MESSAGES FROM TRASTA ESG

In this issue of our newsletter, COP16 holds a significant place. The COP16 Biodiversity Summit was held from October 21 to November 1 in Cali, Colombia. Approximately 23,000 delegates from 175 countries attended the summit. The main focus of the discussions was on how to implement the Kunming-Montreal Global Biodiversity Framework, often referred to as the “Paris Agreement for Nature.” Additionally, topics such as financing for developing countries and the equitable sharing of benefits arising from genetic information were also on the agenda.

In addition, our newsletter features the latest research from Lancet Planetary Health, the new regulations from the European Securities and Markets Authority (ESMA), and, as always, the latest updates in the ESG field.

Thanks to your contributions, our valued readers and followers, our newsletter is becoming richer and more comprehensive with each issue. We appreciate your feedback and suggestions, which help guide us.

Stay sustainable…

ÖZGÜN ÇINAR, CEO

ACHIEVEMENTS AND SHORTCOMINGS OF THE COP16 BIODIVERSITY SUMMIT

The COP16 Biodiversity Summit, held in Cali, Colombia, from October 21 to November 1, aimed to protect global biodiversity. While significant progress was made in some areas, the summit’s failure to address critical issues sparked widespread debate. Disagreements between developed and developing countries over financing and monitoring hindered the summit from achieving its intended outcomes.

One of the summit’s most notable achievements was the recognition of Indigenous peoples and Afro-descendant communities as key actors in biodiversity conservation. This decision will enable these communities to play an active role in conservation efforts. Under Article 8J of the Convention on Biological Diversity, Indigenous and Afro-descendant communities were granted full authority and continuous representation in biodiversity governance. Camila Paz Romero, a spokesperson for Indigenous communities, emphasized that this decision sets a global precedent and acknowledged it as the result of years of advocacy.

Another landmark decision was the establishment of a global tax system on products derived from genetic resources. The aim is to ensure the fair distribution of revenue generated from genetic data, particularly in commercial products, with the countries providing these resources. This new fund is expected to generate around £1 billion annually for Indigenous communities and developing countries. While this initiative was welcomed, critics noted the lack of a more ambitious financial framework to safeguard nature.

Despite these advances, COP16 fell short on financial support and monitoring mechanisms. Developing countries criticized developed nations for failing to fulfill their commitments. Financial support plans agreed upon during the summit lacked concrete strategies, and little progress was made on issues such as reforming harmful subsidies and expanding protected areas. The European Union, China, and Canada faced criticism for their perceived lack of leadership.

While COP16 made history with its “empowering Indigenous peoples” decisions, its shortcomings in financing and monitoring have raised doubts about the feasibility of achieving conservation goals. The next interim meeting, scheduled for Bangkok next year, is expected to address these unresolved issues. Though the summit was an important step toward biodiversity conservation, it highlighted the urgent need for more concrete and binding measures.

ALMİNA GENCAL, SUSTAINABILITY SPECIALIST

ESG NEWS

  • 79% of agrifood executives reported at least 2% revenue growth from sustainability strategies. 74% achieved at least 2% cost reductions through sustainability investments and 60% of executives expect the value from sustainability strategies to increase over the next two years, according to a survey conducted by Deloitte. DETAIL
  • More than 85% of countries are set to miss the UN’s deadline to submit new nature pledges ahead of the COP16 biodiversity summit in Colombia, according to a joint investigation by Carbon Brief and the Guardian. DETAIL
  • Countries need a new international pact to fix a mounting water crisis that could cut economic growth by at least 8% and put half the world’s food supplies at risk by 2050, an OECD-backed commission said on Thursday. DETAIL
  • Current climate policies will result in global warming of more than 3 degrees Celsius (5.4 degrees Fahrenheit) by the end of the century, according to a United Nations report on Thursday, more than twice the rise agreed to nearly a decade ago. DETAIL
  • The CSO at a Crossroads, a BSR report, highlights important issues on sustainability.  83% of CSOs report that collaboration with other C-Suite leaders is essential for achieving ambitious sustainability objectives.  64% of CSOs believe regulation enables meaningful strategic impact.  50% of CSOs spend the majority of their time on “high-impact” work, highlighting the need for more strategic focus.DETAIL
  • A UK transport firm has implemented and tested new sail technology on its specialized ships to lower its carbon footprint. FastRig is a retractable wing sail for retrofitting on ships, cutting fuel use and GHG emissions by up to 30%. DETAIL

🍃GREEN COLUMN🍃

ESMA’s Priority Guidelines: Enhancing Transparency and Quality in Financial and Sustainability Reporting

The European Securities and Markets Authority (ESMA) has announced its 2024 European Common Enforcement Priorities (ECEP), outlining key areas that companies operating within the European Economic Area (EEA) should focus on in their annual financial reports. These priorities aim to improve the quality of financial statements, enhance transparency in sustainability reporting, and strengthen market reliability. Below, we summarize the key highlights for you.

Priorities for IFRS Financial Statements

ESMA emphasizes the importance of comprehensive transparency regarding liquidity risks. Under the updated requirements of IAS 7 Statement of Cash Flows, companies must disclose details of supplier financing arrangements (SFA), including the terms under which debts are arranged and payments to suppliers. Companies’ disclosures about their liquidity management under these arrangements are expected to attract investors’ attention.

Companies are also required to clearly report their compliance with credit covenants when reporting long-term liabilities. This entails transparently presenting details of agreements made to ensure financial stability. In cases of covenant breaches or renegotiations, companies will face additional reporting obligations, providing valuable insights for investors’ risk assessments.

To ensure compliance with cash flow reporting, ESMA recommends companies report cash flows on a gross basis, separately disclose non-cash transactions, and accurately classify cash equivalents. These disclosures aim to provide investors with a clearer perspective on a company’s financial health.

Priorities for Sustainability Disclosures

The ECEP highlights that companies must include a comprehensive materiality assessment in their sustainability disclosures, evaluating both financial and environmental impacts. This analysis helps companies identify which sustainability topics are financially material and tailor their disclosures accordingly. It is also crucial for companies to explain how they conducted the process and which stakeholders were engaged, following the guidelines provided by the European Financial Reporting Advisory Group (EFRAG).

ESMA expects companies to assess their activities’ alignment with the environmental objectives under the EU Taxonomy Regulation. Compliance with the taxonomy provides transparency on companies’ contributions to environmental goals, enhancing trust among stakeholders.

Furthermore, sustainability disclosures should be aligned with the scope of financial reporting. Companies are expected to provide value chain-wide information during the first three years of sustainability reporting and outline their plans for improving data collection and disclosure in the future.

Priorities for Electronic Reporting (ESEF)

The 2024 priorities also address common issues in electronic reporting under the European Single Electronic Format (ESEF). These include errors in tagging, alignment of tagging with financial statements, and completeness of data. ESMA requires companies to ensure that all items in their financial statements are accurately tagged and fully compliant in digital format. This enhances the transparency and comprehensibility of financial reports, making them more accessible to stakeholders.

ESMA also emphasizes the need for consistency between financial and sustainability reporting, particularly in addressing climate risks. Disclosures should explain how sustainability issues like climate change impact financial statements and outline risk management strategies. Additionally, ESMA provides guidance on carbon pricing and alternative performance measures (APMs) to help companies improve their reporting processes.

The 2024 European Common Enforcement Priorities aim to enhance the quality of financial and sustainability reporting, strengthen transparency, and bolster market confidence. By improving internal control systems, these priorities encourage companies to adopt responsible financial management practices. Each priority is vital for ensuring that investors and stakeholders can make informed decisions with confidence.

Throughout 2024, ESMA and national enforcement authorities will monitor companies’ compliance with these priorities, taking necessary actions to address deficiencies. High-quality reporting standards not only provide financial transparency but also contribute to sustainable growth. Companies that align with ESMA’s priorities will have the opportunity to implement responsible, long-term financial strategies and advance their sustainability visions.

This initiative marks the beginning of a new era of transparency and trust in financial and sustainability reporting across Europe.

DAMLA GÜNALP, SUSTAINABILITY ASSISTANT SPECIALIST

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