On Thursday, May 20, 2021, US President Biden signed an Executive Order, entitled “Climate-Related Financial Risk” (Climate Risk EO), that sets the stage for the US federal government, including its financial regulatory agencies, to begin to incorporate climate-risk and other ESG issues into financial regulation. The Climate Risk EO further demonstrates the
Paul Forrester is a respected corporate finance and securities lawyer whose practice is especially focused on structured credit, including collateralized loan obligations, energy (including oil and gas, utilities, shipping, refinery and pipeline) financings and project development, and financing (especially concerning renewable energy, industrial, petrochemical, power and transportation projects and infrastructure).
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On May 4, 2021, the Autorité de contrôle prudentiel et de résolution (“ACPR” – the French Prudential Supervision and Resolution Authority) published a first assessment of financial risks stemming from climate change and the main results of a climate pilot exercise (which many have referred to as a climate risk “stress” test) conducted…
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…
On April 21, 2021, the European Commission adopted a comprehensive package of measures to help improve the flow of money toward sustainable activities across the European Union.
The measures adopted include:
- The EU Taxonomy Climate Delegated Act, which aims to support sustainable investment by making it clearer which economic activities most contribute to meeting
On April 15, 2021, General Mills, a leading global food company, announced that it had closed the first-ever sustainability-linked loan (SLL) facility for a US consumer packaged goods company.
The $2.7 billion five-year multi-currency revolving credit facility (RCF) was arranged by Bank of America (which acts as administrative agent) and syndicated to a significant number of banks and other lenders.
The RCF was filed with the US Securities and Exchange Commission and includes a matrix that will adjust the applicable interest rate and fees under the RCF based on General Mills’ reductions in its greenhouse gas emissions in owned operations (i.e., only Scope 1 and 2 emissions) and its use of renewable electricity for global operations.
On April 14, 2021, the Basel Committee on Banking Supervision (BCBS) issued two climate-related reports—one on climate-related risk drivers and their transmission channels and a companion report on measurement methodologies for financial risks. Among the reports’ findings:
- Banks and the banking system are exposed to climate change through macro- and microeconomic transmission
On March 25, 2021, the New York Department of Financial Services (NYDFS) issued for public comment “Proposed Guidance for New York Domestic Insurers on Managing the Financial Risks of Climate Change” (Guidance). Comments must be submitted by 11:59 p.m. EDT on Wednesday, June 23, 2021, and must be made…
Offshore wind (OSW) project development in the United States continues its rapid pace. In addition to the significant “E” factors already present in such projects, several recent OSW solicitations undertaken and executive orders released during the COVID-19 pandemic have included specific “S” factors.
In our Legal Update, we provide further detail on OSW…
In a speech on March 17, 2021, the CEO of the UK’s Financial Conduct Authority (FCA), Nikhil Rathi, highlighted how the financial services regulator is prioritizing diversity and inclusion (D&I) initiatives in the near term. Speaking at the launch of the HM Treasury Women in Finance Charter Annual Review, Mr. Rathi outlined why D&I is a key consideration for the FCA, noting that:
“We care because diversity reduces conduct risk and those firms that fail to reflect society run the risk of poorly serving diverse communities. And, at that point, diversity and inclusion become regulatory issues.”
Key steps the FCA is now taking on D&I include:
- Working with the Prudential Regulation Authority (PRA) on a joint approach to D&I for all financial services firms; and
- Considering whether to make diversity requirements a part of the FCA’s premium listing rules, similar to the approach taken by NASDAQ in the US.
The past few weeks have seen a flurry of ESG-related announcements coming from the US Securities and Exchange Commission (SEC) Acting Chair and staff. The most recent press release announced that the SEC has created a Climate and ESG Task Force in the Division of Enforcement:
“[T]he Climate and ESG Task Force will develop initiatives to proactively identify ESG-related misconduct. The task force will also coordinate the effective use of Division resources, including through the use of sophisticated data analysis to mine and assess information across registrants, to identify potential violations.
The initial focus will be to identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules. The task force will also analyze disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies.“
SEC registrants may be wondering if these announcements change their legal obligations and what actions they should take in response in order to ensure compliance. We discuss the implications for registrants in this Blog Post.