ESG – How do UK firms avoid falling into a greenwashing trap? – JP Morgan Acquires $500 Million of Commercial Timberland

On the 1st February 2023 , J.P. Morgan Global Alternatives disclosed that institutional investors under the guidance of their wholly-owned timber investment manager, Campbell Global, have spearheaded the acquisition of over 250,000 acres of productive, high-quality, commercial timberland in three properties situated in the Southeastern USA. The acquisition, valued at over $500 million, highlights the expertise of Campbell Global, which was acquired by J.P. Morgan Asset Management in August 2021.

Campbell Global is renowned as a leader in timberland management and has overseen more than five million acres of timberland globally for foundations, pension funds, and other institutional investors since its inception.

On the surface, it is fair to assume that JP Morgan aims to achieve their return on their investment by cutting down trees and selling their timber commodity to gain revenue. However, that is quite the contrary. Chief Executive of Campbell Global, John Gilleland states,

“These acquisitions will give our clients access to sustainably managed forests that leverage our more than 40 years’ experience in timberland management”.

This precious resource of timber forestry containing over 120 million trees holds over 18 million metric tons of stored CO2 equivalents (mtCO2e), including more than half a million mtCO2e net retained carbon as of 2021 alone. With companies increasingly focusing on Environmental Social Governance (ESG), offsetting their carbon impact through buying carbon offsets from firms such as JP Morgan’s Campbell Global can serve as an attractive option.

What is ESG?

ESG (Environmental, Social Governance) is the term used to highlight matters that are typically associated with corporate responsibility or environmental sustainability. It can be described as a framework that helps stakeholders understand how an organisation is managing risks and opportunities related to environmental, social and governance criteria. ESG takes a holistic approach that sustainability extends beyond how an organisation manages risks related to environmental issues.

On 9th December 2022, the UK Government announced a substantial set of reforms intended to instil growth in the financial services sector named The Edinburgh Reforms. Within these reforms, the Government published a statement entitled  ‘Building a smarter financial services framework for the UK’ which essentially plans to set out sustainable finance measures as part of a second ‘tranche’ of reforms in the transition away from the Retailed EU law (REUL) following BREXIT.

In 2023, ESG reporting will be formalised through the Sustainability Disclosure Requirements (“SDRs”) CP22/20. SDRs will be rolled out in the coming years and fully mandatory disclosure is expected by 2025.

Key points on SDRs include:

  • Will apply to investment funds (primarily those marketed to retail investors in the UK) and the firms that manage or distribute those products
  • Organisations will be able to manage sustainability-related risks, opportunities and impacts
  • Set relevant metrics and targets
  • SDRs will incorporate the new UK Green Taxonomy
  • A classification system of which activities can be considered ‘green’ will be introduced

The key consideration for all regulated firms is to ensure that they are compliant with the FCA’s ‘Anti-Greenwashing Rule’. This rule sets out to clamp down on greenwashing on how terms like ‘ESG’, ‘green’ or ‘sustainable’ can be used.

Purchasing carbon offsets from firms such as JP Morgan’s Campbell Global may be an attractive proposition. Nevertheless, UK firms must ensure that they can robustly evidence that they are naming and marketing financial products and services in a clear, fair and not misleading manner, whilst also being consistent with the sustainability profile of the product or service i.e. proportionate and not exaggerated. The consequences of not doing so will most likely result in fines, which can impact reputation, public trust and cause financial impact to firms.

Read our previous article about ESG here.

How can Complyport help?

At Complyport we are supporting many firms with implementing ESG requirements through:

  • Compliance framework review to assess the impact of ESG requirements across the business
  • Formulating roadmaps to implement this timely and efficiently
  • Assessing the effectiveness and completeness of a roadmap
  • Testing and reviewing
  • Policy and procedure updates
  • Training

Please contact Jan Hagen for any questions and assistance regarding ESG implementation plans via email at jan.hagen@complyport.co.uk to book in a free consultation.

About Complyport

Complyport is a market leading consulting firm supporting the UK financial services industry for over 20 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.

Complyport advises and assists firms to become authorised and to comply with the rules and requirements of regulators on an ongoing basis. We have successfully assisted over 1000 firms to become authorised with the FCA and EU and are providing regulatory support to over 600 regulated firms on an ongoing basis globally. With presence in the UK and EU, as well as via our Associates Network, Complyport can assist firms across multiple jurisdictions.

We specialise in supporting the UK financial services industry with compliance guidance, advice and best practice including support with:

  • MIFIDPRU permissions
  • Prudential support, IFPR, ICARA and financial resilience advice
  • Consumer Duty implementation advice
  • Cryptoasset registration
  • Financial Promotions guidance, support, and management software solutions
  • Operational resilience & Cybersecurity advice
  • CASS advice and protections of client assets
  • Compliance managed services and resourcing compliance personnel
  • Financial Crime and Forensics
  • Skilled Person Reviews and Regulatory Investigation

Contact our Head of Regulatory Business Solutions, Jan Hagen via email at: jan.hagen@complyport.co.uk to book a free consultation.

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