Products

On 23 February 2023, the Asia Pacific Loan Market Association, Loan Market Association and Loan Syndications and Trading Association jointly published updates on the Green, Social and Sustainability-Linked Loan Principles (the “Principles”) together with their supporting guidance documents (the “Guidance”). 

All transactions completed prior to 9 March 2023 will be exempted from following the updated Principles and Guidance, and instead should be reviewed in conjunction with the Principles and Guidance in force at the time of the loan’s origination, extension or refinancing, as applicable.

All green, social and sustainability-linked loans originated, extended or refinanced after 9 March 2023 must fully align with the updated Principles and Guidance to be classified as green, sustainability-linked or social loans.

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Products

The UK Financial Conduct Authority (the “FCA“) recently published its Discussion Paper (DP23/1) on ‘Finance for positive sustainable change’ (“DP23/1“) as part of its ongoing effort to promote sustainable finance and align the financial sector with the UK’s environmental, social, and governance (“ESG“) goals. DP23/1 draws on the Task Force on Climate Related Financial Disclosures (“TCFD“) recommendations and considers how regulated firms’ governance, incentives and competence can support sustainability-related objectives.

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Risk Management

Companies must recognise that they are subject to increased expectations in terms of effective identification and management of social issues. A failure to do so – and the resulting inequality – is increasingly seen as representing a systemic risk to the resilience of business operations and value chains. Expectations are reinforced by the wave of new due diligence regulations and reporting standards focussed on addressing both the ‘E’ and ‘S’ in ESG (see, for example, our earlier blog posts on the EU’s Corporate Sustainability Reporting Directive here, as well as on the UK Financial Conduct Authority’s Greenwashing rules here).

CFOs have a critical role in communicating how companies are addressing wider social issues linked to their business operations and ensuring companies’ compliance with related regulations and reporting standards. To help CFOs execute this role effectively, the World Business Council for Sustainable Development (the “WBCSD“) and Shift have released a primer for CFOs for advancing the ‘S’ in ESG (the “Report“). The Report aims to provide a starting point for CFOs working to address the demands and challenges associated with the ‘S’ in ESG, covering both an overview of the what, the who and the how of corporate social performance and key recommendations for improving the measurement of that performance.

Continue Reading Business and Human Rights – a “primer” for CFOs for advancing the ‘S’ in ESG
Malaysia - Kuala Lumpur

On February 17, 2023, the Securities Commission Malaysia (“SC”) published the revised Guidelines on Sustainable and Responsible Investment Funds (“Guidelines”) setting out the reporting and disclosure requirements for a fund to qualify as a Sustainable and Responsible Investment (“SRI”) Fund and, under a new chapter added to the Guidelines, an ASEAN Sustainable and Responsible Fund (“SRF”). The amendments revise the first version of the Guidelines issued in December 2017 and are effective on the date of issuance.

Continue Reading Securities Commission Malaysia Publishes Revised Guidelines on Sustainable and Responsible Investment Funds
Sustainable Development

Mining companies are closely linked to the energy transition, both as businesses for which new requirements apply and as suppliers of critical minerals used to produce electric vehicles batteries, solar panels and wind turbines, among other products. In this Legal Update, we discuss emerging climate change-related guidelines and requirements, give examples of how mining companies are adjusting their operations in response to the energy transition, and note new forms of financing that industry participants can pursue.

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Governance

On 28 February 2023, the Judicial Court of Paris (the “Court”) issued an interim order (the “Order”) in the context of a judicial dispute concerning compliance with the French Law n°2017-399 of 27 March on the Duty of Vigilance (the “French Vigilance Law”). This decision is the result of a lengthy judicial process that started back in 2019 when the defendant was summoned by several NGOs before the Court for an alleged lack of compliance with its obligation of vigilance.

Continue Reading Business and Human Rights: first French case-law on the Duty of Vigilance – judges adopt a cautious approach to avoid judicial interference in corporate management
Governance

The age-old debate over the purpose of for-profit corporations has reignited, with two rival theories on offer: shareholder primacy and stakeholder parity. The first posits that the primary purpose of corporations is to maximize shareholder value, while the second urges the equal interests of all other constituents, especially employees, customers, and communities.

While the debate can seem complex and polarizing, the reality for corporate directors is simple and subtle: directors’ legal duties run to shareholders, but directors may promote the interests of others when those are rationally related to shareholder interests. If prevailing debate sometimes suggests a stark choice between shareholders and other stakeholders, the reality is that their interests are more aligned than it may seem and directors continue to operate accordingly.

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MOSS and glass globes

Hong Kong’s Financial Secretary, Paul Chan, delivered the 2023-24 budget on 22 February 2023 with the promotion of a green economy, sustainable development and China’s “3060 Dual Carbon Targets” at the forefront.

He laid out his vision to establish Hong Kong as a leading global green technology and financing hub.

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China - Hong Kong

In the Hong Kong government’s 2023-2024 budget, the Financial Secretary, the Hon Paul MP Chan, unveiled various measures to bolster Hong Kong’s economy following the Covid-19 epidemic, with a strong focus on promoting green and sustainable finance and technology and advancing the virtual assets sector (also reported here). 

The following initiatives were announced, amongst others:

  • Setting up of a Green Technology and Finance Development Committee which will partner with representatives from green technology, green finance and green standard certification to formulate an action agenda for the promotion of Hong Kong as an international hub.
  • An International Greentech Week at the end of 2023 to gather representatives, enterprises and investors from green technology industries around the world.
  • Further expansion of the existing Government Green Bond Programme, to cover sustainable finance projects (more details to be announced in due course by the HKMA).
  • Establishment of a task force on virtual assets development, to review recommendations by financial regulators and market participants on the sustainable and responsible development of the sector.
  • Setting up of a Digital Economy Development Committee which will undertake research on digital infrastructure, cross-boundary data transfer, digital transformation of enterprises and human resources support.

The Hong Kong government’s resolve to be a leader in green finance and innovation is demonstrated by its inaugural issuance of a HK$800 million tokenised green bond on 16 February 2023, the first in the world issued by a government. In addition, in October 2022 the Hong Kong Exchanges and Clearing Limited launched Core Climate, an international carbon marketplace (reported here).

The Securities and Futures Commission of Hong Kong (SFC) has said that it supports the establishment of a virtual assets task force and also welcomes the Government’s measures to develop Hong Kong as an international green technology and financial centre.  In connection with virtual assets, the SFC has, on 20 February 2023, launched a public consultation on the proposed regulatory requirements for operators of virtual asset trading platforms.  This follows the new licensing regime, taking effect on 1 June 2023, that requires all virtual asset trading platforms conducting business in Hong Kong or actively marketing to investors in Hong Kong to be licensed by the SFC (see our legal update).  As part of the consultation, the SFC is seeking views on whether to allow licensed platform operators to serve retail investors, and if so, what measures need to be in place to ensure a robust framework.  Interested parties are invited to submit their comments to the SFC by 31 March 2023.

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

On 28 February 2023, the Council of the European Union and the European Parliament reached a provisional agreement on the creation of the European Green Bond Standard (“EU GBS“).

Continue Reading Alert – Council of the EU and European Parliament reach provisional agreement on European Green Bond Standard