The SEC stays silent, US derails development funds, carbon markets face fire.
🇪🇺 The Corporate Sustainability Reporting Directive (CSRD) is going ahead from 2024, after opposition was narrowly overturned this week. The European Commission plans to delay sector-specific reporting requirements, however, giving companies time to adjust to the sector-agnostic ones. By 2026, 50,000 companies will fall under CSRD scope — and that’s only in Europe. Many international companies will be subject to the requirements, prompting concerns about interoperability between jurisdictions. On that front, the International Sustainability Standards Board recently declared that CSRD alignment doesn’t meet its own disclosure requirements. Central to the tension is a debate about single vs. double materiality, where the EU has found an ally in California, at least. Meanwhile, the SEC, whose disclosure rules were due this month, has been very quiet.
🇺🇸 The US has carved out a complicated niche in the green transition. On the one hand, the Biden administration has funnelled capital towards clean-energy, transforming the US economy. Just this week, it unveiled $3.5B for electric grids and $7B for hydrogen hubs. On the other hand, the greenbacks don’t always end up in green hands. The FT reports that fossil fuel companies have raked in much of the funds earmarked for clean hydrogen, for instance, and the technology is no stranger to controversy at the best of times. The US has also battled accusations of ‘green protectionism’, most recently in Egypt, where the G77 has blamed the US for crumbling negotiations over a ‘loss and damage’ fund for developing nations. Green financing may be transforming US cities, but even the Gates Foundation warns that the US is a “stumbling block” in development finance elsewhere.
🗺️ Message to asset owners: Positive progress, but work to be done. This week, the UN-convened Net Zero Asset Owner Alliance published its third annual Progress Report, reporting the first ever decline in financed emissions among its 86 members. Despite promising progress, the Alliance warned of a steepening road ahead. Based on IPCC modelling — to which its decarbonisation targets are anchored — net portfolio emissions must come down by 40-60% before 2030 (almost double the 22-32% target for 2025). The Alliance underscored the “critical” role of investor engagement in driving “real-world emissions reduction.” It was a message echoed by Climate Action 100+ in its annual assessment of company progress (also published this week), in which the investor initiative urged shareholders to drive portfolio companies towards faster action.
🗺️Carbon offsetting is facing fire (again), after a New Yorker article reported that South Pole, a carbon credit broker, sold millions of credits for carbon reductions that weren’t real. The problem here, writes Bloomberg’s Matt Levine, is not that the REDD+ project in question wasn’t doing its job, but rather that the surrounding forests were also doing their job. Here’s the thing: In the carbon market, credits are only as valuable as their environmental impact. For nature conservation projects, your evidence is counterfactual: You must prove a forest would have been chopped down had it not been conserved. That means benchmarking your (protected) forest against a reference (unprotected) forest; if it stays standing, that’s great news for the climate and bad news for a carbon-credit seller. It proves the market is a grift, writes Harvard’s Lina Thomas in the FT, but she urges readers to see it as an opportunity to “purge the market of BS” and better it rather than bin it.