On August 20, 2021, Hong Kong’s Securities and Futures Commission (SFC) published its conclusions (the “Consultation Conclusions“) from last year’s consultation (the “Consultation“) on proposed amendments to the Fund Manager Code of Conduct (FMCC) that will require fund managers to consider climate-related risks in their governance, investment and risk management processes. The Consultation Conclusions set out the SFC’s analysis of the responses to the Consultation, as well as the final amendments to the FMCC that will require fund managers to implement a range of climate-related practices as early as August 20, 2022.

In this Blog Post, we provide a high-level overview of the amendments to the FMCC and highlight key takeaways from the Consultation Conclusions as Hong Kong enters a new phase of sustainable fund management.

Continue Reading Hong Kong SFC Finalizes Climate Risk Requirements for Fund Managers

The Voluntary Carbon Markets Integrity Initiative (VCMI), a global task force initiated to monitor the integrity of voluntary markets for the purchase and sale of carbon offset credits, held a global launch event and issued its consultation report (VCMI Report) in late July. The VCMI Report seeks to provide further guidance for assessing carbon credits and the emissions reductions they represent.

In a related statement, John Kerry, the US special presidential envoy for climate, praised the VCMI principles: “We welcome the VCMI’s focus on clear norms for companies to use high-quality carbon credits, including toward their net zero targets in a way that is credible, transparent, and aligned with the goal to limit global warming to 1.5 degrees.”

Continue reading on MayerBrown.com for more detail on the VCMI Report.

On August 6, 2021, the US Securities and Exchange Commission (SEC) approved Nasdaq’s board diversity rule. Nasdaq originally proposed its rule in December 2020 and subsequently amended the proposal to reflect feedback submitted by commenters.

The rule requires Nasdaq-listed companies to have, or explain why they do not have, at least two diverse directors, including (1) at least one director who self-identifies as female (regardless of gender designation at birth) and (2) at least one director who self-identifies as either an “Underrepresented Minority,” as defined in the Nasdaq rule, or as LGBTQ+. Nasdaq-listed companies are also required to annually disclose directors’ self-identified gender, race and ethnicity (i.e., African American or Black, Alaskan Native or Native American, Asian, Hispanic or Latinx, Native Hawaiian or Pacific Islander, White, or Two or More Races or Ethnicities) and LGBTQ+ status in a standardized board diversity matrix. Alternative requirements apply to, inter alia, foreign issuers and smaller companies.

Continue reading on MayerBrown.com for more detail on the board diversity rule and practical considerations, including the implications of increasing attention to board diversity for companies that are not listed on Nasdaq.

On 20 July 2021, the Hong Kong Monetary Authority (HKMA) issued draft guidelines (the Draft Guidelines) on the management of climate-related risks by authorised institutions (AIs). The Draft Guidelines further develop the HKMA’s approach to climate risk, initially outlined in its June 2020 White Paper on Green and Sustainable Banking, and incorporate leading international standards and practices to provide comprehensive climate risk management guidance for banks in the areas of governance, strategy, risk management and disclosure.

In this Blog Post, we highlight key aspects of the Draft Guidelines and takeaways for AIs considering how to approach these new proposals in Hong Kong. For more information about evolving regulatory approaches to climate disclosure and risk management around the world, please see our comprehensive analysis, Climate Disclosure and Risk Management: Global Approaches.

Continue Reading Hong Kong Proposes Climate Risk Management Guidelines for Banks

In a recent Blog Post on May 28, 2021, we discussed a landmark court ruling issued by the Hague District Court in May 2021[1], requiring Royal Dutch Shell (Shell) to reduce the CO₂ emissions of the Shell group by net 45% in 2030, compared to 2019 levels. In a statement on July 21, 2021, Shell confirmed that it will appeal against this decision. In the meantime – and pending any final determination – Shell remain bound by the earlier court ruling.

In this Blog Post, we highlight key aspects of the Hague District Court’s decision and Shell’s recent decision to appeal.

Continue Reading ESG Litigation: Shell to Appeal Court Ruling in Netherlands Climate Case

On 15 July 2021, Hong Kong’s Green and Sustainable Finance Cross-Agency Steering Group (Steering Group), representing a critical mass of Hong Kong’s financial regulatory bodies, announced next steps to advance green and sustainable finance in the Special Administrative Region (the Announcement). According to the Announcement, the regulators will prioritize:

  • climate-related disclosures;
  • carbon market opportunities; and
  • a new cross-sector platform to help the financial industry manage climate change-related risks and opportunities.

In this Blog Post, we highlight key aspects of the Announcement and points for market participants to consider as Hong Kong moves toward a more sustainable future.

Continue Reading Mandatory Climate Disclosures, Carbon Markets Attract Regulatory Attention in Hong Kong

On 8 April 2021, we discussed in our blog post the UK government’s consultation on the draft climate risk regulations under the Pension Schemes Act 2021. The government has recently published a response to the draft regulations, the finalised regulations and the accompanying statutory guidance. The new regulations will apply to trustees of larger occupational pension schemes from 1 October 2021.

In a new podcast, Mayer Brown Counsel Beth Brown sets out the reporting requirements under the new regulations and the accompanying statutory guidance, and identifies the changes made to the consultation regulations. Listen on Mayer Brown’s youtube channel and, for more information, see our earlier Legal Update on the response to the consultation.

The EU has presented its proposal for a Carbon Border Adjustment Mechanism (CBAM). The mechanism is closely aligned with the EU’s emissions trading scheme and the purpose of the CBAM is to be able to increase the EU’s internal carbon price without pushing production offshore. This risk of “carbon leakage” arises when energy-intensive goods can be produced outside of the EU without being subject to the EU ETS and then be put on the market alongside products produced in the EU.

For more details, see our Legal Update here.

As part of national plans to cut carbon emissions, the UK Cabinet Office released a Procurement Policy Note on 5 June 2021 (“PPN 06/21“, or the “PPN“): this mandates the assessment of Carbon Reduction Plans by UK central government departments as part of the procurement of large public contracts.

Key aspects of the Public Procurement Notice

  • UK Procurement Policy Note 06/21 requires a bidder for large public contracts (exceeding £5 million per annum) to produce a Carbon Reduction Plan (CRP) setting out how it intends to achieve ‘net zero’ carbon emissions by the year 2050 (compared to 1990 levels).
  • This relates to regulated contracts for goods, services and/or works awarded by UK central government departments, their executive agencies and non-departmental public bodies.
  • This will apply to procurement processes commenced on or after 30 September 2021 – bidders should take steps now to prepare for compliance, which might require new data collection and reporting procedures.

Continue Reading ESG and UK Public Procurement: Carbon Reduction Requirements

In our blog post on 13 May 2021, we discussed the consultation papers published by the China Securities Regulatory Commission (“CSRC”) on proposed ESG-related amendments to the disclosure rules applicable to listed companies. On 28 June 2021, the CSRC published the final set of amendments (“Final Amendments”) to the disclosure rules applicable to annual reports and half-year reports, respectively, together with relevant explanations to the amendments (“Explanations”).

Continue Reading China Publishes Environmental and Social Disclosure Rules for Listed Companies