In this month’s ESG Market Alert, we cover:

  1. Regulators propose changes to the Sustainable Finance Disclosure Regulation;
  2. Retail investors focus on carbon footprint;
  3. Broadening the definition of ESG; and
  4. Market Practice Development: ESG resolutions at AGMs

Regulators propose changes to the Sustainable Finance Disclosure Regulation

On 12 April 2023, the European Supervisory Authorities (the “ESA”) (made up of the European Banking Authority, European Insurance and Occupational Pensions Authority, and European Securities and Markets Authority) published a consultation paper detailing proposed changes to the Sustainable Finance Disclosure Regulation (the “SFDR”).

Proposed changes to the SFDR, on which feedback is being sought, include:

  • adding product disclosures in relation to decarbonisation targets, including in relation to how targets will be reached; and
  • amending or refining current indicators used to track the adverse impact of investment decisions, policies, etc., including the definitions for such indicators as well as the applicable methodologies and formulae used for calculation.

Additionally, the ESA are proposing revisions to wider ancillary regulation related to the SFDR to, among other things, expand disclosures in relation to how sustainable investments are not significantly harming the environment. The ESA also emphasised the importance of improving  the standardisation of methodology for disclosure of targets for retail investors, specifically from the perspective of aiding analysis of investment product claims; tied to this, the ESA have also proposed a template of key information be developed outlining pre-contractual information to be provided to investors detailing how product targets will be met. 

Retail investors focus on carbon footprint

A survey conducted by Kana Earth in November 2022 has shown that a proactive approach to reducing a fund's impact on the environment is now equally as important for retail investors as the fund's charges and performance.

The survey in question revealed that 65% of UK retail investors are more likely to invest in funds that provide more information about their carbon footprint and are transparent in their plans to reduce it, highlighting the ever-growing importance UK retail investors are placing on ESG-related matters. To facilitate investment in transparent UK carbon offset projects, Kana Earth intends to launch an open ledger and investment platform for the UK carbon offsetting market which will enable investors to pursue ethical returns whilst supporting the achievement of carbon emission reduction targets.

Broadening the definition of ESG

The UK’s All-Party Parliamentary Group on Environmental, Social and Governance recently published a report calling for a holistic approach to sustainability.

However, investors have hit back at the report, in particular its characterisation of ESG. The report focused on ESG as a non-financial criterion and a risk management tool that can be used to judge an asset’s profile, which has been criticised by different market players for being too narrow an interpretation of the benefits of ESG. Various stakeholders argue that ESG has the potential to extend far beyond a risk management tool and should be viewed instead as a tool that can achieve long-term financial gains for clients. Others have also argued that the market needs to stand behind a broader definition of ESG that also underscores other themes, such as public health, labour rights and modern slavery.

Market Practice Development: ESG resolutions at AGMs

Conflicting trends are emerging regarding ESG-related resolutions at the annual general meetings of market-leading international investment banks. A growing number of ESG-related resolutions are being proposed; however, the resolutions themselves are garnering, as a general rule, less support amongst shareholders than previous years. By way of example, support for resolutions to phase out the financing of fossil fuel projects saw a general decrease from 2022 to 2023. At a number of market-leading international investment banks these resolutions generally received support from fewer than 10% of shareholders, in contrast to roughly 11-12% of shareholders supporting similar resolutions in 2022. Putting this support into context – while dissent of c. 10% does represent a significant vote against a board recommendation, significant shareholder dissent is typically considered to be 20%+ of shareholders voting against a board recommendation and, were these votes in respect of UK entities, such activity would be reported under the UK Corporate Governance Code to the Public Register of dissent.

One form of resolution that bucked this particular trend was in relation to ESG-related climate transition plans – support from shareholders tended to amount to closer to c. 30% voting in favour of the relevant resolution at various market-leading international investment banks’ annual general meetings. To date, no such resolution in respect of a transition plan has passed at a general meeting of a major international investment bank in 2023.

ESG Counsel™

The Hogan Lovells ESG team is here to help, including on all the issues raised in this snapshot. Hogan Lovells is one of the leading ESG firms in the world, delivering uniquely tailored cross-practice and -geographic holistic advice as ESG Counsel to clients globally. Our holistic and solutions-driven approach to managing ESG issues draws on the full scope of our global practice and sector capabilities (including our leading global corporate, environmental, governmental relations and regulatory, employment, and dispute resolution teams) to drive sustainable value and maximize positive impact for clients. Please contact us to discuss next steps or for our latest ESG-related materials, including our ESG Academy.

ESG Academy: New and improved resources 

Of the many ESG tools we’ve released, the one we hear you say you love the most is our ESG Global Vision Tool, our free online guide to global ESG rules and regulations, so we’ve set to work enhancing and improving it for you.

We’ve introduced a side by side ESG Litigation Guide that allows quick access to targeted information about ESG disputes, allowing maximum insight into the development of procedures on ESG issues and their handling by case law.

We now also offer enhanced functionality across our original tool, including the ability to generate a report, set alerts, and compare countries. All of our reporting is regularly updated and we are constantly adding new countries to our coverage. We hope you use and enjoy!



Authored by Nicola Evans, Patrick Sarch, Rita Hunter, Bryony Widdup, Scott Prior, Olivia Drawbell, Muhammad Gangat, Eseohe Imafidon, Zuzanna Krzyzos, Hannah Okorafor and Sibylla Ward.


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