The U.S. Securities and Exchange Commission has made a long-awaited move: On Monday, it issued draft climate-related financial disclosure rules that will require large, public companies to report on their climate impact, including their emissions and governance of climate risk.
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It’s a step that will force companies to think about their climate footprint and provide data for investors and others about direct and indirect emissions, including in companies’ value chains. The rules are now open for public comment.
• The proposed rules would require disclosures aligned with existing frameworks, including the Task Force on Climate-Related Financial Disclosures. TCFD’s secretariat is led by Mary Schapiro, a former SEC chair, who says that, with the new rules, “we are that much closer to providing investors with a consistent, comparable view into the financial impacts of climate change so they can make better-informed financial decisions.”
She adds, “When markets have the information to accurately price the financial impacts of climate change, capital will shift towards businesses that prioritize climate resilience, transition, and sustainability.”
• The rules would be a “big step forward” in making corporate climate impact less opaque and would be a “fundamental foundation” for more transparency and for stakeholder capitalism, though that will take more than regulation, Fran Seegull, president of the U.S. Impact Investing Alliance, tells me.
• But the SEC rules should be treated as a baseline for global standards, Seegull adds. They’re focused solely on financial materiality and not the other potential consequences of an investment, which some EU standards consider.
• The bottom line is that they “could flow more capital to good environmental actors, maybe in new and different ways,” Seegull says. But whether the rules will have a significant effect on climate finance, especially in low- or middle-income markets, is unclear. We will likely have more data about large companies’ climate actions in those places. And there are a few more things to keep an eye on, per Seegull: The SEC is considering a regulation on truth in advertising for ESG and sustainability funds, as well as a rule about human capital disclosure.
ICYMI on Devex Pro: Development finance trends to watch in 2022
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The right blend?
75%
—That’s the percentage of blended finance deals that include participation from at least one DFI, according to new research about how the institutions deploy catalytic capital. About three-quarters of these DFI investments have been on commercial terms, but DFIs have deployed about $1.6 billion in concessional financing on average annually since 2015.
The real cost of food
Food experts argue that within our food systems, current price mechanisms fail to account for social, environmental, and health impacts. My colleague Rumbi Chakamba explores whether a true cost accounting system that incorporates those factors would lead to more sustainable food systems.
Devex Pro: Can true cost accounting lead to sustainable food systems?
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Investment unlocked
The Africa Investment Forum took place last week, after being delayed by the pandemic. It’s a bit hard to figure out exactly how much investment was actually secured. But the African Development Bank, which organized the virtual event with the goal of spurring economic growth and integrating African trade, says the meetings “have drawn $32.8 billion in investment interest in bankable projects.”
One of the projects on display was a massive West Africa transportation network designed to connect five countries. The Abidjan-Lagos corridor is estimated to cost $15.6 billion. Solomon Quaynor, a vice president at AfDB, says resource mobilization for that project should be completed next year. Another transport network elsewhere in Africa was also touted: Rail lines would be built to connect landlocked areas, such as mines in the Democratic Republic of Congo, to ports in Tanzania.
One of the urgent issues on AfDB’s agenda in the near term, though, will be securing funding to handle the fallout from Russia’s invasion of Ukraine. The bank hopes to set up a funding facility soon, according to AfDB President Akinwumi Adesina.
Not on the bandwagon
While some have praised the results of Village Enterprise’s development impact bond, which I wrote about earlier this month, Mulago Foundation CEO Kevin Starr has a Twitter thread with a different take:
Community corner
Thank you to all who sent your feedback last week. Patrice Niyongabo, for example, told us that “reading the DIB model was a big joy and an inspiration ... a real best practice to upscale through South-South & Triangular Cooperation I look forward to discussing further.” We will continue covering development impact bonds and other financing models in Devex Invested, so if you also have an interest in upscaling these, please write to me at invested@devex.com.
Applicants wanted
If you’ve got an innovative finance idea that will mobilize private capital for sustainable development in emerging and frontier markets, a Swiss public-private partnership known as the SDG Impact Finance Initiative is looking to provide funds to test and scale it. The grants, ranging from $50,000 to $500,000, will pay for feasibility studies. This first round is targeting education, decent work and economic growth, responsible consumption and production, and climate action.
And if you’re an expert in scaling sustainable finance in low- and middle-income countries, you might be interested in applying to a new European Commission expert group on the topic. Up to 20 high-level members will provide recommendations for a commission strategy that is expected to be adopted in 2023.
What we’re reading
Africa’s electricity boom may need $350 billion in investment. [Bloomberg]
7 experiments tackling the barriers to localization. [Devex Pro]
Bonds that build back better: the rise of ESG securities. [Pictet Asset Management]
Shabtai Gold contributed to this edition of Invested.
About the author
Adva Saldinger@AdvaSal
Adva Saldinger is a Senior Reporter at Devex where she covers development finance, as well as U.S. foreign aid policy. Adva explores the role the private sector and private capital play in development and authors the weekly Devex Invested newsletter bringing the latest news on the role of business and finance in addressing global challenges. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.
