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Sustainability

Biodiversity, net zero, and the evolution of ESG standards – the 2023 NL Green Finance Conference offers platform to share learnings

The inaugural Netherlands Green Finance conference, jointly organised by Allen & Overy and NatWest, provided a unique opportunity for a range of local financial market stakeholders to engage on the most pressing ESG topics. These included the emergence of biodiversity metrics and targets, drafting of credible transition plans and the increasingly complex regulatory environment.

The keynote speaker at the event was Brenda Kramer, Senior Advisor Responsible Investment at PGGM and former member of the Technical Expert Group of the European Union that helped establish the EU Taxonomy. Participants included issuers, investors, financial institutions, consultancies, NGOs[1] and other agencies.

Participants were constructive on the current wave of environmental regulatory guidance, seeing frameworks such as TNFD[2], TCFD[3] and CSRD[4] as important bases for developing a holistic environmental strategy. It was also clear however that greater action remains required. Discussions focused on aligning financial outcome metrics with core ESG topics (e.g. climate change, biodiversity loss) to accelerate action.

Three roundtable discussions provided an opportunity to share detailed views and experiences around biodiversity, net zero and transition strategies, and ESG disclosure and standards. Below, we’ve summarised the key take-aways from these sessions: 

Roundtable 1: Biodiversity - developing natural capital strategies in an inclusive way, and disclosure expectations for biodiversity

Moderated by NatWest’s Daniel Bressler with panellists Erwin Kooij from Danum Advisors; Anne-Claire van den Wall Bake-Dijkstra from Deloitte; and Christine Wortmann from the WWF

1. Investors, as well as the wider public, often only focus on climate when looking at environmental aspects rather than understanding climate as a part of nature and biodiversity. This coordinated approach can also help to change the perception that nature is only about measuring negative impacts rather than embracing nature as a solution for climate mitigation and adaptation.

2. There is good news as the overall understanding and focus on biodiversity is moving faster than the awareness of climate change some 10-15 years ago.

3. Expectations for organisations to disclose their impact on biodiversity are just as high now as they are for ESG data as a whole – with similar reporting challenges:

Roundtable 2: Building a credible net zero & transition strategy, and climate-related litigation

Moderated by Dr Arthur Krebbers with panellists Tim Sweerts from the A&O Litigation Practice; Kaili Mao from Goldman Sachs Asset Management; and Taco Bosman from E&Y

1. The biggest challenge around net zero targets and target achievements remains the data calculation of Scope 3, with continuous benchmarking often causing complications for Treasury and Investor Relations teams.

2. Disclosure requirements to access green financing help to focus the gathering of relevant data swiftly, however, this can lead to a significant amount of data, which internal teams need to know how to interpret and how to meaningfully present to investors, debt providers, and other stakeholders.

3. Green bonds act as a strong catalyst for wider transition action, both through tangible asset-liability linkage and through encouraging broader decarbonisation efforts at a company.

4. Litigation risks currently arise around “greenwashing”, hence it is crucial  for companies to ensure they can back-up any decarbonisation statements with credible transition plans.

  • To mitigate litigation risks, it may not be sensible for companies to share every net zero ambition in the public domain but to focus on the most material parts of their transition plan.

Roundtable 3: The evolution of ESG disclosure and standards

Moderated by Jonathan Heeringa from A&O, the panel members – Fiona Watson from the WBCSD; Antonina Plakhotniuk from NatWest; and Ralph Kroesemeijer from AFM             

1. While some convergence of disclosure frameworks globally is happening, national or even regional contexts will remain important, meaning that a full convergence of universally applicable ESG reporting standards is not very likely.

2. The EU’s Corporate Sustainability Reporting Directive (CSRD) has already had a significant global impact with extraterritorial effects on value chains, and the establishment of the International Sustainability Standards Board.

3. Despite potential compliance costs, issuers see value in preparing for CSRD reporting in order to learn about the previously unknown aspects of their business and find commercial opportunities.

  • The CSRD may further facilitate the KPIs being linked to transition targets disclosed in the corporate reporting.
  • Better reporting under the CSRD can also be helpful for the UoP structures of green, social and sustainability bonds, and it will allow investors to more easily identify genuinely sustainable investment options.
  • In addition to the CSRD, issuers increasingly aim to align with the EU taxonomy, demonstrating leadership in sustainable finance markets.

4. Looking at the evolution of ESG and sustainable finance over the last few years, companies increasingly prefer issuing in labelled format to reach a broader universe of investors and to communicate their sustainability efforts more effectively.
 

  1. NGO Non-governmental organisation
  2. TNFD Taskforce on Nature-related Financial Disclosures
  3. TCFD Taskforce on Climate-related Financial Disclosures
  4. CSRD Corporate Sustainability Reporting Directive

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