The Sillion Briefing 29.11.2024
Need-to-know corporate sustainability and ESG news, delivered fortnightly
In this edition...
COP29 ends
UK Green Taxonomy
Gensler out
EU omnibus
HSBC CSO resigns
Triodos on nature
Arsenal goal
China dominates minerals
Events
Curtains on COP29
There was a mood of division present throughout this year's COP. You’ll have already heard that negotiations concluded with an agreement asking governments to provide $1.3 trillion annually for climate finance to developing economies by 2035 – celebrated in some quarters, but widely criticised for being insufficient and unclearly legislated. Also making headlines was a final deal on the overall rules to launch carbon trading markets, almost a decade after it was first proposed as Article 6 of the 2015 Paris Agreement. Transactions of carbon credits will operate under UN-monitored systems, and are structured to prevent double-counting of emission reductions.
A few additional outcomes for your radar below:
Tensions grew as Azerbaijan's President Ilham Aliyev praised natural gas during the conference, prompting calls for a UN-led overhaul of the COP process, casting doubt on its credibility ahead of COP30 in Brazil.
A fully operational Loss and Damage Fund to address the economic, infrastructure and societal impacts of climate-induced events.
Global clean energy, hydrogen and storage pledges, including expanding clean hydrogen production through the Hydrogen Action Declaration, and an aim to deploy 1,500 gigawatts of energy storage globally by 2030.
One Number: 3.8%
The percentage that energy sector employment increased by last year, as per the IEA's 2024 World Energy Employment report.
This growth rate surpasses the overall economy's job growth by 1.6%, with clean energy sectors leading the surge in new energy positions.
Policy and regulation
UK Green Taxonomy: Consultation open until Feb 2025
A consultation has been opened on the UK’s long-promised Green Taxonomy, with the goal of gathering views on whether such a Taxonomy would be a worthwhile addition to existing sustainable finance policies. In this context, a taxonomy is a classification of economic activities that can be considered sustainable in alignment with national goals, with the aim of creating consistency around what counts as sustainable investment. The consultation makes reference to the complexity of other taxonomies, nodding to the difficult launch of the EU Taxonomy and its high degree of stringency, which has made it hard to use when constructing sustainable portfolios and funds. Interoperability with other taxonomies is still identified as a priority, suggesting that the format and terminology of the UK taxonomy would likely still be aligned with the EU’s approach, as had been expected. You can review the consultation and submit responses here.
US SEC’s Gensler to step down upon Trump inauguration
Trump had promised to fire Gary Gensler, the chair of US financial regulator the SEC (Securities and Exchange Commission), on “day one” of his presidency – and indeed, Gensler has now said he will stand down in January. As well as becoming notorious in the crypto world for promising to regulate the sector, Gensler had been a driving force behind the ‘Climate Rule’. This asks US companies of a certain size to disclose climate-related risks (in TCFD fashion) as well as GHG emissions. With the Climate Rule having had progress halted by multiple lawsuits, it’s unclear in what form the regulation will now progress to becoming law, with the new administration likely to reduce or strike down the ruling entirely.
EU
Omnibus may group EU sustainability regulations together
In a bid to “reduce bureaucracy”, European Commission President Ursula von der Leyen has proposed a joining together of the Corporate Sustainability Reporting Directive (CSRD), EU Taxonomy, and Corporate Sustainability Due Diligence Directive (CS3D) into a single regulation through an ‘omnibus’, an infrequently used regulatory instrument. As the omnibus approach requires each law to be re-opened, the move immediately raised alarm, with many concerned that it would be used to weaken the regulations – although von der Leyen has insisted the content of the laws would not be changed. While an omnibus approach might resolve areas of overlap and increase clarity for large companies in particular, the burden of these legislations wouldn’t be significantly lessened without unwelcome reductions to each regulation – which in the meantime might create greater uncertainty for in-scope companies. The omnibus is still at very early stages, and there’s still lots of legislative process for it to go through before we see if, and how, it will materialise. We’ll keep you updated in subsequent Briefings.
Finance
HBSC sustainability chief steps down
HSBC has announced that its Group Chief Sustainability Officer Celine Herweijer is leaving her role at the end of this year. While perhaps a routine personnel change to the naked eye, her exit coincides with CEO Georges Elhedery’s cost-cutting drive, which has notably removed the sustainability role from the bank’s executive committee and prompted speculation that green issues are being deprioritised in HSBC’s strategy.
Triodos Bank commits to nature-based solutions
Ethical Dutch bank Triodos has announced a bold commitment to invest €500 million in nature-based solutions by 2030, reflecting its recognition of biodiversity as a key material impact. The initiative aims to support projects that restore and conserve nature, reduce CO2 emissions, and deliver societal benefits. Triodos has pledged to avoid negative impacts on biodiversity across its activities by enforcing strict minimum standards and enhancing its engagement with companies to ensure alignment with its environmental objectives.
Corporate
Arsenal shoots for the top of the (climate) leaderboard
Arsenal has become the world’s first football club to have its long-term climate targets validated by the Science Based Targets Initiative, aiming to reduce direct emissions, classified as Scope 1 and 2, by 42% by 2030 and 90% by 2040, using 2021 as a baseline.
China dominant in transition-critical minerals as Northvolt collapses
Northvolt, Europe’s biggest battery hope, entered bankruptcy last week, as the EU’s ambitions to construct a battery supply chain continued to falter. Chinese battery expert Robin Zeng’s assessment of European efforts to compete with China was damning, citing “wrong design… wrong process… wrong equipment”. Kent Masters of Albemarle, the world’s largest lithium producer (an essential mineral for EVs) commented that building a lithium supply chain in North America and Europe that could compete with China was currently not viable, with reliance on China inevitable for now.
Calendar
2024
SBTi: Draft Corporate Net-Zero Standard (CNZS) V2.0 public consultation – Q4 2024
ESMA: ESMA Guidelines on fund names using ESG or sustainability-related terms to apply to funds – 21st November 2024
2025
CSRD: Undertakings previously subject to the EU's NFRD must report ESRS in their Annual Report this year (i.e. FY24 reporting) – 1st January 2025
UK SRS: UK Sustainability Reporting Standards (SRS) published – Q1 2025
UK SDR: UK Sustainability Disclosure Requirements (SDR) rules on labelling of sustainability-focused funds to come into force – April 2025
ESMA: ESMA Guidelines on fund names using ESG or sustainability-related terms to apply to funds which existed before the rule change – 21st May 2024
London Climate Action Week 2025 – 21st-29th June 2025
COP: COP30, Belém, Brazil – November 2025
SBTi: Corporate Net-Zero Standard (CNZS) V2.0 to come into force – by end of 2025
2026
CSRD: All large undertakings must report ESRS in their Annual Report this year (i.e. FY25 reporting). In CSRD parlance, a 'large undertaking' is a company exceeding two of the three following thresholds: Balance sheet total €25 million, net turnover €50 million, 250 employees – 1st January 2026
UK SRS: UK listed companies need to begin work on their IFRS Sustainability Standards (ISSB Standards) and transition plan reporting, in order to be ready for next year
2027
UK SRS: UK Sustainability Reporting Standards (SRS) to become mandatory for FY26 reporting, making the IFRS Sustainability Standards S1 and S2 (the ISSB Standards) and transition plan reporting mandatory – FY26 reporting
CSRD: Listed SMEs must report ESRS in their Annual Report this year (i.e. FY26 reporting). In CSRD parlance, an SME is a company which exceeds only one (or none) of the following thresholds: Balance sheet total €25 million, net turnover €50 million, 250 employees – 1st January 2027
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to very large companies (over 5,000 employees and over €1.5 billion turnover) – 26th July 2027
2028
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to large companies (over 3,000 employees and over €900 million turnover) – 26th July 2028
2029
CSRD: Non-EU undertakings with EU branches / subsidiaries must report ESRS for the previous business year. This applies if the non-EU undertaking has a net turnover generated within the EU above €150 million, and if it has either subsidiaries that are large undertakings or SMEs (CSRD definitions of these are given in the calendar above) with securities traded on an EU market; or if it has branches with net turnover generated in the EU above €40 million – 1st Jan 2029
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to all remaining companies within its scope (over 1,000 employees and over €450 million turnover) – 26th July 2029
Any questions, comments, or feedback?