The risk of an accusation of “greenwashing” is now an important concern for many companies. Greenwashing is an ill-defined concept but, nevertheless, is increasingly a source of litigation and regulatory scrutiny – with more of both expected. It carries with it reputational, regulatory and litigation risks for which companies should be prepared. Whilst the risks are always context specific – varying by jurisdiction, industry
Businesses, especially micro, small and medium-sized enterprises (MSMEs), continue to face practical challenges in ESG reporting due to costs, the lack of resources and expertise on sustainability reporting, and the complexities around multiple standards and reporting frameworks in use globally.
On 22 June 2023, the Monetary Authority of Singapore (MAS), United Nations Development Programme (UNDP) and the Global Legal Entity Identifier Foundation (GLEIF) announced an initiative to develop digital ESG credentials for MSMEs worldwide to facilitate ESG reporting for this sector. The initiative, named Project Savannah, will produce a multi-jurisdictional proof of concept targeted for launch at the upcoming COP28.
On 26 June 2023, the International Sustainability Standards Board (“ISSB”) issued its long-awaited inaugural global sustainability disclosure standards: IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) (together, the “Standards”). The ISSB also released a related Sustainability Standards Navigator tool and a three-minute video. The
On April 19, 2023, the influential CDP (formerly known as the Carbon Disclosure Project) announced that nearly 7,000 organizations worldwide can disclose their plastic-related impacts for the first time, as CDP’s global environmental disclosure platform opens for 2023 reporting. CDP is adding plastic-related reporting to its online platform in response to a request from more than
Regulators are increasingly mandating companies to make environmental disclosures (see here, here and here).
The CDP – a not-for-profit organisation aiming to encourage the disclosure of environmental risk – has measured and scored the effectiveness of companies’ 2022 environmental disclosures in their latest ‘A List’ Report (the “CDP Report”). The CDP Report shows that a mere 12 of the 18,700 companies that responded to the CDP’s questionnaires scored a ‘triple A’ for their environmental disclosures, whilst over 29,500 companies scored an ‘F’ after failing to provide any data to the CDP.
According to the CDP, over 680 investors with combined assets of US $130 trillion, and over 280 large purchasers with US $6.4 trillion in buying power requested over 48,000 companies to disclose environmental information through the CDP in 2022.
The requirement for companies to conduct human rights diligence (“HRDD“) is increasingly being implemented by legislators across the globe. For example, the EU is expected to adopt its draft corporate sustainability and due diligence directive in 2023. Importantly, the Directive will apply to Japanese companies and their subsidiaries if they meet certain criteria (for further information on the applicability of the directive to Japanese companies, read our earlier blog post here). Japanese companies are, therefore, being required to strengthen their HRDD processes as a result of the legislation of foreign jurisdictions (including the EU).
On 13 September 2022, the Japanese Government published its Guidelines on Respecting Human Rights in Responsible Supply Chains (the “Guidelines“), which recommend that all enterprises engaging in business activities in Japan respect human rights in their supply chains and carry out HRDD.
**A Chinese version of this blog post follows the English version.**
China’s State Council-backed think tank, China Enterprise Reform and Development Society (“CERDS“), alongside a number of major Chinese companies including Ping An Insurance Company, issued “The Guidance for Enterprise ESG Disclosure” effective on 1 June 2022 (“Guidance“). The Guidance is China’s first ESG disclosure guideline, and covers all companies and industries. It follows the environmental disclosure rules issued by China’s Ministry of Ecology and Environment (MEE) which came into effect earlier in February 2022 (which we reported here).
On 3 August 2022, Australia’s Financial Services Council (“FSC“) published FSC Guidance Note No 44 Climate Risk Disclosure in Investment Management (“Guidance Note”) to provide a set of common baseline expectations for the investment management industry’s approach with respect to net-zero commitments, disclosure of climate-friendly investment features and climate change risk reporting.
Emissions reporting standards and practices in the private equity sector have been described by certain commentators as being some way behind those in the public markets; certainly the private equity asset class has, so far, received less attention in the context of Environmental, Social and Governance (ESG)-related reporting developments more generally. That is changing, however; General Partners (“GPs“) are increasingly called upon to disclose climate-related data and establish greenhouse gas (“GHG“) emissions reduction targets across their portfolios.
There is not, at present, an agreed standard for reporting such information at a fund level, which has resulted in inconsistent approaches being adopted by different funds. Inconsistencies, of course, potentially impair the ability of investors to make meaningful comparisons between portfolio companies, and indeed between funds.
In an attempt to address this inconsistency, the Initiative Climat International (“ICI“) — a practitioner-led group of private equity funds and investors that represents over USD $3 trillion in assets under management — in partnership with sustainability consultancy group Environmental Resources Management (“ERM“), have taken the proactive step of launching a new, non-binding standard that sets out a consistent approach to GHG disclosure across the private equity sector. The standard, outlined in the ICI and ERM’s Greenhouse Gas Accounting and Reporting report (the “Report”), aims to better align the disclosure practices of private equity funds with the practices currently adopted by many listed companies in the public markets.
Continue Reading New standard published for Greenhouse Gas Emissions reporting in Private Equity
In a previous blog post, we noted that the International Sustainability Standards Board (ISSB) will shortly publish its proposed general sustainability-related and climate disclosure requirements.
On 31 March 2022, the ISSB published highly anticipated drafts of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (General Requirements Exposure Draft) and IFRS S2 Climate-related Disclosures (Climate Exposure Draft) for public consultation and comments. Each of the Exposure Drafts are accompanied by a ‘Basis for Conclusions’ and ‘Illustrative Guidance’ document. A high-level summary of the proposed requirements is available here.