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Partner Andy Lewis outlines four key steps for pension schemes on the net zero journey.

In this edition, we highlight the key regulatory and policy developments this Autumn which will impact investors in and operators of energy and infrastructure assets in the UK. Please get in touch if you'd like to discuss any of the issues discussed below.

As many companies take the first steps towards understanding the impact of the Corporate Sustainability Reporting Directive ("CSRD") on their organisations, a series of seemingly impactful changes to the regime, and corresponding alarming headlines, have emerged. However, while these changes and headlines might make businesses worry that they will need to pivot their plans and processes as a reaction, in practice, many of those currently preparing for CSRD reporting may find that recent developments do not move the dial significantly and they may well still be on the right path towards CSRD compliance.

On 2 October 2023, the European Securities and Markets Authority (ESMA) published a trends, risks and vulnerabilities (TRV) risk analysis report on ESG names and claims in the EU fund industry (the report). While undoubtedly of interest, it should be noted that this is not the reply to ESMA's 2022 fund names consultation – we are still waiting for that (see below for details).

On 28 September 2023, the European Supervisory Authorities (ESAs) published their second annual report (Report) on the extent of voluntary disclosures of principal adverse impacts (PAIs) under the EU Sustainable Finance Disclosure Regulation (SFDR). Based on feedback from national competent authorities (NCAs), the ESAs made some preliminary recommendations to the European Commission on best practices, on entity-level statements and, in the context of the European Commission's comprehensive assessment of SFDR,  asked the Commission to consider wider points that would require changes to SFDR itself. This is separate from the Commission's Targeted Consultation and Public Consultation on SFDR – see our briefing.

The European Commission has issued a Targeted Consultation and a Public Consultation on the implementation of the Sustainable Finance Disclosure Regulation (SFDR).  The Consultations include a series of questions on the practical functioning of the SFDR and its possible reform. The EU appears to have recognised that the SFDR is not as user-friendly as it had hoped and is seeking to assess its potential shortcomings and explore potential changes. 

The Commission de Surveillance du Secteur Financier ("CSSF") recently published its observations and recommendations on the implementation of sustainability-related provisions in the investment fund industry as part of its supervisory work in the area of sustainable finance.

The speed of developments in the world of sustainability reporting over the last 12 months has been unprecedented, and this trend shows no signs of abating. Over the last five weeks alone, two "global baseline" sustainability reporting standards have been adopted and endorsed for use in capital markets, twelve European Sustainability Reporting Standards have been finalised, and the UK has committed to develop "Sustainability Disclosure Standards", based on the international standards, by July 2024.

In their expert analysis chapter for the latest edition of the International Comparative Legal Guides for Alternative Investment Funds, Travers Smith Funds Partner Jeremy Elmore and Associate Rory Page discuss the opportunities that effective ESG engagement may provide for asset managers, existing ESG regulations and the basis on which it can provide a competitive advantage to GPs. 

A regular briefing for the alternative asset management industry. 

A regular briefing for the alternative asset management industry. 

The European Commission issued, on 13 June 2023, a Sustainable Finance Package with a number of additional ESG measures including:  

A regular briefing for the alternative asset management industry. 

On 5 April 2023, the Commission launched a consultation on its draft of the long-awaited technical screening criteria ("TSC") for the four remaining Taxonomy objectives, sometimes known as "TAXO4"¹.  The TAXO4 TSC were initially intended to be in place by 1 January 2023, a year after the TSC for the first two environmental objectives, but have been significantly delayed. Therefore, the draft's publication finally provides a fuller picture of the Taxonomy and gives those with ambition to align to the remaining environmental objectives an idea of the scale of that task.

In 2020, the UK outlined its roadmap to implementing the recommendations of the Taskforce on Climate-related Financial Disclosures ("TCFD"). With the first wave of premium listed companies already having prepared reports, the second wave will see standard listed companies, the largest asset managers and very large companies issuing TCFD reports or TCFD-aligned reports under the Companies Act this year. Smaller asset managers with over £5bn of assets under management will already be thinking about how to make their first firm-level reports next year.

The European Commission (Commission) has issued further guidance on the interpretation of the Sustainable Finance Disclosure Regulation (SFDR).  This is in the form of responses to questions put to it in September 2022 by the European Supervisory Authorities (ESAs).  The responses include guidance on the definition of sustainable investment, disclosures around the reduction of carbon emissions and principal adverse impact disclosures.

This Briefing sets out the headline themes and changes that premium listed companies should be aware of for the 2023 AGM season, with a list of further useful resources set out at the end of the Briefing. 

In this week's Alternative Insights, we are looking forward to the key themes for 2023, following an event we held in London on Wednesday and the launch of our new annual Insights publication.

Entering the policy debate behind other antitrust regulators, the CMA has signalled that it will give firms more latitude to pursue green collaborations – but the devil will be in detail.

The EU's Directive on Corporate Sustainability Reporting ("CSRD") was published in its final form in mid December 2022, giving organisations in its scope certainty about when the significantly expanded reporting requirements will apply to them.