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Japan is considering whether to require all of its primary listed companies to publish an annual sustainability report which substantively conforms with the standards issued by the IFRS’ International Sustainability Standards Board (“ISSB”). The new mandatory disclosure rule would be applied in phases based on the size of market capitalization, with the biggest companies planned to be entering into the scheme from the financial year ending March 2027. The regulator in charge, the Financial Services Agency (“FSA”), established an ad hoc advisory board, the Working Group on Sustainability Disclosure (Reporting) and Assurance (“Sustainability Disclosure WG”) under its Financial System Council in February 2024. A public consultation in respect of the local adaptation of some of the ISSB standards will end on 31 July 2024.

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On 3 June 2024, the Asia Pacific Loan Market Association (“APLMA”) published its set of “Model Provisions for Green Loans” (“Model Provisions”), following the publication of the “Draft Provisions for Sustainability-Linked Loans” by the London-based Loan Market Association (“LMA”) a year earlier in May 2023. The markets expect that the Model Provisions will bring some clarity into the classification of green loans going forward.

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On May 28 2024, the Biden administration released the “Voluntary Carbon Markets Joint Policy Statement and Principles”.

The Joint Statement makes a number of important and supportive points in favor of the VCM, noting that:

  • High-integrity VCMs, as well as carbon credit markets more broadly, have the potential to support decarbonization efforts within the United States and globally.
  • Important questions have emerged about how to ensure that VCMs genuinely drive additional decarbonization action (rather than reward what would have happened anyway) that is sustained over time and does not simply shift emissions elsewhere.
  • Fully achieving the potential of these markets requires further action to address challenges that have emerged.

The principles set out in the Joint Statement (the “Principles”) will guide how the US Government engages with VCMs. Through the Joint Statement, the US government encourages the US private sector and other stakeholders in the carbon credit value chain to responsibly participate in the VCM market, consistent with the Principles (see further below). While the focus of the Joint Statement is on VCMs, much of the content speaks to the development and operation of carbon credit markets more generally.

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On April 24, 2024, the Loan Market Association (LMA) published its Sustainability Coordinator Letter. The publication of the LMA’s letter follows the LSTA’s February 2023 publication of its own Sustainability Structuring Agent Engagement Agreement Inserts. This Legal Update contains a comparative analysis of the LMA and LSTA’s documents, notes key similarities and differences between the two, and provides some key takeaways for ESG loan market participants.

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The European Securities and Markets Authority (ESMA), published a combined report on its 2023 Common Supervisory Action (CSA) and the accompanying Mystery Shopping Exercise (MSE) on marketing disclosure rules under MiFID II. ESMA, together with the National Competent Authorities (NCAs), states that marketing communications and advertisements generally comply with MiFID II requirements. Investment firms generally have procedures in place that ensures compliance with the rules for marketing materials. However, there are increasing concerns about marketing material which includes sustainability claims. ESMA identified several areas of improvements and announces that further supervisory actions in this area shall be undertaken.

Continue Reading ESMA’s Final Report on the 2023 Common Supervisory Action and Mystery Shopping Exercise on marketing
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On 16 May 2024, the UK Government published an implementation update on its development of economy-wide sustainability disclosure requirements (the “Implementation Update“). The Implementation Update, which the UK Government committed to publishing in its 2023 Green Finance Strategy (which you can read more about here), discusses:

  1. its endorsement of the IFRS Sustainability Disclosure Standards;
  2. transition plan disclosures;
  3. the Financial Conduct Authority’s (“FCA“) Sustainability Disclosure Requirements (“SDR“) and investment labels regime;
  4. the UK Green Taxonomy; and
  5. nature-related disclosures.
Continue Reading UK government publishes implementation update in relation to sustainability disclosures
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On 14 May 2024, the European Securities and Markets Authority (“ESMA“) published its final report on “Guidelines on funds’ names using ESG or sustainability-related terms” (the “Guidelines“). The Guidelines aim to provide fund managers with clear and measurable criteria to assess their ability to use ESG and/or sustainability-related terms in fund names, thereby ensuring that investors are protected against associated greenwashing risk.

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In a survey carried out by HSBC in 2023, 97% of real estate developers and investors said net zero was important to their business and 59% of the largest real estate companies said net zero was their top priority.

A third of companies in the sector already have Transition Plans and the push for formalising Transition Plans across the sector is increasing.

In April 2024, the Transition Plan Taskforce (“TPT”) published its final set of transition plan resources to help businesses transition to net zero.

In this article, we consider the guidance available to the real estate sector in preparing Transition Plans (“TP”).

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The UK Competition and Markets Authority (“CMA“) has announced that three fashion retailers have signed voluntary undertakings to ensure that consumers have a clearer idea of how green their clothes really are. At the end of March 2024, ASOS, Boohoo and George at Asda committed to only make green claims about their products that are accurate, clear and not misleading. At the same time, the CMA also published an open letter to the fashion retail sector stressing that players should ensure that all the green claims they make comply with UK consumer protection law. The commitments will be a particularly useful resource to fashion retailers, and businesses more generally, that are considering how to apply the CMA’s Green Claims Code to their products, and gearing up for potentially more potent interventions by the CMA in this space. To this end, it should be noted that the CMA ominously concludes its open letter by noting that its anticipated new powers under the Digital Markets, Competition and Consumers Bill (“DMCC“), which is currently being approved by Parliament, will allow the CMA for the first time, to impose financial penalties for breaches of consumer protection law, such as misleading green claims, without having to go to court.

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