SDR and green taxonomy updates: Takeaways from UKSIF summit

Baroness Vere announces transition plan disclosure consultation and panels discuss COP28 and regulation

UKSIF’s 2023 Leadership summit kicked off with panel discussions on biodiversity, COP28 and thoughts on what the sustainable regulation landscape could look like in the future on the agenda. Here are the key takeaways from the event.

FCA is assessing asset managers against its guiding principles

Although there was no update on an exact date on when to expect the UK’s SDR regulations, the Financial Conduct Authority’s (FCA) director of ESG Sacha Sadan re-confirmed that it would be before the end of 2023.

“We’ve said that the SDR and the labelling regime will come out by the end of the year, and I’m confirming that today. Hopefully we’re not the sort of regulator that puts things out on Christmas Eve, so that’s coming.”

The FCA has published a review of fund managers, finding many have not met its expectations when it comes to ESG and sustainability labels, stewardship and governance.

COP28 may skirt around fossil fuels

The second panel of the day, COP-Out? What the lead-up to COP 28 has shown us about the oil and gas lobby, addressed concerns over whether fossil fuel lobbyists will sway proceedings at the conference this year.

“The first thing we have to say about COP is that it’s an emissions-focused treaty, and the reason oil and gas are not spoken about much is because the original design of COP was to address emissions, not fossil fuels explicitly,” said panellist Mark Campanale, chair of the research council at Carbon Tracker.

“And that’s really helpful for the fossil fuel industry, to have a big summit like this on decarbonisation without talking about fossil fuels. It’s a bit like an anti-smoking summit not being able to talk about cigarettes.”

He added: “That plays into the hands of the lobbyists, and what we will see at this COP is an attempt to completely detach emissions from fossil fuels. So, even from the Presidency, there will be a heightened focus on emissions, talking about carbon capture and storage, negative emissions technologies and the reduction of fugitive emissions. But the huge issue of fossil fuels will be swept under the carpet.”

Countries will produce double the amount of fossil fuels required for 1.5 degrees

The COP28 panel also cited the fourth SEI Production Gap report, which shows that, despite 151 national governments having pledged to achieve net-zero emissions, and projections suggesting that fossil fuel demand will peak this decade, countries will, in aggregate, produce more than double the amount of fossil fuels in 2030 than would be consistent with limiting warming to 1.5 degrees.

“There’s awareness of this fossil fuel issue, but to expect anything great from the negotiations on it, it’ll just be a pretty watered-down statement, and that shouldn’t surprise anyone,” said Chris Dodwell, head of policy and advocacy at Impax Asset Management.

“There’s not going to be a stop to supply on its own account, so what we should be thinking about instead is demand. And what we need to be doing more consciously is remembering that actually when we’re putting in place our net-zero strategies in developed countries, its about demonstrating that there’s an alternative way forwards.”

UK hopes to give investors certainty

New Treasury Lords Minister, Baroness Vere, kicked off the summit with a message to attendees: “We understand that financing our transition requires public investment and certainty. Power Up Britain set out all of the details that we need in order to get there, from from renewable to sustainable aviation fuels, to give business the certainty that they need.”

She also announced that the government would be consulting on how transition plans can best be disclosed, and reaffirmed its commitment to the UK’s green taxonomy, which it is expected to begin consultation on before the end of the year.

Shadow-minister for the treasury, Tulip Siddiq MP, said the Labour party understands that what the private sector needs to fully get its weight behind the sustainable agenda is certainty. However, she lambasted the UK “dragging its feet” on the development of a coherent regulatory framework for sustainable finance if it wants to retain a global leadership role on the agenda.

“We urgently need a coherent policy vision for green finance to stop us falling further behind as other international places continue to take initiative. The current lack of timing, clarity on timing and direction from the government is hampering business relations and business confidence as I’m constantly told. So, we hope that in government the Labour Party will provide that direction.”

‘Moving real investments in the real economy’

In the final panel session of the day, What do the original sustainable finance pioneers see as the future?, pioneers of the sustainable finance sector discussed their thoughts on the mainstreaming of green finance and what the next steps are.

“We are potentially coming to the end of a decade of foundational stuff, focused on disclosure and compliance. The next stage is moving real investments in the real economy,” said Nick Robins, professor in practice in sustainable finance at LSE.

“One of the things I’ve been very critical of the UK government over is the licensing of new oil and gas, particularly the Rosebank development, because it’s a big step backwards. But, to give them a little bit of credit, the Transition Plan Taskforce has been really rather good, and I’ve been delighted to be a part of it. This could mark a shift in terms of sustainable finance regulation, because in a sense we are moving away from the TCFD era of risk and opportunity, and moving towards transition plans that are much more focused on hitting a goal: net zero. Yes, risk and opportunity will still play an important role, but the most important thing is the outcome.”

This article was updated on 17 November 2023 to include the afternoon panels.