Terra conference is set to provide business insight on CSRD and impact investing

Last Updated on Thursday, 27 June, 2024 at 2:31 pm by Andre Camilleri

The first Terra annual conference on Environmental, Social and Governance (ESG) and Impact Investing is set to take place on 10 July, World Energy Independence Day.

The event shall feature leading international and local speakers on the subject of ESG and is expected to help businesses prepare for incoming legislation, namely the Corporate Sustainability Reporting Directive (CSRD). ESG has brought the environmental and social impacts of businesses to the forefront of regulatory agenda.

In the coming months, all businesses will be directly or indirectly impacted by the SFRD legislation as banks, insurance companies and large clients will want to know about their sustainability when deciding on interest rates, premium charges and on which companies to engage. PKF Malta is privileged to be a speaker and shall present a short paper on ESG, the European Sustainability Reporting Standards (ESRS) as mandated by the CSRD.

For a start one may remind readers that last year PKF had successfully organised three separate conferences on the ESG topics. Two of the events were conducted with the joint collaboration of the Times of Malta. ESG is a framework that helps stakeholders understand how an organisation manages risks and opportunities around sustainability issues.

It has evolved from other historical movements that focused on health and safety issues, pollution reduction and corporate philanthropy. This has changed how capital allocation decisions are made by multi-nationals and state regulators in the world. Social issues are becoming a higher priority on the business agenda. This is, in part, due to increasing evidence of companies facing operational, reputation and financial losses as a result of failing to address the externalisation of costs and risks to workers, communities and consumers.

Key stakeholders in Malta including regulators, investors, banks, customers and civil society are demanding transparency around how corporate strategy and practices are impacting people and profit. The Sustainable Finance Disclosure Regulation (SFDR), a European regulation that applies to financial market participants, came into effect in March 2021 and impacts regulated financial intermediaries and their products. The second part of the SFDR, the Regulatory Technical Standards (RTS) came into force on 1 January 2023.

While there is no single Maltese law which is ESG specific, a variety of rules and regulations may be considered to align with principles enshrined in the environmental, social and governance aspects of ESG, including the Sustainable Development Act (Cap 521 of the Laws of Malta); the Environmental Protection Act (Cap 549 of the Laws of Malta); the Renewable Sources Regulation (SL 545.11); the Climate Action Act (Cap 543 of the Laws of Malta); the Equality for Men and Women Act (Cap 456 of the Laws of Malta); the Code of Principles of Good Corporate Governance (Appendix 5.1 to the Capital Markets Rules, issued by the MFSA; the Corporate Governance Code, also issued by the MFSA and applicable to entities regulated by the MFSA Corporate Governance Code) and the Voluntary ESG Code of Good Practice for the Remote Gaming Sector in Malta, issued by the Malta Gaming Authority.

In Malta, the integration of ESG norms is becoming increasingly robust, influenced heavily by EU regulations and local initiatives. The EU’s regulatory framework, including the Non-Financial Reporting Directive (NFRD) and its successor, the Corporate Sustainability Reporting Directive (CSRD), play a crucial role. These directives require large companies and those listed on regulated markets to disclose non-financial and sustainability information, enhancing transparency and accountability in environmental and social matters.

Maltese entities, especially in the financial sector, are also governed by the Sustainable Finance Disclosure Regulation (SFDR), which mandates the disclosure of sustainability risks and the impact of investment decisions on ESG factors. This is part of a broader EU strategy to channel private investment into sustainable development, supporting the European Green Deal and the transition to a carbon-neutral economy.

Next interesting topic to be discussed in Terra conference centres on impact investing. This refers to investments made with the intention of generating positive, measurable social and environmental impact alongside a financial return. Unlike traditional investments that primarily focus on financial performance, impact investing seeks to address specific social or environmental challenges through the deployment of capital. What is so special about impact investment?

It is a powerful approach that combines financial returns with positive social and environmental outcomes. By intentionally directing capital towards projects and organisations that address critical challenges, impact investors can contribute to sustainable development and create lasting positive change. This motive is a core component of the investment strategy often directed towards specific sectors or issues, such as renewable energy, affordable housing, education, healthcare and sustainable agriculture.

While there are challenges related to measurement, financial trade-offs and market development, the benefits of impact investing, including social and environmental impact, financial returns and enhanced reputation, make it an increasingly attractive option for investors seeking to align their values with their investment strategies.

Readers may be aware that Green bonds are slowly becoming popular in Malta and so far have been an agent to raise capital for projects with environmental benefits, such as renewable energy, energy efficiency and pollution prevention. It is hoped that the innovative financial facilities currently offered by the Malta Development Bank will be seed sowed in fertile land.

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