© Amauri Aguiar
BaFin says EU should streamline disclosure regime, World Bank prices world-first reforestation bond, IASB consults on its sustainable accounting standards, all this and more in the latest Green Central Banking roundup.
BaFin calls for less is more approach to SFDR Reforms
Germany’s financial regulator, BaFin, has called for a substantial streamlining of the EU’s sustainability reporting requirements, citing concerns around the complexity and fragmentation of European disclosure regulations. Bafin’s comments were made ahead of an upcoming review of the EU’s sustainable finance disclosure regulation (SFDR).
Bafin has proposed reducing the compulsory ESG indicators from 18 to six core metrics to make disclosures more meaningful and manageable for investors, focussing on key areas like emissions, biodiversity, and human rights.
“Less would be more,” Rupert Schäfer, BaFin’s executive director for strategy, policy and control, said in a statement.
Schäfer outlined BaFin’s support for a UK-style fund labelling system with three categories, instead of the current two-tiered classification. Like the UK’s, the first two categories would include one for green projects and another for transition investments. Schäfer’s proposal differs from the UK’s by suggesting an exclusion-based third category over the UK’s impact-based one.
Schäfer also emphasised the need to tightly define investments in line with the EU’s green taxonomy and other international standards, such as the UN’s sustainable development goals, to avoid greenwashing.
World Bank breaks ground with reforestation outcome bonds
The World Bank has priced a groundbreaking USD$225mn amazon reforestation-linked bond, its largest outcome bond to date. With investors agreeing to forgo part of the ordinary coupon payments, this 9-year, principal-protected bond will mobilise approximately $36mn for Mombak, a Brazilian carbon removal company, to implement Amazon reforestation activities.
The bond’s unique coupon structure combines a fixed World Bank-guaranteed portion with a variable component tied to the generation of carbon credits, known as carbon removal units, from reforestation projects. This directly links investor returns to tangible environmental outcomes, signalling a shift from previous bonds based on avoided emissions which, critics argue, often fail to deliver genuine emissions reductions.
Mombak will execute the reforestation projects by acquiring land or partnering with local landowners to replant native tree species, with financial incentives tied to meeting specific land acquisition milestones.
Environmental organisations, including Friends of the Earth, have warned that banks and financiers may face a “cascade of significant financial, operational, reputational, social, biodiversity, among other risks” if free, prior and informed consent from local communities is not prioritised during such conservation projects.
Separately, the Centre for International Environmental Law has called for comprehensive reforms in national forest sector governance alongside financial incentives to ensure long-term, sustainable forest protection.
IASB proposes climate reporting examples
The International Accounting Standards Board (IASB) has published a consultation document with eight proposed examples illustrating how companies should apply its sustainability accounting standards. The document focuses on areas such as materiality judgements, disclosures about assumptions and estimation uncertainties, and disaggregation of information.
The examples were developed in response to investor concerns about insufficient or inconsistent climate-related information when reporting on climate-related matters in their financial statements. Consultation on the draft document is open for comment until 28 November.
According to the IASB, the document does not represent a change to the content of the standards but rather a clarification intended to enhance transparency and consistency in disclosures.
The IASB collaborated with the International Sustainability Standards Board on this project to help strengthen the connection between financial statements and companies sustainability disclosures.
Closing the green power gap in the global south
There is a “green window of opportunity” to meet the global south’s rapidly growing demand for energy without compromising climate or development goals, says a recent Rockefeller Foundation report. According to the study, urgently scaling up green power in energy poor countries is the key to meeting these twin challenges.
Access to abundant energy is crucial for economic development as 3.8 billion people currently live in countries with insufficient access to energy. The Rockefeller Foundation emphasises that energy poor countries will continue pursuing development, whether this is achieved through fossil fuels or renewable energy.
To prosper economically, 72 of the world’s poorest countries must nearly quadruple their power production by 2050. To achieve this and keep the world on track with climate goals, this group of nations will need to generate 8,700 terawatt-hours of clean energy annually by 2050, leveraging their vast untapped renewable resources, particularly in solar and wind.
The Rockefeller Foundation stresses the importance of providing affordable green energy technology to facilitate this transition and outlines four pathways tailored to different countries’ needs. The Rockefeller Foundation says achieving these goals will require an additional $1.7tn in annual clean energy funding by 2030, which it says is feasible with appropriate policies in place.
This page was last updated October 3, 2024
Written by
Ike Walker, a Green Central Banking contributor since 2023, has a decade's experience in research writing. An Utrecht-based scholar, Ingrid specialises in transformative justice, green finance, law and systems change. They are an Utrecht University's Bright Minds scholar and previously worked for Cambridge University and various justice-based NGOs.
