The European Securities and Markets Authority (“ESMA“) has today published three useful explanatory notes covering key topics of the European sustainable finance framework, namely: a) the definition of “sustainable investments”; b) the application of do no significant harm (“DNSH“) principle; and c) the use of estimates.

The explanatory notes set out factual information regarding these concepts, with the aim of allowing stakeholders to navigate and better understand the EU’s sustainable finance legislative framework. These documents are described by ESMA as purely descriptive and not intended to replace relevant legal texts nor to provide guidance on the application of relevant provisions.

Nevertheless, they are a useful consolidated resource on these important and, at times, difficult topics and will be of particular value to those currently preparing for and applying these concepts in relation to the Taxonomy Regulation, Sustainable Finance Disclosure Regulation, Corporate Sustainability Reporting Directive and the Benchmark Regulation. For further information about these regulations, please read our earlier updates here, here, here and here.

The explanatory notes are available here:

Plastic pollution is a global environmental problem. To combat this issue, the United Nations Environment Assembly passed a resolution in March 2022 to develop a draft global agreement on plastic pollution by the end of 2024 (reported here). The third session of the Intergovernmental Negotiating Committee recently concluded in Nairobi, Kenya with the next session scheduled in April 2024 in Ottawa, Canada. Further, in April 2023, the international non-profit organisation, CDP, added plastic-related impacts to its global disclosure platform for companies and governments (reported here).

In Hong Kong, waste plastics continue to make up around 20% of municipal household solid waste disposal. To address growing concerns over the harmful effects of plastic waste on the environment and public health, the Hong Kong government recently passed the Product Eco-responsibility (Amendment) Bill 2023 (the “Bill“) to introduce regulations on disposable plastic tableware and other common plastic products, some of which will be banned from sale or free distribution in the coming year. Consequently, businesses in the food and beverage and hospitality industries will have to adapt their business operations. Hong Kong residents and visitors must also modify their consumption habits accordingly.

Continue Reading Hong Kong Promotes Product Eco-Responsibility: New Regulations on Disposable Plastic Products

In line with the global trend of increasing importance of sustainability-linked loans, the Loan Market Association (LMA) and the European Leveraged Finance Association jointly published on 5 October 2023 the updated Best Practice Guide to Sustainability-Linked Leveraged Loans (the “Updated Guide”), which contains updates to the original Best Practice Guide to Sustainability-Linked Leveraged Loans published in June 2021 (the “Original Guide”).

The Updated Guide seeks to provide practical guidance as to the application of the Sustainability-Linked Loan Principles (SLLP) as revised on 23 February 2023 to leveraged loans (SLLLs), setting out what borrowers, finance parties and their respective advisers should consider when integrating sustainability factors into leveraged loan facility agreements. Leveraged loans are uniquely positioned to incorporate sustainability-linked loan (SLL) characteristics because of (i) the close relationship between lenders and borrowers due to the on-going due diligence process in leveraged finance transactions, (ii) information reporting is not constrained by securities law and (iii) investors and lenders are accustomed to performing “deep dives” into the borrower’s business.

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On October 24, 2023, the US federal banking regulators finalized interagency principles for the effective management and supervision of climate-related financial risks (the “Climate Principles”).1 The Climate Principles are targeted at larger banking organizations and are intended to convey consistent supervisory expectations regarding how climate-related financial risks should be managed.

The US federal banking regulators had separately proposed the Climate Principles in 2021 and 2022.2 The Climate Principles mostly follow the proposals, with only a few noteworthy changes. 

Importantly, Climate Principles are effective immediately. In this Legal Update, we review the changes made to the draft Climate Principles and discuss what the industry may expect next.

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The Brazilian Securities Commission (“CVM“) made a significant announcement on October 20, 2023, by introducing CVM’s Rule No. 193. This resolution provides comprehensive guidance on the creation and dissemination of sustainability information reports, specifically the IFRS S1 and IFRS S2, as outlined by the International Sustainability Standards Board (“ISSB“), which are aligned with the recommendations of the Task Force on Climate-Related Financial Disclosures (“TCFD”) and the criteria set by the Sustainable Accounting Standards Board (“SASB”).

Continue Reading Brazil Sets Global Precedent: First Nation to Embrace ISSB Sustainability Financial Reports

On 27 September 2023, Brazil’s Supreme Court concluded the trial of Extraordinary Appeal No. 1,017,365, which discussed a cut-off date for indigenous occupation as a requirement for demarcation of indigenous lands. Based on a strict interpretation of the Brazilian Constitution, the time limit thesis tried to implement a cut-off date to restrict indigenous land claims, arguing that only indigenous lands occupied on the date of the 1988 Constitution promulgation could be demarcated by the Federal Government. In reviewing the appeal, the Supreme Court not only rejected the time limit requirement, but also established a broad set of criteria covering other relevant aspects to the demarcation of indigenous lands.

Continue Reading Brazil’s Supreme Court rejects time limit requirement for indigenous land demarcation

What is a taxonomy anyway?

The EU’s “Taxonomy” is a classification framework that determines whether an economic activity is environmentally sustainable.  

Under EU legislation, “large” EU companies will soon need to report on their taxonomy “alignment” as part of their mandatory sustainability disclosures.  This means, at risk of oversimplifying, reporting on the extent to which the activities of their business corresponds to what the EU views as “environmentally sustainable”.

This catches a lot of large subsidiaries of US and other international businesses.  It is likely to be a complicated exercise for many businesses, and one that they have not had to undergo before.

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Our international ESG team has been keeping an eye on what’s going on with regards to green taxonomies. With so much activity already this year, we summarize some of the key developments below.


We recently published this reminder of the EU’s taxonomy framework. Our publication is particularly relevant to non-EU groups with large subsidiaries in the EU. They will soon have to report on taxonomy alignment.


Meanwhile, Brazil’s draft Sustainable Taxonomy Action Plan, is currently under public consultation and receiving contributions and comments for its improvement. The deadline for taking part in the public consultation is October 20, 2023. Find out more, here.


Earlier this year we reported on the International Sustainability Standards Board’s Proposed IFRS Sustainability Disclosure Taxonomy, which was published for public consultation.

Hong Kong

The ISSB’s work followed hot on the heels of the “Prototype of a Green Classification Framework for Hong Kong”, which we wrote about here. We await details of Hong Kong’s inaugural green taxonomy prototype.

ASEAN / Singapore

On March 27, 2023, the ASEAN Taxonomy Board released Version 2 of the ASEAN Taxonomy for Sustainable Finance, which we wrote about here. This blog post also covered developments in Singapore on a green and transition taxonomy designed for financial institutions in the city state.


Meanwhile, the UK’s Green Technical Advisory Group (GTAG) has also been busy and in August and September published a number of documents setting out its recommendations, including in respect of “Implementing an effective reporting regime for the UK Green Taxonomy”, “Developing a UK taxonomy adapted to the UK’s needs in the short and medium term: Scope, coverage and reporting considerations”, “Operational considerations for taxonomy reporting: assessing and dealing with data gaps and the use of proxies” and “Treatment of green financial products under an evolving UK Green Taxonomy”.

On 5 October 2023, in the “Closing statement” from the Chair of the GTAG, GTAG announced the publication of its paper on the long term ‘institutional home’ for the Green Taxonomy, stating that “This completes the suite of 9 GTAG papers that have summarized the independent advice the GTAG has offered to the UK Government since the inception of GTAG in June 2021” and that GTAG looks “forward to supporting the next stage of the Government’s efforts to introduce a UK Green Taxonomy that is welcomed by the market as being robust, useful and usable.” We await the UK government’s upcoming consultation.

In 2021, at COP 26, the UK Government announced its intention that the UK would become the world’s first net zero aligned financial centre.  It also launched the Transition Plan Task Force (“TPT”) with a view to producing a Gold Standard Disclosure Framework for transition plans.

Last week, the TPT published its Disclosure Framework and Implementation Guidance.

The Disclosure Framework and guidance set out a baseline, consistent with international disclosure standards for organisations to report on their pathway to achieving net zero.

The UK has committed to moving towards making the disclosure of Transition Plans mandatory.

What is a Transition Plan?

A Transition Plan sets out:

  • high-level targets organisations are using to mitigate climate risk;
  • interim milestones; and
  • actionable steps the organisation intends to take to hit those targets and milestones.

Key to the success of the Disclosure Framework is its consistency with international standards.


The ISSB has adopted IFRS-S1 and IFRS-S2 which serve as the global baseline of sustainability disclosures for capital markets.

IFRS-S2 requires an entity to disclose “[any] climate-related transition plan [it] has”.

The TPT builds on the work of the ISSB and supports compliance with IFRS S2.

Disclosure Framework

Pursuant to that, the TPT has developed a sector-neutral Disclosure Framework alongside sector-neutral Guidance and Sector Guidance covering 40 sectors (to be published in November 2023).  The latter includes “real economy sub-sectors” such as utilities and power, food and beverage and oil and gas and “finance sub-sectors” (e.g. banking, asset management etc).

The Disclosure Framework applies three guiding principles:

  • Ambition – i.e. what are the organisation’s main strategic aims and business model;
  • Action – i.e. what policies will it apply to achieve these aims and what resources will be made available; and how will the organisation engage with stakeholders; and
  • Accountability – targets (including interim targets) and governance issues (e.g. Board oversight and upskilling).

What are the next steps?

Some organisations have already produced initial Transition Plans and these provide a useful model for other organisations embarking on the next steps in their journey to net zero.  In November 2023, the TPT will publish sector-specific guidance on transition planning and in Q4 of 2024 the UK Government will consult on transition plan requirements.

Brazil’s draft Sustainable Taxonomy Action Plan (the Action Plan), prepared by the Ministry of Finance, is currently under public consultation and receiving contributions and comments for its improvement. The deadline for taking part in the public consultation is October 20, 2023.

The development of a sustainable taxonomy seeks to address Brazil’s main environmental and social challenges, taking into account its commitments, objectives and priority plans. Consisting of a classification system that defines, on a scientific basis, activities, assets and/or categories of projects that contribute to climate, environmental and/or social objectives, taxonomies provide a common terminology for companies, financial institutions, and investors to manage investment decisions, as well as for regulators, governments, and other stakeholders to develop public policies. Also, they are essential for increasing transparency of information on sustainable economic and financial activities. According to the International Capital Market Association (ICMA), they provide specific criteria and indicators that make it possible to assess whether an activity contributes to sustainability and/or the transition to a sustainable economy.

The Action Plan addresses several topics:

  • discusses the landscape of sustainable finance in the world, with a focus on international commitments;
  • lists domestic and international taxonomy initiatives;
  • explains the strategic, environmental and social objectives intended for the Brazilian taxonomy;
  • presents the international commitments and national legislation linked to the taxonomy; and
  • highlights the design of the taxonomy by explaining how its objectives are articulated and which principles and definitions are used for its construction.

The Action Plan is particularly important to the private sector, as it includes, among other objectives, climate change mitigation and adaptation covering the following sectors:

  1. agribusiness;
  2. extractive industries;
  3. industries;
  4. electricity and gas;
  5. water, sanitation, waste management and decontamination;
  6. construction;
  7. transport and storage; and
  8. social services.

The ongoing public consultation is an opportunity for stakeholders, including companies, financial institutions, investors, and society in general, to contribute with suggestions and feedback on the Action Plan, to help shape the guidelines that are expected to steer investments and policies in Brazil going forward, to influence the regulations, and to better understand sustainability criteria. In addition, for companies, alignment with the taxonomy creates potential to attract investments, improve market competitiveness, reduce legal risks and enhance sustainable transparency practices.

Tauil & Chequer’s Environmental Practice is ready to help should you need any assistance or advice in taking part in the public consultation process.