Private markets ESG-focused data solutions provider Novata announced today the launch of a new solution, Novata Carbon Navigator, aimed at enabling users to track, measure and report carbon data.

According to Novata, the new solution was developed to address organizations’ needs to monitor and reduce their carbon footprint and meet disclosure requirements, as businesses face increasing transparency and sustainability demands.

Mark Fischel, Carbon Product Lead at Novata said:

“The Novata Carbon Navigator will radically improve the carbon experience for investors and their portfolio companies. Our clients have expressed the need for a simplified carbon solution and the Carbon Navigator, which is both fast and easy to use, meets this demand.”

Key features of the new solution include quick calculation of Scope 1, 2 and 3 emissions in Novata’s ESG platform, simplified tracking of company emissions activities such as energy use and facilities, calculation of emissions from the supply chain by uploading expenses and categorizing vendors, and a shareable audit trail for emissions reporting and meeting regulatory requirements.

Novata is a public benefit corporation founded in 2021 by a consortium including S&P Global, the Ford Foundation, asset management firm Hamilton Lane, and social change-focused investment firm Omidyar Network, and supported and advised by several leading private equity firms and pension funds, to provide private markets investors with a solution for ESG measurement, data collection and benchmarking, and enable reporting on ESG data.

Lauren Peat, Chief Revenue Officer at Novata, said:

“With the Novata Carbon Navigator and our expert ESG Services team, we are now the one-stop solution for data collection and management so our clients can make progress on their sustainability goals.”

The Taskforce on Nature-related Financial Disclosures (TNFD) announced a commitment by 320 companies and financial institutions to start nature-related corporate reporting, based on the recently released TNFD recommendations, with some to begin disclosures with their annual corporate reporting for 2023.

The commitments, announced at the World Economic Forum’s (WEF) Annual Meeting in Davos, Switzerland, marks a significant move towards the establishment of standardized reporting on nature-related governance, strategy, risk management and targets, with companies signing on representing $4 trillion in market capitalization, and also including more than 100 financial institutions across banks and insurers as well as asset owners and managers representing $14 trillion.

Each of the companies have pledged to begin providing TNFD-aligned disclosures as part of their annual corporate reporting for either the 2023, 2024 or 2025 fisal years.

Asset managers joining the commitment included Norges Bank Investment Management (NBIM), the investment manager for Norway’s $1.4 trillion oil fund.

Carine Smith Ihenacho, Chief Governance & Compliance Officer of NBIM, said:

“Addressing nature-related financial risks has been a longstanding priority on our ownership agenda at Norges Bank Investment Management. As active contributors to the Taskforce on Nature-related Financial Disclosures (TNFD), we are committed to leveraging this tool to deepen our understanding of our portfolio’s nature-related impacts and dependencies, further reinforcing our responsible investment efforts in this important area.”

The commitments follow the publication in September by the TNFD of its final recommendations for nature-related risk management and disclosure, following a a two-year process, beginning with the formation of the TNFD in June 2021, building on the success of the Task Force on Climate-related Financial Disclosures (TCFD).

The TNFD’s recommendations are anticipated to be used to help shape the development of future sustainability disclosure standards. The International Sustainability Standards Board (ISSB) of the IFRS Foundation, for example, which recently launched its landmark sustainability and climate reporting standards, has already announced that the TNFD recommendations will inform its future standard setting, and environmental disclosure platform CDP stated that it plans to align its global disclosure platform with the TNFD framework.

Calling the commitments a “milestone moment for Nature finance and for corporate reporting,” David Craig, Co-Chair of the TNFD and former founder and CEO of Refinitiv, said:

“As climate-related sustainability reporting goes mainstream through the new International Sustainability Standards Board (ISSB) standards and regulation in a growing number of countries, this is a clear signal that investors, lenders, insurers and companies are recognizing that their business models and portfolios are highly dependent on both nature and climate and need to be treated as both strategic risks and investment opportunities.”

The government of Australia announced the release of new draft legislation which would introduce mandatory climate-related reporting requirements for large and medium sized companies, including disclosures on climate-related risks and opportunities, and on greenhouse gas emissions across the value chain.

According to a statement by Australia Treasurer Jim Chalmers introducing the new proposed law, the climate-related disclosure requirements are aimed at helping “maximise the economic opportunities of cleaner, cheaper and more reliable energy and manage climate change risks… giving investors and companies the transparency, clarity and certainty they need to invest in new opportunities as part of the net zero transformation.”

The introduction of the proposed law follows the release of a ‘Discovery consultation’ launched by the Treasury in December 2022 on the development of a climate risk disclosure framework, and a subsequent announcement in June 2023 of plans to implement mandatory climate-related financial disclosure requirements.

In October, the Australian Accounting Standards Board (AASB) released an exposure draft outlining its proposed standards for companies to report climate-related information, which form the basis of the new disclosure requirements. The AASB proposals are based on the recently released sustainability disclosure standards by the IFRS Foundation’s International Sustainability Standards Board (ISSB), while including some modifications in areas such as Scope 3, or indirect value chain emissions reporting, and on reporting requirements for companies that do not have material climate-related financial risks or opportunities.

Under the new requirements, companies would be mandated to report on material climate-related risks and opportunities, metrics and targets including Scopes 1, 2 and 3 emissions, as well as “any governance or risk management processes, controls and procedures of the entity related to these matters.”

The new proposed legislation would apply to all public companies and large proprietary companies required to provide audited annual financial reports to the Australian Securities and Investments Commission (ASIC) that meet specific size thresholds, starting with companies with over 500 employees, revenues over $500 million or assets over $1 billion, as well as asset owners with more than $5 billion in assets, which would begin reporting for fiscal years starting from July 1, 2024. Medium-sized companies (250+ employees, $200 million+ revenue, $500 million assets) would be required to begin reporting for years beginning from July 2026, while smaller companies (100+ employees, $50 million+ revenue, $25 million+ assets) would begin the following year.

The legislation also includes a phased-in approach for Scope 3 reporting, allowing companies an extra year from the beginning of their disclosure requirements to report on the quantity of their indirect value chain emissions, as well as on the application of liability for reporting, with “limited immunity” for sustainability reports for years until the end of June 2027.

The new law would also introduce assurance requirements for climate-related reporting similar to those for financial reports, and require companies to obtain assurance reports from their financial auditor.

The government initiated a consultation for the new draft legislation, with submissions allowed until February 9.

Chalmers said:

“The draft legislation gives companies the opportunity to build capacity to make high quality climate risk disclosures by providing early visibility of the proposed reporting requirements and expand the breadth of entities required to report over time.”

Financial services and solutions provider Apex Group announced today the launch of Holtara, a new ESG solutions subsidiary, combining the firm’s ESG advisory and reporting platform, focused on serving private markets clients.

The launch of Holtara follows Apex’ acquisition last year of asset management service provider MJ Hudson’s Data & Analytics business, which included the firm’s ESG & Sustainability advisory services and platforms, and the recent launch by Apex of an enhanced set of ESG solutions targeting investors, asset managers and corporates.

Peter Hughes, Founder & CEO of Apex Group, said:

“This is an important milestone in our ESG journey as a Group, and through bringing together the existing Apex ESG offering, and the additional expertise brought in through the MJ Hudson acquisition, under one brand – we can deliver a powerful offering driven by a combination of people and platform.”

Under the new brand, Holtara will offer ESG advisory services with more than 80 specialists focused on topics ranging from carbon and climate, to impact, DEI and supply chain, to help clients determine material ESG themes for their portfolios and to set and manage ESG commitments, in addition to providing ESG Advantage, its platform aimed at streamlining ESG reporting to comply with global regulation and align with industry frameworks.

Holtara will be led by Emma Bickerstaffe, who has been appointed Managing Director and Head of ESG Product. Bickerstaffe joined Apex from MJ Hudson, where she had been serving as Managing Director, ESG & Sustainability. Prior to joining MJ Hudson in 2021, Bickerstaffe served as Managing Director of The Big Exchange, a partnership between asset managers including Standard Life Aberdeen, Columbia Threadneedle and AllianceBernstein offering impact funds to retail investors.

Bickerstaffe said:

“Recent years has seen greater political and shareholder scrutiny of ESG claims, resulting in the urgent need for accurate data, transparent reporting and meaningful sustainability commitments. Today we launch Holtara to ensure ESG can stand up to this scrutiny.

“We recognise the importance of combining platform and people services to not only simplify and streamline ESG reporting, but also to ensure expertise is on hand to help clients focus on the most material topics, verify collected data and prioritise initiatives to improve performance year on year.”

The Government of Canada announced that it has launched a consultation on the establishment of a new registry requiring plastic producers to report on the quantity and type of plastic they place on the Canadian market, and tracking plastic across its lifecycle in the economy, from production through end of life.

According to the government’s statement announcing the new consultation, the new Federal Plastics Registry will form part of Canada’s initiative to reduce plastic pollution and waste, with Canadians currently throwing away 4.4 million tonnes of plastic waste annually, with only 9% recycled. The registry is aimed at informing actions to accelerate the transition to a circular economy, providing harmonized plastics data across the country, and making information accessible to consumers and businesses.

Under the new proposed registry, producers will be required to report annually on the amount and type of plastic they place on the market, how the plastic moves through the economy, and how it is managed at end of life. Categories of plastic targeted by the proposed registry cover most of that placed on the Canadian market, ranging from packaging, single-use and disposable products and home appliances to electronics, construction, tires and textiles.

The consultation will seek input on aspects of the registry including its objectives, product categories covered, stakeholders required to report, reporting requirements and timelines, among other issues. The launch follows an initial consultation on the development of the registry completed in 2022. In April 2023, the government published a technical paper on the approach and details of the registry, as part of a series of measures to reduce plastic pollution, which also included consultations into proposed new labelling rules for products, and requirements for recycled content in plastic packaging.

Steven Guilbeault, Minister of Environment and Climate Change, said:

“Canadians are demanding action to tackle the plastic waste and pollution crisis, and the federal government will continue to act. The Federal Plastics Registry is an important tool that will help track and manage plastics across the economy. It will support provinces and territories in making producers responsible for their plastic waste at end of life and help move Canada toward a circular economy for plastics.”

The consultation will run until February, 13, 2024.

The successful establishment of climate reporting rules in the U.S. could potentially help companies facing more onerous climate-related disclosure requirements in other jurisdictions, according to comments by Securities and Exchange Commission (SEC) Chair Gary Gensler at a Council on Foreign Relations event.

Alternatively, the lack of a U.S. rule would be more likely to result in many companies forced to comply with foreign reporting rules such as those in the EU’s Corporate Sustainable Reporting Directive (CSRD), Gensler warned, with the SEC unable to discuss substituted compliance – a system under which companies are seen as satisfying some requirements under one jurisdiction’s rules by complying with comparable rules elsewhere – with its EU counterparts.

The SEC released its proposed climate disclosure rules in March 2022, which would require U.S. companies to provide information on climate risks facing their businesses, and plans to address those risks, along with metrics detailing the companies’ operational climate footprint, and in some cases emissions emanating across their value chains. The comment period for the proposed rule ended late last year, but the Commission has yet to issue a final rule.

While the SEC continues to review its climate reporting rule, other sustainability disclosure regimes are emerging, often with a different or more comprehensive focus than the U.S. proposal, that will apply to many of the U.S. public companies under the SEC’s jurisdiction.

Most notably, the EU’s CSRD rules’ requirements in areas such as Scope 3 supply chain emissions reporting will likely be more comprehensive than the SEC’s requirements, which as proposed would mandate the disclosure only if the company determines that it is material or has made a public commitment regarding its Scope 3 emissions. The CSRD also utilizes a double materiality approach under which companies are required to report on how they expect climate and environmental changes to affect their businesses, as well as the how they impact people and planet.

The CSRD rules would apply to many U.S. companies, as the regulation extends the reporting requirements to non-European companies that generate over €150 million in the EU.

Similarly, California Governor Gavin Newsom recently signed a bill into law which will effectively require large U.S. companies that do business in the state to disclose their full value chain emissions.

In his comments, Gensler said that while the SEC views its climate reporting rules through “the lens of materiality,” and with a focus on how investors would use the information, he noted that “other jurisdictions may be looking at it for other reasons… to lower climate or greenhouse gas. That’s not our remit.”

Gensler continued:

“If we were not to finalize a rule, or if we finalize a rule and it’s overturned in the courts, either way if we don’t have a rule… some significant number of U.S. companies will have to comply with the European standards – significant number, thousands maybe.

“If we finalize something, even if it’s different than Europe… then we can have some discussions with the Europeans about what’s called ‘substituted compliance,’ possibly.”

While many expected the finalized rule to be released earlier this year, the SEC has yet to set a firm date for its final release, as it deals with the significant volume of feedback it has received on its proposal. Gensler noted that the proposal “got over 16,000 public comments – we never get that. Four or five thousand is a big number, and we often get 200 public comment letters on something were doing.”

Gensler said that he was not announcing when the final rule would be released. A regulatory agenda statement released by the U.S. Office of Information and Regulatory Affairs yesterday listed the current Final Action date for the SEC’s climate rule as April 2024.

Europe’s three primary financial regulatory agencies, the European Supervisory Authorities (ESAs), announced the publication of their Final Report amending the draft Regulatory Technical Standards (RTS), completing their review of key disclosure rules for financial products under the Sustainable Finance Disclosure Regulation (SFDR), with proposals for new mandatory reporting on social factors such as exposure to tobacco production and inadequate wages, as well as new financial product disclosure of greenhouse gas (GHG) emission reduction targets.

The EU SFDR forms part of the EU’s Action Plan on financing sustainable growth. The regulation aims to establish harmonized rules for financial market participants including investors and advisers on transparency regarding the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes and the provision of sustainability‐related information with respect to financial products.

The publication follows a request by the European Commission in April 2022 for the ESAs to review the Regulatory Technical Standards (RTS) set out in the SFDR regulation, including its indicators for principal adverse impact (PAI) and financial product disclosures. Originally set with a 12-month deadline, the ESAs informed the Commission of a 6-month delay in its review in November 2022.

Among the key changes proposed in the ESAs’ review is an extension and adjustment of the list of PAIs, detailing the adverse impacts of investment decisions on sustainability factors, to include a series of social indicators. Mandatory PAI indicators now include “exposure to companies active in the cultivation and production of tobacco” (updating a prior tobacco-related indicator), “employees earning less than an adequate wage,” and modified indicators for investments in companies that have been involved in violations of the OECD Guidelines for Multinational Enterprises, and for the gender pay gap between female and male workers.

The regulators also developed draft RTS incorporating new disclosures for financial products regarding GHG emissions reduction targets, applying to products that have emissions reductions as their investment objective. Requirements for these products would include disclosure in pre-contractual documents on the type of outcome the product is committing to achieve and on the alignment of the target with the goal of limiting global warming to 1.5 degrees C, periodic report disclosure to provide progress and explanation on how the investment strategy contributed to the progress, and to have more detailed disclosures available on the website.

Additional proposed revisions to the SFDR regulation brought forward by the regulators include improvements to disclosures on how sustainable investments “Do No Significant Harm” (DNSH) to the environment and society, simplification of templates for pre-contractual and periodic disclosures, among other technical adjustments.

Following the publication of the ESAs’ report, the European Commission will have three months to decide whether to endorse the draft RTS. The potential application of the new RTS would be independent of an ongoing review by the Commission of the SFDR, announced in September 2023.

Click here to access the ESAs’ report.

The European Financial Reporting Advisory Group (EFRAG) and the Global Reporting Initiative (GRI) announced today a new cooperation agreement to deepen cooperation on sustainability reporting, including plans to collaborate in areas including reporting standards development and training.

The announcement marks the second collaboration agreement between EFRAG and the GRI, following an initial agreement launched in 2021 for the development of EU sustainability reporting standards and supporting convergence with global standards.

The organizations, as part of the new collaboration agreement, also released a GRI-ESRS Interoperability Index, a new tool outlining how the disclosure requirements and data points in the European Sustainability Reporting Standards (ESRS) and the GRI standards relate to each other, preventing the need for “double reporting” for entities disclosing under both systems.

The ESRS, developed by EFRAG, and officially adopted by the European Commission in July, set out the rules and requirements for companies to report on sustainability-related impacts, opportunities and risks under the EU’s upcoming Corporate Sustainable Reporting Directive (CSRD). The CSRD, on track to begin applying from the beginning of 2024, will significantly expand the number of companies required to provide sustainability disclosures to over 50,000 from around 12,000 currently, and introduce more detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk.

GRI Sustainability Reporting Standards are one of the most commonly accepted global standards for sustainability reporting by companies, developed to enable consistent reporting across companies and industries, providing clearer communication to stakeholders regarding sustainability matters. The GRI published a major update of the standards in 2021, and recently published new proposed climate change and energy reporting standards.

Patrick de Cambourg, Chair of EFRAG Sustainability Reporting Board, said:

“Interoperability is at the heart of the EU approach. From the beginning and going forward EFRAG strives to build on and contribute to the global progress of quality sustainability reporting as well as to minimise the reporting burden for companies. With the recently adopted ESRS, companies will be able to prepare their sustainability statement in an interoperable ecosystem and this is good news.”

Under the new agreement, EFRAG and the GRI will collaborate in areas including standards and guidance development for both existing and new sector standards, proportionate reporting for SMEs in the EU, and on standards for non-EU companies for which the CSRD will apply. The organizations will also work together on education and training for ESRS preparers and users – including steps to accredit GRI as an ESRS training organization – as well as on the interoperability of digital XBRL taxonomies, with a simplified tagging system and digital correspondence table between both standards.

Eelco van der Enden, CEO of GRI, said:

“The partnership between GRI and EFRAG has already borne fruit by ensuring that the new EU standards and the GRI Standards – which many companies in Europe and beyond are using to report their impacts — are closely aligned. Encompassing practical resources and training alongside deeper engagement on standards, this new MoU reassures companies and all stakeholders of our joint commitment to an aligned, efficient, and feasible EU and global ecosystem for impact reporting.”

The launch of the new interoperability index follows the organizations’ confirmation in September that they have achieved a high level of interoperability between the ESRS and the GRI Standards. With the publication of the index, the organizations said that entities reporting under ESRS will be deemed reporting ‘with reference’ to the GRI standards and existing GRI reporters will be able to leverage their current reporting efforts to prepare their ESRS ‘Sustainability statement.’

Carol Adams, Chair of the GRI Global Sustainability Standards Board (GSSB), said:

“The interoperability index is an important deliverable of our collaboration as it will enable GRI reporters to substantiate the high degree of alignment between GRI and ESRS standards in relation to impacts. Building on our technical collaboration over the past two years, we welcome this new agreement.”

Capital markets technology and exchange company Nasdaq announced today the launch of Nasdaq Sustainable Lens, a new AI-powered SaaS platform aimed at helping companies and investors to navigate and utilize ESG data from across thousands of companies.

According to Nasdaq, the new platform provides users access to more than 9,000 companies’ documents, enabling them to summarize sustainability-related disclosures and credibly answer stakeholder questions, as well as to benchmark disclosures against new reporting standards and other companies, working as an AI-powered ESG assistant, in place of manual research.

Key features of the new platform include the ability to deliver answers to questions through chat and summarization, monitor ESG trends across peers and sectors, use a natural language search tool to navigate thousands of sustainability reports and financial filings, benchmark disclosures against peers, back up sustainability claims, and assess alignment of ESG reporting with regulations and frameworks.

Along with the release, Nasdaq outlined research conducted leveraging the new platform to analyze sustainability disclosures from 7,200 companies, with findings including insights that only 44% of the companies currently provide climate-related disclosures aligned with CSRD, ISSB and the proposed SEC climate rule, while 75% are providing CSRD and ISSB-aligned human capital disclosures.

In a blog post announcing the new platform, Michael Stiller, New Initiatives, Capital Access Platforms at Nasdaq, said:

“Two powerful trends are colliding. The sustainability and ESG landscapes are evolving simultaneously as AI technology advancements provide teams with newfound productivity gains.

“As Nasdaq strives to meet customer demands, we maintain our overarching goal to leverage technology as an enabler – to power economic progress, help humans work smarter and uncover new proprietary data and insights.”

Companies globally are making progress with their climate disclosures, both in terms of the number of businesses reporting on climate-related factors and the quality of the reporting, according to a new study released by global professional services firm EY, although the improvements are only “marginal,” and significant work remains to prepare for reporting against the new sustainability disclosure standards released by the IFRS Foundation’s International Sustainable Standards Board (ISSB).

For the report, EY’s fifth annual Global Climate Risk Barometer, EY analyzed the disclosures of more than 1,500 companies across 13 climate risk-exposed sectors and 51 countries.

Key aspects of disclosure examined in the report included “Coverage,” based on the number of Task Force on Climate-Related Financial Disclosures (TCFD) recommendations addressed by companies, and “Quality,” or the extent to which disclosure meets requirements of the 11 TCFD recommendations.

The report found a continued increase in the quantity of climate disclosure by companies, with the Coverage metric reaching 90% in this year’s survey, compared with 84% last year, and only 70% in 2021. Quality scores, on the other hand, continue to lag at 50%, while improving from 44% last year and 42% in 2021.

By sector, the report indicated that those with the greatest exposure to climate-related transition risk tended to post higher disclosure scores, both in terms of coverage and quality. The energy sector, for example, received the highest scores among for coverage (95%) and quality (55%), with other strong non-financial performers including the materials & buildings and mining sectors. Within the financial industries, the insurance sector scored the highest, with a coverage score of 93%, and quality reaching 55%.

For the first time, the report examined companies’ readiness for meeting the requirements of the IFRS Foundation’s climate reporting standard, IFRS S2. The IFRS Foundation’s ISSB released their inaugural general sustainability reporting standard (IFRS S1) and IFRS S2 in June 2023, and the new standards are expected to inform emerging disclosure requirement systems from many regulators globally, beginning as soon as next year.

Assessing company disclosures across the four main pillars of IFRS S2, which include governance, strategy, risk management, and metrics and targets, the reports assessment was decidedly mixed, indicating stronger scores in governance categories, with nearly 60% of companies disclosing on skills and competencies to oversee strategies and on how committees are set up to oversee target setting, but much lower in risk management, with only 3% disclosing “information pertaining to changes in process used to identify climate-related risks prior to the reporting period.” Strategy and metrics and targets was also mixed, with 65% of companies disclosing progress against previously set targets, and 54% disclosing on Scope 3 emissions categories, but only 5% disclosing on quantitative/qualitative information impacting financial planning, and 12% disclosing emissions details on legal entities.

The report also examined disclosures around transition planning, one of the key aspects of IFRS S2, finding that only around half (53%) of companies disclose a specific net zero strategy, transition plan or decarbonization strategy. More highly-exposed sectors again were found to be in the lead on this metric, with 60% of energy and mining companies and 58% of transportation companies disclosing transition plans. Lagging sectors included financial asset owners and managers at 39% and agriculture, food and forest products at 43%.

Other notable findings in the report included indications that companies are more focused on risks than opportunities in their climate reporting, with 77% of companies assessed having conducted analysis on risk compared to 68% on opportunities. The report also found that companies are still lagging on disclosing the links between climate impact and financial performance, with only 33% of companies referencing climate-related matters in their financial statements, and only 26% providing quantitative impacts of climate-related risks in financial statements.

Dr. Matthew Bell, EY Global Climate Change and Sustainability Services Leader, said:

“At a time when we should significantly ramp up our transitioning to a net-zero economy if we are to meet our climate commitments, this year’s EY Global Climate Risk Barometer indicates that there is a concerning disconnect between the stated climate ambitions and the corporate actions to achieve them.

“Climate risk disclosure should not be viewed as a separate tick box exercise, but as an opportunity to inform wider commercial strategy and gain competitive advantage.”

Click here to access the report.