Multinational companies are facing increased pressure to ensure that they have adequate ESG-related policies in place and (more importantly) that they are implementing those policies in practice within both their business and associated supply chains via appropriate systems and controls. Companies that are found not to have implemented or adhered to those policies face increased legal and reputational risk which has the potential to have a materially negative impact on their business.

Although there are various formal legal routes through which a company that is found to have failed to implement or adhere to ESG-related policies can be held to account, National Contact Points (“NCPs“) are increasingly being used as a means of holding companies’ “feet to the fire” regarding their ESG non-compliance.

Companies that are subject to an adverse NCP finding, or publicly known complaint, may expose themselves to additional risks, including reputational damage and follow-on civil litigation. This article will explain what NCPs are, why they are becoming increasingly relevant and what businesses should be doing to minimise their exposure to an NCP complaint.

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Japan is considering whether to require all of its primary listed companies to publish an annual sustainability report which substantively conforms with the standards issued by the IFRS’ International Sustainability Standards Board (“ISSB”). The new mandatory disclosure rule would be applied in phases based on the size of market capitalization, with the biggest companies planned to be entering into the scheme from the financial year ending March 2027. The regulator in charge, the Financial Services Agency (“FSA”), established an ad hoc advisory board, the Working Group on Sustainability Disclosure (Reporting) and Assurance (“Sustainability Disclosure WG”) under its Financial System Council in February 2024. A public consultation in respect of the local adaptation of some of the ISSB standards will end on 31 July 2024.

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On 3 June 2024, the Asia Pacific Loan Market Association (“APLMA”) published its set of “Model Provisions for Green Loans” (“Model Provisions”), following the publication of the “Draft Provisions for Sustainability-Linked Loans” by the London-based Loan Market Association (“LMA”) a year earlier in May 2023. The markets expect that the Model Provisions will bring some clarity into the classification of green loans going forward.

Continue Reading APLMA publishes Model Provisions for Green Loans

On May 28 2024, the Biden administration released the “Voluntary Carbon Markets Joint Policy Statement and Principles”.

The Joint Statement makes a number of important and supportive points in favor of the VCM, noting that:

  • High-integrity VCMs, as well as carbon credit markets more broadly, have the potential to support decarbonization efforts within the United States and globally.
  • Important questions have emerged about how to ensure that VCMs genuinely drive additional decarbonization action (rather than reward what would have happened anyway) that is sustained over time and does not simply shift emissions elsewhere.
  • Fully achieving the potential of these markets requires further action to address challenges that have emerged.

The principles set out in the Joint Statement (the “Principles”) will guide how the US Government engages with VCMs. Through the Joint Statement, the US government encourages the US private sector and other stakeholders in the carbon credit value chain to responsibly participate in the VCM market, consistent with the Principles (see further below). While the focus of the Joint Statement is on VCMs, much of the content speaks to the development and operation of carbon credit markets more generally.

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On April 24, 2024, the Loan Market Association (LMA) published its Sustainability Coordinator Letter. The publication of the LMA’s letter follows the LSTA’s February 2023 publication of its own Sustainability Structuring Agent Engagement Agreement Inserts. This Legal Update contains a comparative analysis of the LMA and LSTA’s documents, notes key similarities and differences between the two, and provides some key takeaways for ESG loan market participants.

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The European Securities and Markets Authority (ESMA), published a combined report on its 2023 Common Supervisory Action (CSA) and the accompanying Mystery Shopping Exercise (MSE) on marketing disclosure rules under MiFID II. ESMA, together with the National Competent Authorities (NCAs), states that marketing communications and advertisements generally comply with MiFID II requirements. Investment firms generally have procedures in place that ensures compliance with the rules for marketing materials. However, there are increasing concerns about marketing material which includes sustainability claims. ESMA identified several areas of improvements and announces that further supervisory actions in this area shall be undertaken.

Continue Reading ESMA’s Final Report on the 2023 Common Supervisory Action and Mystery Shopping Exercise on marketing

On 16 May 2024, the UK Government published an implementation update on its development of economy-wide sustainability disclosure requirements (the “Implementation Update“). The Implementation Update, which the UK Government committed to publishing in its 2023 Green Finance Strategy (which you can read more about here), discusses:

  1. its endorsement of the IFRS Sustainability Disclosure Standards;
  2. transition plan disclosures;
  3. the Financial Conduct Authority’s (“FCA“) Sustainability Disclosure Requirements (“SDR“) and investment labels regime;
  4. the UK Green Taxonomy; and
  5. nature-related disclosures.
Continue Reading UK government publishes implementation update in relation to sustainability disclosures

On 14 May 2024, the European Securities and Markets Authority (“ESMA“) published its final report on “Guidelines on funds’ names using ESG or sustainability-related terms” (the “Guidelines“). The Guidelines aim to provide fund managers with clear and measurable criteria to assess their ability to use ESG and/or sustainability-related terms in fund names, thereby ensuring that investors are protected against associated greenwashing risk.

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In a survey carried out by HSBC in 2023, 97% of real estate developers and investors said net zero was important to their business and 59% of the largest real estate companies said net zero was their top priority.

A third of companies in the sector already have Transition Plans and the push for formalising Transition Plans across the sector is increasing.

In April 2024, the Transition Plan Taskforce (“TPT”) published its final set of transition plan resources to help businesses transition to net zero.

In this article, we consider the guidance available to the real estate sector in preparing Transition Plans (“TP”).

Continue Reading Transition Plans & Real Estate