Governance

EU legislators are being pressed to ensure that, as they progress plans for mandatory human rights and environmental due diligence, they highlight the importance of companies identifying and mitigating corruption.

Global Witness and Transparency International EU published a report in April 2021 which highlights that, despite commitments from every EU country to tackle bribery and corruption, only three of 27 countries (France, Germany and Italy) have enacted legislation that requires companies to prevent and detect corruption.  The report proposes that the EU’s proposed mandatory human rights due diligence legislation should make it clear that companies should address the negative risks and impacts of corruption as part of a broader human rights and environmental due diligence obligation.

Continue Reading Business and Human Rights: The Corruption Dimension

China - Hong Kong

On May 4, 2021, the Hong Kong Monetary Authority (HKMA) released the details of its Green and Sustainable Finance Grant Scheme (GSF Grant Scheme), which will consolidate Hong Kong’s existing Pilot Bond Grant Scheme and Green Bond Grant Scheme into one new program. According to the Chief Executive of the HKMA, Mr. Eddie Yue:

“The global green bond market has grown from practically non-existent ten years ago to US$270 billion in 2020.  In Hong Kong, we have taken early and proactive steps to strengthen Hong Kong’s position as a regional green and sustainable finance hub, including the issuance of two rounds of Government green bonds since 2019 and the establishment of the Green and Sustainable Finance Cross-Agency Steering Group to coordinate cross-agency market development efforts.  The launch of a new [GSF] Grant Scheme to support green and sustainable bond issuance and lending will further enrich the green and sustainable finance ecosystem in Hong Kong.”

Continue reading for more details on the GSF Grant Scheme.

Continue Reading Hong Kong’s New Green And Sustainable Finance Grant Scheme Begins May 10

Wind Turbine

On April 30, 2021, Bank Negara Malaysia (BNM) published Malaysia’s national climate-focused sustainability taxonomy for the financial sector, the Climate Change and Principle-based Taxonomy (CCPT). The CCPT sets out five Guiding Principles (GPs) intended to help financial institutions (FIs) assess and categorize economic activities according to the extent to which they meet climate objectives and promote the transition to a low-carbon economy.

In this Blog Post, we discuss the scope and applicability of the CCPT, the five GPs and what this new national taxonomy could mean for Southeast Asia’s forthcoming regional sustainability taxonomy.

Continue Reading Malaysia Publishes Climate Change Taxonomy For Financial Institutions

Portraits of National Leaders

In a Report published in April 2021, The Circle, an NGO that champions equal rights and equal opportunities for women and girls, proposed an EU regulation specifically aimed at achieving a living wage for workers in the garment industry. As the fashion industry emerges from the COVID-19 pandemic – which has brought renewed attention to complex supply chains and the conditions of workers in garment factories – Jessica Simor QC, author of the Report, argues the need for a legal framework to protect garment workers from exploitation.

The proposal comes off the back of the EU’s commitment to introduce a mandatory human rights due diligence law, and other initiatives currently progressing at the EU-level, which indicate considerable political will to introduce measures that identify and remediate human rights harms in global supply chains.

Continue Reading Business and Human Rights: Fashion Focus – A Proposal for New EU Legislation on a Living Wage

Governance

The European Coalition for Corporate Justice, European Center for Constitutional and Human Rights and Initiative Lieferkettengesetz reflect, in a Business and Human Rights Resource Centre Paper entitled “Towards EU Mandatory Due Diligence Legislation”, on insights from past efforts of companies to advance responsible business conduct and monitor their supply chain. Among other things, they caution against relying on “policing” suppliers through social audits and warn that private auditing and certification must not become a synonym for human rights and environmental due diligence. According to the Paper:

“Private auditing and certification must not become a surrogate for the human rights and environmental due diligence of companies. Auditing and certification failures are widespread, ranging from garment factory collapses and fires (Rana Plaza, Ali Enterprise, Tazreen) to dam collapses, resulting in thousands of avoidable deaths and injuries. We now know these mechanisms under-identify and under-document risks and impacts, and can serve as a ‘fig leaf’ disguising actual negative impacts. Currently this multi-billion euro compliance industry goes about unchecked and unregulated with various inherent conflicts of interest.”

In this Blog Post, we discuss the future of social auditing, including with respect to emerging human rights due diligence legislation, and practical steps that businesses can take today to position themselves for the future of human rights due diligence.

Continue Reading Business and Human Rights: Pitfalls Of Social Auditing

Malaysia - Kuala Lumpur

On April 28, 2021, the Securities Commission Malaysia (SCM) updated the Malaysian Code on Corporate Governance (MCCG) to strengthen the corporate governance culture of Malaysia’s listed companies. According to SCM, in this first update since 2017, the MCCG “focuses on the role of the board and senior management in addressing sustainability risks and opportunities of the company”, among other topics. The SCM notes:

“The MCCG 2021 also addresses the urgent need for companies to manage [ESG] risks and opportunities, with the introduction of new best practices that emphasise the need for collective action by boards and senior management. The global commitment and acceleration of efforts to transition towards a net zero economy has resulted in demand for greater action on the part of corporates. The SC[M]’s review of sustainability statements by large listed companies found that some have begun to address climate-related risks but more can and needs to be done.”

In this Blog Post, we provide additional background on the MCCG and highlight ESG-related aspects of the 2021 update, as well as recent, similar efforts to highlight the connection between ESG management and good corporate governance in other Asian jurisdictions.

Continue Reading Malaysian Securities Regulator Incorporates ESG in Updated Corporate Governance Code
Brazil - Brasilia

On April 26, 2021, the Central Bank of Brazil (BCB) launched a new public consultation (No. 86/2021, the “Consultation”) on a proposed regulation for mandatory disclosure of social, environmental, and climate risks by financial institutions.

Climate-related risks must be disclosed in accordance with the TCFD Recommendations (“Recommendations”), including both physical and transition risks. As for environmental and social risks, the Consultation indicates that disclosure must be aligned with ESG criteria.

The draft resolution under the Consultation establishes that, starting in 2023, financial institutions will submit an annual Report on Social, Environmental and Climate Risks and Opportunities with information on the previous year (up to December 31, 2022). Reporting will be made using standardized tables inspired by Pillar 3 of the Basel Framework. The reports will be made publicly available online for 5 years.

Disclosure of information on quantitative indicators used to manage risks and on business opportunities will be optional.

The BCB intends to regulate disclosure in two phases. The first phase is the object of the Consultation and covers qualitative aspects of the Recommendations, focused on governance, strategies, and risk management. The second phase will cover quantitative aspects of the Recommendations (metrics and targets).

The Consultation closes on June 5, 2021.

Wind power and solar power stations

Two new net zero alliances for the financial sector were launched on April 21, 2021: The Glasgow Financial Alliance for Net Zero (GFANZ) and the Net-Zero Banking Alliance (NZBA). The launch of these two alliances will bring about coordinated commitments across the financial system that are subject to transparent reporting and accounting in line with the Race to Zero criteria.

We highlight key aspects of GFANZ and NZBA in this Blog Post.

Continue Reading Fueling The Race To Zero: Launch Of The Glasgow Financial Alliance For Net Zero And The Net-Zero Banking Alliance

United States - Washington DC

In a widely anticipated announcement made at the commencement of the Leaders Summit on Climate, President Biden committed the United States to a 50-52 percent reduction in greenhouse gas (GHG) “pollution” from 2005 levels by 2030.

The announcement also notes that President Biden fulfilled his promise to rejoin the Paris Agreement and set a course for the United States to tackle the climate crisis at home and abroad, reaching net zero emissions economy-wide by no later than 2050. It states:

“As part of re-entering the Paris Agreement, he also launched a whole-of-government process, organized through his National Climate Task Force, to establish this new 2030 emissions target – known as the “nationally determined contribution” or “NDC,” a formal submission to the United Nations Framework Convention on Climate Change (UNFCCC).”

Continue reading on MayerBrown.com for more details on the announcement’s stated requirements to meet the GHG reduction target, as well as details on the Biden administrations approach in developing the target.

Products

As businesses emerge from COVID with a significant amount of corporate debt, the landscape in the financial markets has also evolved: The focus on ESG issues has intensified. We have seen institutional investors demand more in these areas, in terms of both disclosures and concrete targets, from banks and funds.

Meanwhile, emerging regulations and reforms designed to help meet climate change targets and enhance corporate governance, sustainability and environmental and social responsibility are underway. It is timely to take stock of where we are and consider how ESG issues could affect refinancings and restructurings of debt going forward.

In a Legal Update, we highlight seven key potential development areas through considering recent legal developments, market practices and trends.

Continue reading on MayerBrown.com.