The REP Wrap: 42% of firms report no alignment with EU taxonomy
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More than 40% of companies disclosing against the EU’s green taxonomy say they have zero alignment with the framework. That’s according to research by Morningstar, who assessed the latest reported data, comparing it with 2023. It found that at least 1,300 non-financial firms report on their taxonomy alignment, but for 42% of them, the official number of qualifying activities is 0%. For those opting to disclose “above-zero data”, 28% of their capex is aligned with the taxonomy, and total aligned investments over the past two years total more than $500bn.
Meanwhile, the Canadian government has formally endorsed efforts to create a voluntary taxonomy focused on the climate transition. In 2020, an initiative was set up to let the market decide which projects supported of Canada’s climate transition, but it was shelved in 2022 after a series of missed deadlines and disagreements about what should be included. The Government revived it this week, saying it wanted a “voluntary Made-in-Canada” taxonomy to define investments “based on scientifically determined eligibility criteria that are consistent with the goal of reaching net-zero emissions by 2050 and limiting global temperature rise to 1.5°C above pre-industrial levels”. Under new governance, the framework will start with electricity, transportation, buildings, agriculture and forestry, manufacturing, and extractives, including mineral extraction and processing, and natural gas. The first sectors will be released within a year.
The Chancery Lane Project has translated its ‘climate clauses’ into Japanese and German, so that more companies can integrate net-zero commitments into their contracts to help meet their targets. The UK-based non-profit’s six legal clauses are already used by Telstra, Salesforce, Vodafone and NatWest. They provide climate change clauses for Heads of Terms, due diligence questionnaires for M&A, ESG-linked executive pay, employment contracts and other topics.
Swiss pharmaceutical companies Acino has revealed its head of sustainability has been put on its global leadership team and now reports to the CEO. The firm included the update in its latest sustainability report, covering 2023, adding that it had launched a new code of conduct for suppliers and evaluated all its new “high-risk suppliers” in accordance with the Pharmaceutical Supply Chain Initiative’s standards.
Manufacturing heavyweight 3M has had its near-term climate goals validated by the Science Based Targets initiative. The target is to reduce its absolute Scope 1 and 2 greenhouse gas emissions by 52.6% by 2030, from a 2019 baseline; and reduce Scope 3 emissions by 42% (using a 2021 baseline) over the same period. SBTi also closed its public consultation on net-zero standards for financial institutions this week.
The International Capital Market Association has published a paper on how sustainable commercial paper can be used to provide short-term financing for longer-term sustainability efforts. It outlines best practice and addresses some of the key challenges, including the clash of time horizons.
Dutch investor body Eumedion has written to listed companies in the Netherlands to ask them to put their CSRD reports to a shareholder vote in 2025. The group, which specialises in corporate governance and sustainability, said the firms should also align their transition plans with the EU’s Corporate Sustainability Due Diligence Directive by next year. The letter highlights the topics that Eumedion’s institutional-investor members will engage the companies on over the next 12 months. Separately, it wrote to the six largest audit firms to tell them to “pay increased attention” to the design and execution of companies’ double materiality assessments in their assurance work, and make the assurance report part of “an integrated auditor’s opinion on both the financial statements and the sustainability statement”.
Almost 25% of business have exited regions at risk from the impact of climate change, according to a study by Marsh McLennan. More than 70% of the companies surveyed for the research are yet to engage with their suppliers on the topic. The authors said it was clear that climate adaptation was a growing consideration for firms, but “many struggle to map and identify complex climate risks; some still see adaptation simply as a cost; and others find it difficult to justify investment to mitigate a risk that is ill-defined or feels distant”.