There have been two recent developments in the UK which further highlight the litigation risk for  international companies in respect of the activities of  their foreign subsidiaries. The UK is certainly not the only regime where there has been a notable increase in human rights related litigation but a distinct pattern is emerging.

PGI Group (PGI), a group of companies that operate in the agribusiness and renewable energy spaces, and its Malawian subsidiary, Lujeri Tea Estates Ltd (Lujeri), are facing a legal action in the UK High Court in connection with alleged systemic sexual abuse, including rape, sexual assault and discrimination, in Malawi.  Lujeri is a supplier to a number of known UK tea brands, including Typhoo, Yorkshire Tea and Tetley.  It is also a major supplier of macadamia nuts, which are grown in its Malawi orchards.

In the meantime, British American Tobacco (BAT) and Imperial Brands sought last month to strike out claims made against them and their subsidiaries by Malawian tobacco farmers, which were filed in the UK High Court last December.

These cases add to the growing list of companies to have faced legal claims in the UK courts in respect of the actions of their foreign subsidiaries (see our previous commentary on Camellia plc, Royal Dutch Shell plc and Vedanta Resources plc).  The cases also highlight the increasing litigation risk dynamic amid the growing trend of human rights and environmental litigation and underline the importance of UK companies taking steps to identify, prevent and mitigated human rights-related risks both in their own operations and also in the operations of their subsidiaries.
Continue Reading Business and Human Rights in the UK – Litigation Risk

On May 19th, 2021, Singapore’s Green Finance Industry Task Force (GFIT), an industry-led initiative convened by the Monetary Authority of Singapore (MAS), issued a detailed implementation guide for climate-related disclosures by financial institutions (FIs) and a whitepaper on scaling green finance in the real estate, infrastructure, fund management and transition sectors. In addition, the GFIT has established a framework to help banks assess eligible green trade finance transactions and will launch a series of ESG-related capacity building workshops and e-learning modules from May 2021 to April 2022 for FIs and corporates.

In an announcement, Ms. Gillian Tan, Assistant Managing Director (Development and International) at the MAS, said:

“GFIT’s initiatives to enhance climate-related disclosures and strengthen green capabilities will enable financial institutions to effectively develop green solutions and align their portfolios towards facilitating Asia’s transition to a low carbon economy. These initiatives will also contribute to global efforts to achieve greater consistency and comparability in climate-related disclosures, as well as provide investors and market participants with the necessary information for climate risk analysis and investment decision-making.”

Continue reading for more details on each of these significant new developments.


Continue Reading Singapore Financial Regulator Announces Initiatives on Climate Disclosures, ESG Capacity Building and More

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

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

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

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

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

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

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 April 6, 2021, the Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code (Council) published a consultation on proposed revisions to Japan’s Corporate Governance Code (Governance Code) and Guidelines for Investor and Company Engagement (Guidelines) intended to, among other things, increase attention to sustainability and ESG matters and promote diversity among Japan’s listed companies.

The Governance Code sets out the fundamental principles for effective corporate governance of listed companies in Japan, while the Guidelines provide agenda items for engagement that institutional investors and companies are expected to focus on. The proposed revisions to these two documents could significantly influence the state of ESG and diversity among Japan’s listed companies, with a key emphasis on sustainability-related disclosures.

In this Blog Post, we provide additional background on the Governance Code and the Guidelines, as well as details and analysis of the consultation proposals.


Continue Reading Japan to Promote ESG Disclosures and Diversity for Listed Companies