ESG Essentials: UK warned over green taxonomy delay, Biden nominates new World Bank president and China considers mandatory ESG disclosures

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UK urged to ‘act now’ to overhaul its green taxonomy

The Green Transition Advisory Group (GTAG) has warned the UK government that it must “act now” on finalising its overdue green taxonomy for sustainable activities or risk failing to secure green jobs and investment. 

The government-appointed group was created to advise on the formulation of the taxonomy, and raised its concerns after investors said that the UK’s slow approach is leaving green investment “far behind where it needs to be.”

The UK’s green taxonomy has already missed its target to be in place by the beginning of 2023, lagging behind peers in the EU, whose climate mitigation and adaptation taxonomy has been in place since 2021.

Late last year the UK treasury left investors disappointed after announcing delays to the taxonomy regulations whilst the government deliberated its approach. But with the US and the EU raising the stakes, the UK government needs to pick up the pace if it wants to keep its position in the race to become a green financial centre.

President Biden nominates Ajay Banga as World Bank president

Following the resignation of former World Bank chief, David Malpass, President Biden nominated former Mastercard executive Ajay Banga to become president of the organisation. A White House release announcing the nomination singled out his credentials in “leading successful organisations in developing countries and forging public-private partnerships to address financial inclusion and climate change”. During his time at Mastercard, he spearheaded many climate-focused initiatives and is regarded as a strong proponent of greater climate action.

Ajay Banga, who was born in India, would be the first president of the World Bank to be born in a developing nation and one of only four to be born outside the US.  

His appointment comes at a point where nearly 60% of low-income countries are in or near debt distress and have called upon international financial institutions for greater help.

Many developing economies are “uneasy about a shift in the World Bank’s focus from poverty to climate change”, and it will be the responsibility of the new president to show these countries that it’s both possible and necessary for these objectives to work in tandem, rather than in opposition. 

China Considers Mandatory ESG Disclosures for Domestic Public Firms

Last week, Bloomberg reported that China plans to introduce mandatory ESG disclosures to support its efforts to transition to a low-carbon economy. According to an unnamed source, Chinese regulators are working alongside advisory bodies to produce an ESG reporting framework for domestic companies that could come into effect by the end of 2023. The standard would be recognised by the global community but relevant to the domestic market, and may be introduced on a “comply or explain” basis before becoming mandatory.

This would be a significant step for China, which was responsible for almost 31% of global emissions in 2021. Although the source remains unnamed, last year China’s Securities Regulatory Commission Vice Chairman Fang Xinghai said that creating compulsory ESG reporting requirements would be the “next step.” 

Chinese regulators have previously raised concerns over the inclusivity of International Sustainability Standards Board requirements, deeming them too high for developing countries. However, if these latest reports are true, the implementation of such disclosures in the world’s second-largest economy would mark a significant milestone in the transition to a low-carbon future.

EU’s Carbon market reaches milestone of €100 per tonne of carbon

The price of an allowance for a tonne of carbon in the EU’s emissions trading system (EU ETS) reached €100 for the first time, a sign of the bloc’s increasing attempts to penalise high polluters by introducing lower caps on legal emissions. The EU ETS, which the European Commission calls “a cornerstone of the EU’s policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively” is the world’s first and largest carbon trading market in operation.  

According to the Financial Times, the five-fold increase in the price of carbon allowances in the last three years has come as the EU “has tightened rules to make the system more onerous for polluters”. Reaching this milestone will likely cause many European companies to re-evaluate their decarbonisation strategy to remain under the cap. 

European companies have until April to ensure they have enough credits to cover last year’s emissions, which will likely result in even more price rises as the fiscal year comes to a close.

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