The Brazilian National Council of Justice (CNJ) has recently issued Recommendation No. 156/2024, advising all branches of the Brazilian Judiciary and judges to adopt the second scope of the CNJ’s Protocol for Judging Environmental Lawsuits (Protocol). This second scope provides guidelines for quantifying the impact of environmental damages on climate change. In 2023, the CNJ published the first scope of the Protocol, which focused on using satellite imaging as evidence in environmental lawsuits.

The second scope aims to assist Brazilian judges in adhering to Article 14 of CNJ Resolution No. 433/2021, which requires that verdicts on environmental damages consider their impact on climate change. Specifically, the Protocol introduces methodologies for calculating greenhouse gas emissions resulting from deforestation and fires in Brazilian biomes, assigning a financial value to these emissions.

The financial valuation of damages is calculated using the following steps:

  1. Determine the extent of the damaged area (in hectares).
  2. Estimate the average carbon stock in the area or biome (per hectare).
  3. Calculate the carbon stock lost by multiplying (1) and (2).
  4. Convert the lost carbon stock into tons of carbon dioxide equivalent (CO2e).
  5. Assign a price to CO2e, based on Protocol parameters.
  6. Calculate the final value by multiplying (4) and (5).

Regarding CO2e pricing, the Recommendation specifies that judges should not use a value lower than the rate established for contracts under the Amazon Fund, which is currently set at USD 5.00 per tCO2e. When this rate is revised, judges are encouraged to adopt the updated value, converted into Brazilian reais (BRL).

This new framework is expected to guide the Brazilian Judiciary in addressing environmental damage lawsuits more comprehensively. By incorporating the climate impacts of deforestation and fires, the assessment of these damages by the Judiciary will no longer be limited to their direct effect on the forest but is also expected to reflect their contribution to climate change.

On 19 November 2024, the Council of the European Union (“Council”) adopted a new regulation on environmental, social and governance (ESG) rating activities.1 The new regulation, which was presented by the European Commission on 13 June 2023, aims to make ESG rating activities in the EU more consistent, transparent and comparable.2  This will in turn build investors’ confidence in sustainable financial products.  We previously commented on the Council’s agreement to regulate ESG ratings providers in December 2023, and the provisional agreement reached between the Council and the European Parliament in February 2024.

Among other things, the new regulation aims to strengthen the reliability and comparability of ESG rating by improving the transparency and integrity of the operations that ESG ratings providers conduct.  In particular:

  • ESG ratings providers established in the EU:
    • will be authorised and supervised by the European Securities and Markets Authority; and
    • will have to comply with certain transparency requirements.
  • ESG ratings provides established outside the EU that wish to operate within the EU will need to:
    • obtain an endorsement of their ESG ratings by an EU authorised ESG rating provider;
    • obtain a recognition based on a quantitative criterion; or
    • be included in the EU registry of ESG rating providers on the basis of an equivalence decision.

The new regulation also requires ESG rating providers to take “all necessary steps” to ensure that that they are not affected by any existing or potential conflict of interest (Article 25).

Next steps

The regulation will be published in the EU’s Official Journal and enter into force 20 days later. The regulation will apply 18 months after the date of its entry into force.

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The Mayer Brown team is closely monitoring these developments and their potential implications, particularly for market participants in the finance sector and across the asset management and investments community.

  1. Environmental, social and governance (ESG) ratings: Council greenlights new regulation, Council of the EU, Press Release, 19 November 2024, available at: https://www.consilium.europa.eu/en/press/press-releases/2024/11/19/environmental-social-and-governance-esg-ratings-council-greenlights-new-regulation/
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  2. Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities, and amending Regulations (EU) 2019/2088 and (EU) 2023/2859, available at: https://data.consilium.europa.eu/doc/document/PE-43-2024-INIT/en/pdf ↩︎

Other contributor: Jan Buschfeld

On 12 November 2024, a Dutch appeals court ruled that Shell does not have to reduce its CO2 emissions by 45% by 2030 compared to 2019 levels, as previously ordered by the Hague District Court on 26 May 2021. Shell now has the right to adjust its own emissions reductions targets as it sees fit. However, the appeals court maintained the District Court’s stance that there exists a private law duty of care which requires, through corporate policy, that companies contribute to the mitigation of dangerous climate change by reducing their emissions. This “unwritten” Dutch duty of care requires that “companies like Shell, which contribute significantly to the climate problem and have it within their power to contribute to combating it, have an obligation to limit CO2 emissions in order to counter dangerous climate change”. Therefore, whilst the appeals court judgment overturned the requirement that Shell reduce its CO2 emissions by 45%, it did not overturn this new duty. Read our full analysis on the Mayer Brown website for more information.

In a significant development for EU corporate sustainability legislation, European Commission President Ursula von der Leyen has announced plans to merge three cornerstone sustainability frameworks – the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), and the Taxonomy Regulation – through so-called omnibus legislation.

While the Commission maintains this consolidation aims to streamline reporting burdens and reduce bureaucratic overlap without altering substantive requirements, the proposal may have unintended consequences as it could inadvertently reopen these established frameworks to substantial revision during the legislative process.

Under the EU’s legislative process, once the Commission tables its proposal, both the European Parliament (EP) and Council will have opportunities to propose amendments. Recent precedent from the EU Deforestation Regulation (EUDR) vote suggests that center-right coalitions may push for more extensive changes than initially intended.

The technical complexity of merging these frameworks presents additional challenges, given their different legal forms (regulations versus directives) and varying scope of application. While the European Sustainability Reporting Standards should remain unchanged under Commission mandate, the broader implications of this consolidation remain uncertain.

Mayer Brown closely monitors these developments as they may significantly impact corporate sustainability compliance requirements in the EU.

On November 11, 2024, one of the first substantive outcomes of the 29th Session of the UN Conference of the Parties to the UN Framework Convention on Climate Change (COP29) was approved. The President of COP19 introduced a draft decision of the Conference of the Parties Serving as the Meeting of the Parties to the Paris Agreement (CMA) Bodies. The decision took note of the Article 6.4 Supervisory Body’s adoption of two standards (one on “methodologies” and one on “removals”), while also reiterating the authority of the Supervisory Body to prepare the rules for the implementation of Article 6.4.

Article 6.4 of the Paris Agreement aims to replace the Clean Development Mechanism (CDM) of the Kyoto Protocol, and to establish a global carbon credit market to promote the reduction of greenhouse gas (GHG) emissions. The standards prepared by the Supervisory Body establish criteria for the implementation of this global market, and aim for a uniform approach for two elements of the mechanism: (i) the development and evaluation of the methodologies applicable to Article 6.4; and (ii) the requirements for activities involving GHG removals under the Article 6.4 mechanism. These standards will assist project developers in creating and submitting their methodologies, and allow projects to be registered under the Article 6.4 mechanism.

Read more at Mayerbrown.com

On 15 October, the UK’s independent public spending watchdog (the National Audit Office or NAO) published its overview of the Government’s approach to the three areas of environmental improvement, net zero and climate change adaptation.

The report provides a high-level critique of Government programmes to date on these three interrelated areas emphasising the scale of the policy challenges and setting out a summary of how the Government proposes to finance the solutions to these issues.

In terms of environmental improvement, the NAO notes that last Government’s Environmental Improvement Programme (EIP) included 10 long-term goals, covering issues from halting species decline, through reducing water and air pollution and increasing tree and woodland coverage.  In 2023, the Office for Environmental Protection (OEP) concluded that the Government was “largely off track” in meeting 7 out of 10 of these goals.

The new Government’s response has been to commit to a “rapid review” of the EIP, to be published by May 2025.

On net zero, the NAO points out that again, a policy vacuum is hindering progress against targets.  In particular, the previous Government’s 2023 Net Zero Growth Plan was successfully challenged in the High Court.  The new Government has promised a response to be published by May 2025.

On adaptation, there are no UK legally binding obligations other than to produce a climate change risk assessment every 5 years.  The current National Adaptation Programme is for the period 2023-2028.

The NAO then turns to the funding needed to meet these various challenges.  It says that a further £50-60 billion of capital investment will be needed by the late 2020s to meet net zero targets.

To halt the decline in biodiversity at least £500 million per year will be needed rising to £1 billion by 2030.

And to meet the adaptation challenge, £10 billion per year may be needed this decade.

Most of this money will need to come from the private sector and, with this in mind, the previous Government launched the UK’s Green Financing Programme in 2021.  So far this has raised £41.6 billion through green gilts, and Green Savings Bonds.  In 2022-3 alone, the Programme raised £10.5 billion.

The largest proportion of the funds is allocated to railtrack renewal, followed by renewable energy and then climate change adaptation.

Although the costs of the Government’s programmes are significant, the report also points out that it is expected that green trade is expected to deliver up to £170 billion of export sales in goods and services to the UK by 2030.

On October 8 2024, Brazil enacted Federal Law No. 14,993/2024, which stems from Bill No. 528/2020, the “Fuels of the Future Bill.” The new law, which addresses several matters related to decarbonization, provides for the regulation and inspection of activities involving the capture and geological storage of carbon dioxide, also known as CCS (Carbon Capture and Storage)—the first Brazilian framework to address this topic.

Under the new framework, the capture of carbon dioxide for geological storage, its transportation through pipelines, and the geological storage itself will be subject to authorization by the National Agency of Petroleum, Gas and Biofuels (ANP); the ANP will be in charge of issuing regulatory standards on the qualification of parties to carry out CCS operations as well as the conditions for granting or transferring the respective authorizations.

Read more at Mayerbrown.com

On 2 October 2024, the European Commission (“Commission”) made public its proposal to postpone application of the EU Deforestation Regulation (“EUDR”), by way of an amendment to the EUDR that would postpone (a) its date of entry into application from 30 December 2024 to 30 December 2025 (and till 30 June 2026 for small and micro-enterprises) and (b) benchmarking deadline to 30 June 2025.

On the same day, the Commission also released the long overdue EUDR Draft Guidance Document (“Guidance Document“) and an updated version of the EUDR Frequently Asked Questions (“FAQs”). The Guidance Document as well as the FAQs provide a useful reference for anyone who must comply with the EUDR by clarifying and elaborating on the key definitions and obligations imposed by the EUDR, whilst discussing the role of certifications and third party verification schemes in risk assessment and risk mitigation.

Finally, the Commission also released updated information on the General Principles on the Benchmarking Methodology, which suggest that a large majority of countries worldwide are expected to be classified as low risk. This is encouraging news for operators since no risk assessment and risk mitigation would need to be performed for products containing or made of commodities originating in low risk countries.

Continue reading at Mayerbrown.com.

Following the UK Competition and Markets Authority’s (“CMA“) recent investigation regarding ‘Green Claims’ in the fashion industry (discussed here), the CMA has now published a Compliance Guide to help fashion businesses “stay on the right side of consumer law”. This is part of the CMA’s “essential” work to ensure consumers can make informed choices based on environmental claims that they can trust.

In short, all of your environmental claims must be clear and accurate. The Compliance Guide is full of concrete examples of green claims in the fashion industry, which are not compliant with consumer law and explanations of how they can be made compliant. It seems to be deliberately drafted to be accessible and broad in application (a similar approach has been adopted in the CMA’s guidance on green collaborations between competitors: CMA Guidance on Environmental Agreements | Insights | Mayer Brown).

Firms at all levels of the supply chain should take note

The CMA emphasises that each business in the fashion supply chain has a responsibility to ensure that its claims are accurate and substantiated. While the focus of the Compliance Guide is on fashion retail (including sales of a retailers own or third-party products via a marketplaces), the CMA notes that it will also be relevant to manufacturers and suppliers (including third party branded suppliers) and wholesalers and distributors (referring to paragraphs 2.20 and 2.21 of the Code).

What is a Green Claim?

These are claims that show how a product, service, brand, or business provides a benefit, or is less harmful to the environment.

Green Claims are used by many businesses to market their products or services – this is an area of growing importance for the increasingly eco-conscious consumer. This also ties in to the CMA priorities set out in its annual plan of working so that the whole UK economy can grow productively and sustainably, as well as people being confident they are getting great choices and fair deals.

CMA’s Dos / Don’ts

Do…Don’t…
Ensure that all Green Claims are clear and accurate, including important information prominently displayed in this manner and having regard to the overall presentation of any claimsHide important information, such as qualifying or other important information that is needed to ensure a claim is not misleading. Examples of hidden information include: placing information away from the claim itself – e.g. the other side of a tag; through a hyperlink or scan of a QR code; or expanding a drop down list
Ensure that any criteria for product ranges are clear and available (e.g. include minimum thresholds that are part of the criteria), ranges should be named accurately, and criteria applied correctly to products
Ensure that any criteria for product ranges are clear and available (e.g. include minimum thresholds that are part of the criteria), ranges should be named accurately, and criteria applied correctly to productsMake a claim if there is not enough space for the necessary important information, where the claim could be misleading without it
Make sure that any comparisons are clear, e.g., between competing products and businesses, or between different versions of a similar product Use unclear terms, such as broader, general or absolute claims – like ‘green’, ‘sustainable’ or ‘eco-friendly’ which are much more likely to be inaccurate and to mislead customers
Explain clearly any action a consumer needs to take, e.g., if you make a claim which is only true if the consumer takes certain action, that action needs to be clearly statedUse imagery and icons in a way which could lead consumers to believe a product is more green than it is
Make sure that any navigational tools or filters are clear and only return qualifying products, e.g. ensuring the filters refer to specific characteristics such as ‘50%+ recycled’ instead of ‘sustainable’Refer to affiliations and accreditations in a way that could mislead customers, e.g. referring to an accreditation relating to product characteristics in respect of an individual product that does not have those characteristics
Make sure your suppliers can back up claimsRely entirely on third parties, because retailers are ultimately responsible for any claims made relating to third-party products they sell and need to satisfy themselves that such claims are not misleading. Adequate supply chain due-diligence is therefore of key importance
Put in place internal processes to make sure all environmental claims are accurate and do not mislead customer
Ensure environmental targets are presented clearly, including at least what the target is aiming to achieve, the date on which the target is expected to be met, and the main ways by which you intend to achieve the target
Make it clear if a claim is based on specific parts of a product’s life cycle 
Describe fabrics clearly and precisely, e.g. including the composition of the fabric and what the percentage make up is
Provide supporting information regarding any affiliations and accreditations, including summary of associated environmental benefits, your connection to the organisation (if any), link to further information, and link to the provider/ scheme’s website

This new Compliance Guide is a clear signal that the CMA is willing to resort to stronger intervention in this space going forward, bolstered particularly by direct consumer enforcement powers and possibility of severe financial penalties following the introduction of the Digital Markets, Competition and Consumers Act 2024 (“DMCC“), with relevant provisions set to come into force around the end of Q1 2025. For further information regarding the DMCC, further reading is here.  

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On 3 September 2024, the UK Government published its factsheet on the Great British Energy Bill which received its Second Reading in the House of Commons on 5 September.

The purpose of the Bill is to establish a publicly-owned energy company designed to drive clean energy deployment and support the UK Government’s aim of decarbonising the UK’s electricity system by 2030.

Great British Energy (“GBE”) will be backed by an initial capitalization of £8.3 billion over the life of this Parliament. It will have five overarching functions:

  • Project investment and ownership – GBE will seek to generate revenue through the ownership and operation of clean energy projects;
  • Project development – GBE will identify and develop clean energy assets in partnership with others. To this end, the Government has announced a partnership between GBE and The Crown Estate (which owns, amongst other things, the seabed off the coast of the UK). The intention is that together, GBE and The Crown Estate will bring forward 20-30 GW of additional off-shore wind leases by 2030 and leverage up to £30-60 billion of private investment;
  • Local Power Plan – GBE will deliver a Local Power Plan with the aim of partnering with and funding local authorities and community groups to roll out small and medium-sized renewables projects using established technologies, up to 8GW in total;
  • Supply chain – GBE will work with others,  including The National Wealth Fund, which has allocated a further £7.3 billion of funding to the UK Infrastructure Bank, to support clean energy supply chains – from off-shore wind to carbon capture  and storage.
  • Nuclear – Great British Nuclear was  established in March 2023 to provide specialist skills to deliver the Government’s nuclear, including small nuclear, programme: GBE will assist in as yet unspecified ways, to support the work of Great British Nuclear.

A consultation  process is already underway to identify the policy priorities for GBE. Under the Great British Energy Bill, a Statement of Strategic Priorities must be developed and laid before Parliament as soon as possible after GBE is established. Juergen Maier, former Siemens UK CEO, has been appointed as Chair of GBE and is understood to be engaging with shareholders on GBE’s policy priorities.