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On April 19, 2023, the influential CDP (formerly known as the Carbon Disclosure Project) announced that nearly 7,000 organizations worldwide can disclose their plastic-related impacts for the first time, as CDP’s global environmental disclosure platform opens for 2023 reporting. CDP is adding plastic-related reporting to its online platform in response to a request from more than 740 investors with US$136 trillion in assets.

Last October, CDP reported that a record of around 20,000 organizations (over 18,700 companies representing over half of global market capitalization and around 1,100 companies and governments) reported on CDP’s platform in 2022 and that this was a 38% increase over the prior year.

Through the platform, organizations will disclose information on the production and use of the most problematic plastics, i.e., plastic polymers, durable plastics, and plastic packaging. This data will be made publicly available in September 2023.

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On April 7, 2023, the Federal Reserve Bank of New York released two staff reports on climate-related risks for financial institutions. While the staff reports do not suggest or impose legal requirements, they provide financial institutions with insights on banking regulators’ positions on climate-related risk management requirements and current industry practices. In this Legal Update, we summarize the key points of the reports and consider how regulators might use them as they develop climate-risk management expectations for financial institutions.

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On 25 April 2023, the European Parliament’s Legal Affairs Committee voted in favour of a revised version of the EU draft Corporate Sustainability Due Diligence Directive (“the Draft Directive”).

The revised version differs from the versions that we have previously commented on here, here and here in the following key respects:

  • Inclusion of financial services: asset managers and institutional investors will now be subject to mandatory due diligence obligations, but pension funds, alternative investment funds, market operators and credit rating agencies will not.
  • Thresholds for inclusion of companies: the due diligence requirements will apply to: (i) EU-based companies with over 250 employees and a global turnover of over €40 million; (ii) parent companies with over 500 employees and a global turnover of over €150 million; and (iii) non-EU companies with a global turnover of over €150 million if at least €40 million of this was generated in the EU.
  • Exclusion of small and medium sized companies (“SMEs”): the Draft Directive will not apply to SMEs.
  • Climate transition plans: directors of companies with more than 1,000 employees will be responsible for ensuring that the company implements a transition plan that is compatible with the goals of the Paris Agreement.

It is expected that there will be a plenary vote on the revised version of the Draft Directive by the European Parliament on 1 June 2023. Following the plenary vote, negotiations with the Council on the final text of the Directive will begin. However, given that business associations have been critical of the current language in the Draft Directive, the text may well change again prior to the plenary vote.

China - Hong Kong

The Stock Exchange of Hong Kong Limited (HKEX) recently published a consultation paper proposing to mandate all listed companies in Hong Kong to provide climate-related disclosure in their Environmental, Social and Governance (ESG) reports. The proposal is formulated with reference to the Climate Standard exposure draft published by the International Sustainability Standards Board and will be introduced as a new Part D of Appendix 27 to the Hong Kong Listing Rules.

The mandatory disclosure rules, if adopted, will come into effect and apply to ESG reports in respect of financial years commencing on or after 1 January 2024. A transition period of two years is proposed for certain (but not all) disclosures where interim provisions are in place. In other words, the first ESG report in full compliance with all the new climate-related disclosures will be produced in 2027 for financial years commencing on or after 1 January 2026.  

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At the Spring 2023 National Meeting of the US National Association of Insurance Commissioners (“NAIC”), a number of sessions were held focused on environmental, social and governance (“ESG”) initiatives, led by the Special (EX) Committee on Race and Insurance (the “R&I Committee”) and the Climate and Resiliency (EX) Task Force (“C&R Task Force”), both of which report to the NAIC Executive (EX) Committee. While neither the C&R Task Force nor the R&I Committee announced any major developments or exposed any substantive items for review or comment, both bodies reported on the ongoing progress of several important initiatives which they have been overseeing during the past few years.

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Lightbulb is located on the soil, and plant are growing.Renewable energy generation is essential in the future.

In this report, Mayer Brown and Sedgwick Richardson share the results of our recent survey about sustainable asset management in Asia.  

As interest in sustainability continues to grow worldwide, much of the focus has been on Europe and the United States. From the explosive growth of flows into funds classified as Article 8 or 9 products under the Sustainable Finance Disclosure Regulation (SFDR) in Europe to pending climate-related disclosure requirements in the United States, there is no shortage of developments in these regions affecting the asset management industry.

In order to bring the Asian context into focus, we surveyed asset managers active in the region to understand how they approach this issue from compliance, strategy and branding perspectives. The survey results, collected from December 2022 to February 2023, reflect the impact of global trends on asset managers generally, as well as the unique influence of stakeholder groups, markets and regulations in Asia.

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Products

This report provides crucial insights into the evolving landscape of ESG and sustainability-related regulations, practices and challenges facing the private equity industry in Asia, and tracks the ESG and sustainability journeys of private equity (PE) fund managers. 

Continue Reading Sustainable Private Equity in Asia: Through the Lenses of Compliance, Strategy and Branding
Products

The European Commission has finally published its eagerly awaited Proposal for a Directive on substantiation and communication of explicit environmental claims (‘the Green Claims Proposal’). As its name suggests, the Proposal was crafted with a view to putting an end to non-mandatory consumer-facing claims of environmental benefit that bear no relation to reality (so-called ‘greenwashing’). 

This update analyses what it might entail for businesses that make environmental claims intended for the EU market.  Once the Proposal enters into force, explicit environmental claims will have to undergo self-assessment and certification prior to appearing on the market. Environmental Labels will also require Commission or Member State pre-approval. That in itself may create a climate that is not prompt for businesses to engage in what is likely to become a very difficult, heavily regulated area. The Green Claims Proposal should be read in conjunction with other Commission proposals, such as the Proposal on ecodesign for sustainable products and the Proposal on consumer empowerment which each bring their own restrictions. Until all of these Proposals have entered into force numerous uncertainties remain as to application of the future legal framework in practice.

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On 30 March 2023, the UK Government published an updated Green Finance Strategy (the “Strategy“). The Strategy, which updates the UK’s 2019 Green Finance Strategy, outlines how “continued UK leadership on green finance will cement the UK’s place at the forefront of this growing global market, and how we will mobilise the investment needed to meet our climate and nature objectives“.

Continue Reading The future of green finance in the UK: UK Government publishes updated Green Finance Strategy
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On January 1, 2023, the European Commission’s Delegated Regulation (EU) 2022/1288 of April 6, 2022 (“Delegated Regulation“), which introduces “Level 2” of the Sustainable Finance Disclosure Regulation (“SFDR”), entered into force. Level 2 of the SFDR complements and clarifies Regulation (EU) 2019/2088 of the European Parliament and of the Council of November 27, 2019 on sustainability disclosure in the financial services sector (“SFD Regulation“), which introduced “Level 1” of the SFDR.

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