In response to growing investor demand for information concerning companies’ sustainability-related financial risks, the sustainability disclosure landscape has rapidly changed over the last decade.  In what marks one of the latest developments to the sustainability disclosure landscape, on 29 April 2022, the European Financial Reporting Advisory Group (“EFRAG“) – a private organisation that provides technical assistance to the European Commission – issued its initial draft European Sustainability Reporting Standards (“ESRS“) for public comment. The ESRS, which EFRAG were tasked with preparing by the European Commission as part of the proposed Corporate Sustainability Reporting Directive (“CSRD“), set out proposed requirements for companies to report on sustainability-related impacts, opportunities and risks under the CSRD.

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At an open meeting on May 25, 2022, the US Securities and Exchange Commission (“SEC” or “Commission”) approved two new proposals regarding ESG that will impact the fund and investment management industry. One of the proposals is directed solely at registered funds and business development companies (BDCs), while the other applies to registered funds, BDCs

The US Securities and Exchange Commission (SEC) rulemaking process has received much attention under Chair Gensler’s leadership not only because of the volume and substance of proposed rules, but also because of the relatively short comment periods allotted for the public to respond pursuant to the Administrative Procedure Act process. As just one example of

Investors are increasingly focussed on how companies address modern slavery and wider human rights issues when making investment decisions.  Despite this, many UK companies are failing to adequately report on, and take sufficient steps to eradicate, modern slavery within their businesses and supply chains, according to the Financial Reporting Council’s (the “FRC“) recently published Modern Slavery Reporting Practices in the UK Report (the “Report”).

The Report, which analysed the reporting practices of 100 companies listed on the London Stock Exchange’s Main Market, highlighted that the majority of companies are failing to disclose sufficient information to enable stakeholders to make informed decisions about companies’ compliance with modern slavery legislation.  Such shortcomings in the quality of companies’ modern slavery reporting presents a number of compliance, reputational and financial risks to companies.

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On April 7, 2022, the federal government of Canada released its Budget 2022 (Budget), which includes significant measures by the Canadian government to build its Net-Zero Economy and to fight climate change. In the Budget, the Canadian government is committed to move towards mandatory reporting of climate-related financial risks across a broad spectrum of Canadian economy, based on the Task Force on Climate-related Financial Disclosures (TCFD) framework. The new reporting requirements will be applicable to, among others, federally regulated banks and insurers, which “play a prominent role in shaping Canada’s economy” – as noted in the Budget.

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On March 21, 2022, the U.S. Securities and Exchange Commission (SEC) voted 3:1, with only Commissioner Hester Peirce dissenting, to propose long-awaited rules that, if adopted, would require extensive reporting by public companies of climate change-related disclosure and related attestation (the “Proposal”). Comments on the Proposal are due 30 days after

Disclosure of information on the ESG-related risks facing financial institutions is widely recognised as a vital tool to promoting market discipline.  It enables stakeholders to assess the risks presented to financial institutions by issues such as climate change, social and governance risks, whilst also allowing stakeholders to review the sustainable finance strategies of financial institutions.  In light of this, governments are increasingly introducing different mandatory ESG-related reporting requirements for financial institutions, such as TCFD-aligned reporting requirements (for further information on TCFD-aligned reporting requirements, please see our previous blog posts here and here).

Adding to the plethora of existing ESG-related reporting requirements, on 24 January 2022, the European Banking Authority (“EBA“) published its final draft implementing technical standards on Pillar 3 disclosures on ESG risks (the “Final Draft ITS“).  The Final Draft ITS sets out mandatory templates, tables and instructions that supplement the EBA’s ‘Pillar 3 package’ prudential reporting requirements (the “Reporting Requirements“), which certain EU-based financial institutions will be required to comply with under the Capital Requirements Regulation (Regulation (EU) No. 575/2013) (the “CRR“).

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This Lexis practice note discusses market trends in 2021 relating to disclosures of climate change risks and mitigation by public companies, which are intertwined with ESG issues. It also provides illustrative disclosures by public companies regarding how climate change has affected or may affect their operations, both directly (e.g., through disruption of supply chains)

In order to implement the “Plan for the Reform of the Legal Disclosure System of Environmental Information” issued by China’s Ministry of Ecology and Environment (MEE) in May 2021, the MEE has issued new disclosure rules (Rules) that will require domestic entities to disclose a range of environmental information

The Brazilian Securities Commission (CVM) issued, on December 22, 2021, CVM Resolution No. 59 (RCVM 59), which amends CVM Rule No. 480 (CVM Rule 480). This new normative arises from Public Consultation No. 09, closed in March 2021, and brings substantial innovations on the informational regime for issuers of securities. Indeed, the reform promotes a reduction in the cost of compliance for issuers and greater accessibility of information to investors by eliminating redundancies and simplifying the content required in the Reference Form, the main document of publicly-held companies in Brazil.

However, most importantly, through RCVM 59, CVM in an unprecedented way establishes criteria and requirements for the disclosure of information on environmental, social and governance aspects, which was previously a mere deliberation of issuers to attract investors engaged in ESG aspects, and it was not foreseen in any regulation of the autarchy.

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