Council of European Union agrees negotiating mandate on ESG ratings

In our monthly Corporate ESG newsletter we breakdown the trending ESG* trades and themes, helping corporates get ahead of the latest issues shaping the market.

Institutional developments

EU invests €2bn of Emissions Trading revenue into clean energy projects

€2.17bn has been invested into nineteen projects to help improve nine Member States’ infrastructure, which takes the Modernisation Fund’s total disbursements to €9.68bn; roughly half was invested in 2023. The fund utilises revenues derived from the EU’s Emissions Trading System (ETS). The key aim of the ETS is to help lower-income EU countries meet their 2030 climate and energy targets, by reducing greenhouse gas emissions (GHG) and improving energy efficiency. From 2024 onwards Greece, Portugal and Slovenia will also receive financial support from the fund. The projects benefitting from the investment have a range of objectives, such as renewable electricity distribution, energy network modernisation and coal generation replacement with lower carbon intensity fuels.


New UK tax to level carbon pricing 

The UK government is due to implement a Carbon Border Adjustment Mechanism (CBAM) by 2027. The measures aim to reduce risks of ‘carbon leakage’, which involves emissions being displaced to other countries with lower/no carbon price. This may be particularly relevant to emissions caused by carbon intensive products that are highly traded, such as iron, steel, and cement. The levy aims to ensure that products from overseas face a comparable carbon price to ones produced in the UK. Charges applied by the CBAM will be based on the amount of carbon emitted in the production of the given imported good and the gap between the carbon price that is applied in the country of origin and the price faced in the UK by domestic producers. Further consultation will take place in 2024 to set out in-scope products and minimise any impact on trade.

Policy and regulation

2024 sustainable finance policy and regulation outlook: Check-out our year ahead outlook that focuses on UK, EU and US insights.

Disclosure, ratings and data

GRI welcomes agreement reached on EU Due Diligence Directive

The Global Reporting Initiative (GRI) has welcomed the Corporate Sustainability Due Diligence Directive (CSDDD) set out by the European Parliament and the European Council. Under the principle of “obligation to act”, it sets new rules for responsible business conduct requiring that companies identify, mitigate and account for any adverse human rights or environmental impacts in their value chain. The CSDDD’s behavioural expectations are complementary to the disclosure requirements adopted one year prior in the Corporate Sustainability Reporting Directive (CSRD), as the latter set mandatory disclosure requirements for companies on their due diligence processes, under the “obligation to tell” principle. As the GRI standards are fully aligned with the Organisation for Economic Co-operation and Development (OECD) due diligence requirements, companies that are already GRI aligned are well positioned to adhere to the CSDDD. 


CDP 2024 disclosure transformation

The Carbon Disclosure Project (CDP) will launch a refreshed disclosure framework on a new platform in April 2024; its aim is to deliver improvements in how organisations disclose through CDP, thereby helping drive climate action. The new questionnaires will be more efficient and user-friendly, with duplication across all existing themes (climate, forests, and water) considerably reduced. Notably, the questionnaire will also be aligned to International Sustainability Standards Board (ISSB) S2 Climate Standard. Importantly, the new framework will enable organisations to meet the demands ahead with greater ease, as the global economy enters a new era of mandatory disclosure. A new disclosure timeline will also be in place for corporates to submit their disclosures from early June to September 2024.


Amendments to the SASB Standards

The ISSB published amendments to the SASB Standards, to enhance their international applicability across different jurisdictions and accounting standards, whilst, also upholding the SASB Standards’ structure and intent- particularly around non-climate related disclosure topics and metrics.


EU Council agrees negotiating mandate on ESG ratings and FCA welcomes the launch of industry code of conduct for ESG ratings and data products

The EU Council reached an agreement on its negotiating mandate on ESG ratings, with the new rules aiming to strengthen the reliability and comparability of ESG ratings. Under the proposed rules, ESG rating providers will need to be authorised and supervised by the European Securities and Markets Authority (ESMA) and comply with transparency requirements. Furthermore, the Council introduced the possibility for ESG ratings providers not to have a separate legal entity for certain activities, provided that a clear distinction exists between activities, and any conflicts of interests are avoided. However, this would not be applicable to consulting or audit activities, for which the creating of a separate legal entity would be required. Meanwhile, the International Capital Market Association (ICMA) and the International Regulatory Strategy Group (IRSG) have launched a voluntary code of conduct for ESG rating and data product providers with the purpose of increasing transparency and trust. The FCA, having appointed ICMA and IRSG for the purpose of establishing the voluntary code, has welcomed the outcome.

Capital Markets

Primary and Secondary Market

For analysis and information on the Primary Market, along with updates on the Secondary Market, please take a look at the full monthly newsletter on Market Insights. If you do not have access to Market Insights, please contact us here.

Carbon Markets

Nasdaq reveals new tech for carbon credits to propel carbon markets

Currently, the carbon credit market operates with bilateral trading and significant reliance on manual processes; limiting its scalability as the market progresses, according to Nasdaq. This rigidity, combined with a lack of standardisation in credit data, has hindered substantial capital inflows into the market. Consequently, Nasdaq has developed a carbon taxonomy framework that can readily incorporate new types of credit as the market expands. There will also be comprehensive APIs that will allow participants to seamlessly interact across the market. Together, this should help establish a standardised, trusted ecosystem capable of attracting high-quality liquidity from a variety of investors. Using smart contract technology, the service enables secure creation, processing, and management of rights linked to the underlying asset. By automating asset servicing and settlement procedures, the technology promises increased efficiency and transparency throughout the trade lifecycle.


APG invests in Women’s Livelihood Bond

APG has invested USD 30 million (December 8, 2023) in a bond that provides access to capital for women entrepreneurs across a number of Asian and African countries. The proceeds will target women-focussed businesses in 6 sectors across 5 countries and the bond will uplift approximately 800,000 women and girls in underserved areas in Asian and African countries. In addition to being innovative, the product has a favourable risk/return profile that generates both value and impact.


BNP Paribas launches the Climate Impact Infrastructure Debt fund

BNP Paribas has launched a new Climate Impact Infrastructure Debt fund structured as Sustainable Finance Disclosures Regulation (SFDR) article 9; targeting €500-750 million from institutional investors, including BNP Paribas Cardif’s seeding commitment. It will have an investment grade profile and is expected to allocate to transactions in continental European countries, supporting energy transition projects that are in line with its investment philosophy. The focus is expected to be on renewable energy, clean mobility and the circular economy, including new sectors such as batteries, hydrogen and carbon capture. Three investments have already been secured for the fund, with financing for a low-carbon energy producer, a green-sourced district heating platform and a portfolio of onshore wind farms.

Regular updates to keep you informed

Regular articles from us on market-moving themes, and updates on what we are doing to further our ESG commitment.


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*For any unfamiliar terms used within this article please refer to our Insights glossary

This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes.  It is indicative only and is not binding. Other than as indicated, this article has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this article, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

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