This article is the first in a series, which we introduced in a previous Blog Post, exploring the “jargon” of the EU Commission’s Chemicals Strategy for Sustainability (CSS), an ambitious political action plan for chemicals regulation in the EU that was released in October 2020.

As part of this political initiative toward a profound reshape of the existing chemicals regulatory framework, the concept of “safe and sustainable by design” is fairly innovative and could well become one of the pillars of chemicals regulation in the EU. In a nutshell, the Commission calls in its CSS for a “transition” to chemicals that are safe and sustainable by design in order to reconcile the societal value of chemicals with human health and planetary boundaries. The Commission presents the “sustainable-by-design” concept as a holistic approach to achieve these objectives: it seeks to integrate “safety, circularity, energy efficiency and functionality of chemicals, materials, products, and processes throughout their life cycle and minimiz[e] the environmental footprint”. It is aimed at constituting an overarching concept, i.e., a guiding principle in the regulation of the chemicals sector.

This ambitious goal will have important concrete consequences for the industry. At the same time the safe and sustainable by design approach is advocated by the EU executive as an opportunity for the European industry to act as frontrunner in a stammering race for the production and use of safe and sustainable chemicals.

Continue reading for more information on the current state of play regarding “safe and sustainable by design”, the development of this important concept and next steps for related regulatory and political action.

Continue Reading “Safe and Sustainable by Design”: The Inception of a Possible Game-Changer in the Regulation of Chemicals in the EU

On 21 April 2021, the EU Commission announced its proposal to extend existing sustainability reporting in a new Corporate Sustainability Reporting Directive (CSRD).  The proposal, which revises the Non-Financial Reporting Directive (the “NFRD“), will extend the reach of sustainability reporting to more companies and will cover more sustainability topics.

This is part of a wider, concerted effort by the EU to legislate for greater E, S and G reporting and accountability standards, like the EU’s proposed mandatory human rights and environmental due diligence law.  It is also part of a larger global trend: for example, New Zealand recently introduced a new Climate Disclosure Law (see our Blog Post on this here). Companies are increasingly embracing voluntary sustainability reporting but there are increased demands for mandatory reporting – the Global Reporting Initiative (GRI) for instance called for mandatory reporting in December last year. However companies’ standards of  voluntary reporting are of variable quality and often do not address the impacts of companies’ business activities on people and the environment.

Key aspects of the proposed Sustainability Reporting Directive:

  1. More companies would be asked to report on sustainability, up from 11,000 previously to nearly 50,000.
  2. The “double materiality perspective” is further reinforced – that is companies have to report on the impact of their business activities on people and the planet across the full value chain, as well as the sustainability risks for the business itself, and to disclose the process for determining their material issues.
  3. Measurements of sustainability will be more consistent, reliable, and therefore comparable, for investors and other stakeholders.
  4. Timing is subject to change, but it is expected these measures would take effect in 2024, i.e. reporting on the financial year ending 2023.

Continue Reading EU Moves Toward Comprehensive Corporate Sustainability Reporting Directive

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 priority the Biden administration is giving to addressing climate change and will likely accelerate ongoing efforts by federal financial regulators to adopt new, climate risk-related regulations.

Continue reading on MayerBrown.com for a detailed summary of the Climate Risk EO.

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

The EU Chemicals Strategy for Sustainability Towards a Toxic-Free Environment (CSS) announces the “new long term vision for the EU’s chemical policy’” intended to achieve a toxic-free environment through the “production and use of safe and sustainable chemicals”. In line with the objectives of the EU Green Deal, this ambitious political document is expected to deeply reshape the current EU chemicals regulatory framework for the next decade.

The Commission published the CSS in October 2020. It lays out more than 50 wide-ranging actions that will have a direct impact on the EU chemicals regulatory framework, listed for completion between 2020 and 2024. It is accompanied by a detailed Action Plan listing the key areas of action and the expected legislative initiatives and providing an indicative timing accordingly. We detailed some of the main initiatives regarding REACH and the CLP in a previous blog post, following the European Commission’s roadmap on the targeted revisions to REACH and CLP, which can be accessed here.

Continue reading for more details and analysis regarding the CSS and the future of sustainability in the EU chemicals industry.

Continue Reading Exploring the “Jargon” of the Chemicals Strategy for Sustainability: A Glance at the Future of Chemicals Regulation in the EU

On May 7, 2021, in connection with the implementation of China’s Securities Law, which came into effect on March 1, 2020, the China Securities Regulatory Commission (CSRCpublished consultation papers on amendments to the “Standards Concerning the Contents and Formats of Information Disclosure by Companies Offering Securities to the Public No.2 — Contents and Formats of Annual Reports” and the “Standards Concerning the Contents and Formats of Information Disclosure by Companies Offering Securities to the Public No.3 — Contents and Formats of Half-year Reports”. The consultation papers propose, among other things, amendments relating to new environmental and social disclosure requirements for listed companies, including:

  • First, in order to highlight the importance of environmental protection and social responsibility of listed companies as public companies, the amendments consolidate all provisions relating to environmental protection and social responsibility into a new “Environmental and Social Responsibility” section.
  • Second, listed companies are required to disclose administrative penalties relating to environmental issues received during the reporting period.
  • Third, listed companies are encouraged to voluntarily disclose the measures they have taken to reduce carbon emissions and their effect, as well as their work on alleviating poverty and revitalizing rural areas.

In addition, the amendments seek to improve existing corporate governance provisions by enhancing annual disclosures on the performance of the Board, requiring the introduction of internal control systems to manage subsidiaries and other requirements.

The consultations are open for public comment until June 7, 2021.

The EU Green Deal announces a zero pollution ambition for a toxic-free environment that should be achieved, among other ways, through ambitious actions against the most hazardous chemicals and enhanced engagement in innovation for the development of safe and sustainable alternatives. One of the first deliverables of this far-reaching policy program is the Chemicals Strategy for Sustainability (CSS), which involves important revisions of the existing EU chemicals legislation including the Chemicals Control Regulation (REACH) and the Classification, Labelling and Packaging Regulation (CLP).

REACH and the CLP are the two main instruments and actual cornerstones of the EU chemicals legislation. They will be simultaneously reopened and revised between now and the end of 2022, with the affirmed objective to improve the protection of people and the environment in line with the Green Deal’s ambition. While the CSS announces this revision and the reinforcement of the existing provision, it provides little clarity as to the exact scope of the revision plan. It is thus rather unclear how important such revisions are intended to be.

On May 4, 2021, the European Commission published two important roadmaps that provide insights on the intentions of the EU executive on the framework for the revised REACH and CLP. The Commission elaborates on the legal and regulatory options that it can consider. Although targeted, the options envisaged by the Commission will certainly lead to significant revisions to the REACH and CLP, and in fact may in some instances constitute a real shift in paradigm.

Continue reading for additional background on the roadmaps and the implications for REACH and CLP in the future.

Continue Reading EU Green Deal: EC Releases Roadmaps Toward an Ambitious Revision of REACH and CLP

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 between July 2020 and April 2021 and covering 9 banking groups and 15 insurance groups (including several public sector financial institutions), together representing 85% of French banks’ total assets and 75% of French insurers’ technical provisions and assets, respectively.

Continue reading on MayerBrown.com for more details on the objectives and features of the pilot exercise, as well as additional work required.

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

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