroad on responsible finance
The UK Government has announced legislation in 2025 that will regulate Environmental, Social and Governance (ESG) ratings providers, bringing them under the supervision of the Financial Conduct Authority (FCA).
Rachel Reeves, the Chancellor of the Exchequer, explained that this initiative responds to growing demand for ESG considerations in investments, and follows recommendations to improve transparency and address potential conflicts of interest in the ESG ratings sector from securities standards setter the International Organization of Securities Commissions (IOSCO). This regulatory push aligns with similar efforts in the EU, where they have already placed ESG ratings providers under the authority of the European markets regulatory, ESMA.
In addition to this development, Reeves is exploring the consolidation of local government pension schemes. This pooling of resources could reduce inefficiencies and save substantial fees, enabling larger investments in infrastructure and other long-term assets and opening the door for strong, centralised ESG-linked investment criteria.
Rachel Reeves, appointed in July 2024, has come out of the gates with a bold agenda and her willingness to look for and act on inspiration from abroad reflects a strategy that seeks to solidify the UK’s position as a global leader in sustainable finance.
England’s nature-friendly farming schemes boosting biodiversity, study finds
New government research has found that England’s biodiversity-boosting farming schemes increase wildlife such as butterflies, bees, birds and bats.
The Environmental Land Management Scheme (ELMS) in England incentivises farmers to create space for nature by allowing hedgerows to grow more naturally and planting wildflowers on field margins to benefit wildlife. Some farmers taking part in the schemes have observed an increase in wildlife, but no data has been available until now.
The report explores future land use scenarios to balance food production, reduce greenhouse gas emissions, and conserve wildlife habitats; none achieve significant reductions without a decrease in food production. Strategies include reducing waste, enhancing farmland productivity and prioritizing arable land for direct human consumption rather than for livestock feed. Given that it takes 9 calories of chicken food to produce just 1 calorie of chicken meat, the report reiterates the need to prioritise growing crops for human use rather than animal feed.
The report highlights the need to shift away from meat consumption to reduce greenhouse gas emissions, with more land needed to house nature and store carbon. But farmers warn they may not be able to continue these schemes if the amount they are paid falls, as they are repurposing land formerly used for food production to help wildlife, whilst facing additional pressures from extreme weather and price inflation.
EIB and Deutsche Bank join forces to lift EU wind production
The European Investment Bank (EIB) has launched a €5bn initiative to support the wind-energy industry in Europe, starting with a €500m counter-guarantee to Deutsche Bank AG. The counter-guarantee will allow Deutsche Bank to establish a portfolio of up to €1bn in banking guarantees for wind energy manufacturers within the EU.
This initiative will enable manufacturers to secure advance payments and provide performance guarantees for wind energy manufacturers in the EU. In turn, the initiative will allow the manufacturers to prepay their suppliers for key components, including turbines, cables and grid connection infrastructure.
The initiative is part of the EU Wind Power Package, introduced by the European Commission in October 2023, which aims to support a competitive wind energy supply chain across the EU. Last year, wind accounted for almost one-fifth (19%) of the EU’s electricity generation. More than 500GW of wind should be operational across the bloc by 2030 if it is to meet its Renewable Energy Directive.
Despite the EU’s success in the wind-power sector, it still faces many challenges including slow project permitting, supply chain bottlenecks and increased international competition. However, EIB’s innovative approach intends to share credit risks faced by commercial banks when dealing with the wind industry. Such innovative approaches to finance could benefit the Global South, where the gap in clean energy financing remains a critical challenge.
Goldman Sachs exits Climate Action 100+ amid US ESG scrutiny
Goldman Sachs Asset Management has announced its departure from Climate Action 100+, an investor-led initiative that aims to pressure 170 of the world’s largest emitters to reduce their carbon footprints and improve their climate-related financial disclosures.
This follows the departure of several other prominent asset managers, including Invesco and AllianceBernstein, who exited the initiative in recent months.
The departures come amid rising political scrutiny in the US regarding environmental, social, and governance (ESG) investing. In late July, Republican leaders from the House Judiciary Committee sent letters to over 130 companies and pension funds demanding explanations for their ESG strategies, signalling increasing political pushback.
Despite leaving Climate Action 100+, Goldman Sachs has stated it remains committed to sustainable investing and will engage with companies on its own account. Climate Action 100+ acknowledged the politicisation of ESG efforts but reaffirmed its mission to support investors in managing climate-related financial risks.
This news appears to be part of a broader anti-esg movement that is driven largely by fossil fuel interests. Documents have revealed that the fossil fuel industry has played a significant role in stoking the controversy around ESG investing by framing it as discriminatory and poses risk to economic freedom. Unfortunately, it seems fossil fuel giants occasionally have the power to influence political decisions, such as in Texas where an anti-ESG law has passed. This will in turn impact the financial industry, as companies such as Goldman Sachs must decide how to act in response.