On November 10, 2021, the Association of Southeast Asian Nations (ASEAN) released Version 1 of the ASEAN Taxonomy for Sustainable Finance (the “ASEAN Taxonomy“). First announced in March 2021, the ASEAN Taxonomy will provide a common language for sustainable finance among the ten ASEAN Member States (AMS) that, together, comprise the fifth largest economy in the world. This is a necessary and timely development as ASEAN remains highly vulnerable to climate change, which has had a significant impact on the people, businesses and governments of ASEAN.

Version 1 is a significant step in ASEAN’s sustainability journey, as this initial document will provide the framework for continuing discussions among AMS as the ASEAN Taxonomy develops. In this Blog Post, we highlight key aspects of Version 1 of the ASEAN Taxonomy and compare this new framework against the world’s most prominent sustainability taxonomy, the EU’s Taxonomy Regulation (the “EU Taxonomy“).

Continue Reading ASEAN Releases Sustainability Taxonomy for Southeast Asia

On November 8, 2021, the acting head of the Office of the Comptroller of the Currency (OCC), Michael J. Hsu, issued a call to action on climate change to the boards of directors of OCC-regulated banks. Specifically, he outlined an initial series of climate change-related questions that boards should be asking bank management and stated that bank boards should use the exercise to help improve climate risk management practices and build up climate risk management and reporting capabilities. While he indicated that this is a long-term effort that will include further guidance from the agency, it is clear from his call to action that the OCC expects banks to begin right now. In this Legal Update, we explain the background to the OCC’s risk management initiatives and discuss this recent call to action on climate risk.

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The sheer volume of capital flows into sustainable, or ESG-focused, funds and products over recent months reflects the rapidly increasing number of investors with ESG-related preferences, or demands, when selecting those investments.  Evaluating, and comparing, the ESG credentials of different investment products presents significant difficulties, however, in circumstances where information and disclosures about those products – and even the terminology used – are, at best, inconsistent, and often incomplete; and, at worst, may attract accusations of “greenwashing”, by using marketing materials to mislead investors about the ESG approaches used in their products.

Continue Reading The CFA Institute releases Global ESG Disclosure Standards for Investment Products

Many UK companies will soon be mandated to make TCFD-aligned disclosures. This follows the Financial Conduct Authority’s (FCA) introduction of the Listing Rules (Disclosure of Climate-Related Financial Information) Instrument in December 2020, which requires companies with a UK premium listing to disclose on a comply-or-explain basis against the Task Force on Climate-related Financial Disclosures (TCFD) recommendations in their annual reports. The FCA and UK Government have held consultations on extending this requirement to standard-listed and large private companies.

To help companies comply with these disclosure requirements, the Financial Reporting Council’s Financial Reporting Lab (the ‘Lab‘) has recently published a ‘TCFD: ahead of mandatory reporting’ report (the ‘Report‘), which provides examples of good disclosure practices by companies that have already voluntarily adopted the TCFD framework. The Report refers to research recently conducted by the Alliance Manchester Business School on the approaches companies have taken to conducting climate-related scenario analysis (the ‘Research‘), which is required in order to comply with the TCFD recommendations. Together, the Report and the Research provide holistic practical advice for companies on making TCFD-aligned disclosures, which is also relevant for non UK based companies who are considering how best to address the TCFD recommendations.

Continue Reading TCFD: Preparing for Mandatory Reporting

Climate change could have serious impacts on the mortgage industry, and stakeholders should take action now. That is the recent urgent message from federal regulators and mortgage industry stakeholders.

Recent reports and initiatives from the Mortgage Bankers Association’s Research Institute for Housing America, the White House, the Departments of Housing and Urban Development, Veterans Affairs and Agriculture, as well as the Financial Stability Oversight Council, are the latest in a movement by regulators and other mortgage industry stakeholders to measure and mitigate climate change-related risk. The reports consistently recommend that regulators and industry actors begin taking steps to identify and measure this risk.

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While climate litigation against private actors in Brazil has been gaining more attention and employing creative legal strategies, as we have already commented here and here, litigation against the government is also keeping pace, as illustrated by a recent case filed against the Brazilian Federal Government and the Ministry of Environment.

On October 26, just a week before the Glasgow Climate Change Conference (COP26), 70 NGOs led by Observatório do Clima filed a public civil action claiming that the current Brazilian National Policy on Climate Change, set forth by Law no. 12,187/2009, is inadequate and unable to provide a response to the current climate crisis. As such, the plaintiffs require that the policy be updated with new commitments, effectively fit to contribute in the fight against climate change.

Continue Reading Climate Litigation in Brazil: New Developments in Seeking Government Action Towards More Ambitious Legislation

Timed to coincide with the opening of COP26—the UN Climate Change Conference—and citing his prior commitment to cutting greenhouse gas (GHG) emissions by 50-52 percent by 20301 and achieving a net-zero economy by 2050, on November 1, 2021, President Biden announced the launch of the President’s Emergency Plan for Adaptation and Resilience (PREPARE). This whole-of-government initiative by FY2024 would provide $3 billion annually in adaptation finance to reduce climate impacts on those most vulnerable to climate change worldwide. The announcement constitutes the first US Adaptation Communication under the Paris Agreement, which President Biden rejoined on the first day of his administration.

Concurrently, the Biden administration released the Long-Term Strategy of the United States: Pathways to Net-Zero Greenhouse Gas Emissions by 2050 (Strategy), which—consistent with the conclusion of the most recent report2 of the Intergovernmental Panel on Climate Change (IPCC)—states that global warming needs to be limited to 1.5º Celsius.

Importantly, the Strategy refers to a forthcoming set of new policies3 to “accelerate existing emissions reduction trends—for example, expanding rapidly the deployment of new technologies like electric vehicles and heat pumps, and building the infrastructure for key systems like our national power grid”—actions intended to help reduce net GHG emissions 50-52 percent below 2005 levels in 2030 and put the United States on a firm footing to meet the net-zero economy goal by 2050.

1 Described more fully in our April 21, 2021, Legal Update “Biden Administration Pledges 50-52% GHG Reduction by 2030.”

2 IPCC, “Climate Change 2021: The Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change,” Cambridge University Press, Cambridge UK, 2021. https://www.ipcc.ch/report/ar6/wg1/

3 United States Executive Office of the President, “The U.S. National Climate Strategy.”