September 2024: New York Climate Week, SEC dismantles ESG Task Force, climate disclosures in Australia & more

Key highlights from September 2024 in the sustainability space.

1- New York Climate Week 2024
The New York Climate Week was held between the 22nd and 29th of September in New York, coinciding with the UN Summit of the Future that took place between the 20nd and 23th of September in the same city. With 100.000 attendees and more than 900 events, the week was significant for the future of global climate goals. As COP29 is expected to see a sharp decline in attendance, due to the host state Azerbaijan's vested interests in oil and gas and the long travel times for US executives, the week is set to be the climate event of the year. During the week, the Climate Group unveiled an urgent 12 month action plan to get the world ‘on-track’ in relation to the climate in just one year. The global to-do list includes seven ambitious actions to deliver on climate commitments, highlighting the fact that the world does not have another year to waste when it comes to the climate crisis. Key takeaways from the week centre around alarm raised as the world breached the 1.5°C warming limit for an entire year for the first time, companies’ regulatory concerns as they ramp up for sustainability related disclosures for the first time in 2025, and geopolitical unrest interfering with the delivery of climate commitments. Other highlights from the week can be accessed here. 

2- SEC dismantles Climate and ESG Task Force

The SEC has quietly disbanded its Climate and ESG Task Force, which was launched in 2021 to address misleading environmental, social, and governance (ESG) disclosures. Initially formed with nearly two dozen staffers, the task force played a significant role in high-profile enforcement cases, including actions against Bank of New York Mellon, Goldman Sachs, and Vale SA. Despite its closure, the SEC emphasized that the expertise developed by the task force has been integrated across its Enforcement Division.

The move comes amid growing backlash against ESG initiatives, with both the SEC and companies increasingly distancing themselves from the term. ESG priorities have been dropped from the SEC’s compliance examiners' focus, and it is uncertain if pending ESG regulations will be finalized before the potential change in SEC leadership in early 2025.

3- Australia passes legislation introducing mandatory climate-related disclosures

On the 9th of September, both houses of the Parliament of Australia passed the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, requiring in-scope entities to disclose climate-related risks and opportunities in accordance with the relevant sustainability standards (ASRS) starting from January 2025. This introduction is a welcome step in harmonising sustainability related financial disclosures internationally. An interesting inclusion in the bill is a requirement for companies to disclose scenario analyses for a low warming scenario (1.5°C) and a high warming scenario (> or = 2.5°C), tying in with the abovementioned concern around the sustained breach of the 1.5°C warming target in 2024. 

4- California’s Responsible Textile Recovery Act signed into law

On September 22, 2024, California Governor Gavin Newsom signed the Responsible Textile Recovery Act (SB 707), establishing the nation's first extended producer responsibility (EPR) program for apparel and textiles. This law requires manufacturers, distributors, and other producers of apparel and textile products to form or join a producer responsibility organization (PRO) by 2026, shifting the burden of managing end-of-life products to the producers. The program will include creating collection systems, education initiatives, and performance standards, and aims to handle post-consumer textile waste through repair, recycling, and managing chemicals like PFAS.

SB 707 is part of a growing EPR trend in California, which also passed EPR laws for electric vehicle batteries, marine flares, carpet, and paint. As more states and countries adopt EPR frameworks, manufacturers and retailers should closely monitor developments and ensure compliance with emerging regulations.

- Content prepared with the help of Defne Fresko Tasci.

August 2024: Dutch ACM clears bank collaboration on disclosures, ASIC's first greenwashing fine, SBTI buildings standard & more

Key highlights from August 2024 in the sustainability space.

1- Dutch banks cleared to work together on sustainability reporting

The Netherlands Authority for Consumers and Markets confirmed on the 14th of August that banks are allowed to collaborate with one another when preparing their sustainability related disclosures to make these more comparable. This conclusion comes as a response to the Dutch Banking Association (NVB) who had asked the Authority whether such collaboration would be permitted under competition rules. The Authority’s decision is significant for the future of sustainability related disclosures, as such collaboration could enhance the comparability and accessibility of the data generated by the disclosures, ultimately improving their quality and reliability. It could also signal progress in terms of sustainability-related industry collaboration, which many have approached carefully given strict competition rules.

2- Australia fines Mercer Superannuation for greenwashing

On the 2nd of August, the Australian Federal Court ruled against Mercer Superannuation (Australia) Ltd. in a case brought by the Australian Securities and Investments Commission (ASIC). The Court found that the company had made misleading statements about the nature and characteristics of some of its ESG investment options, pretending to exclude certain types of companies while including them in the more sustainable options offered on their website. A fine of US$7.4 million was issued. This case was the first of its kind brought by ASIC, joining the growing tide of greenwashing cases around the world, and demonstrating financial authorities’ growing vigilance in the face of eco-hypocrisy. 

3- SBTI launches buildings sector framework

The Science Based Targets initiative (SBTi) has launched a new decarbonization framework for the buildings sector, urging companies and financial institutions to align with net-zero targets. The framework outlines four critical actions: halting fossil fuel installations by 2030, reducing in-use operational emissions, lowering embodied emissions from materials and construction, and retrofitting inefficient buildings. Given that the buildings sector accounts for over a quarter of energy-related emissions, these measures are vital to meet the 1.5°C global warming limit. The SBTi emphasizes immediate action, as the sector plays a key role in preventing climate change's catastrophic effects.

4- New study reveals oceans reaching hottest temperatures in 400 years

A new study was published this month in the scientific journal Nature, highlighting the link between mass blanching of corals in the Great Barrier Reef and record-high ocean temperatures. According to the study, the January–March Coral Sea heat extremes in 2024 were one of the warmest in 400 years, exceeding previous scientific estimates on future warming. Planet warming gasses are mostly to blame for the surge in temperatures, raising concerns about the discrepancy between existing emissions-related targets and the progress that has been made towards these. 

- Content prepared with the help of Defne Fresko Tasci.

July 2024: US Climate reporting, ESRS documentation, ESG in the UK & More

Key highlights from July 2024 in the sustainability space.

1- Update on US Climate Reporting Rules 

Back in October 2023, we had reported that California had adopted first-in-the-US corporate climate disclosure bills. This month, Governor Newsom introduced amendments to delay the compliance deadlines with the bills by two years, deeming compliance with them ‘infeasible’ but confirming that the state remains committed to implementing the regime. California is not alone in its commitment to sustainability related disclosure requirements, with a report published by Fitch on the 9th of July revealing that Washington, New York, Illinois and Minnesota are also going ahead with similar disclosure requirements. The progression of these laws and regulations at state level reveals that thousands of companies operating in the US will - eventually - be required to provide climate-related reporting, even in the potential absence of effective climate reporting rules from the Securities and Exchange Commission.  

2- Activity around ESRS

New material around the European Sustainability Reporting Standards (ESRS) were published this month and should prove particularly useful for companies preparing to disclose under the CSRD in 2025.  First, on the 10th of July, the Global Reporting Initiative (GRI) published a Q&A document on the meaning of the ESRS for existing users of the GRI Standards. Then, on the 25th of July, EFRAG released a study analysing early practices of companies preparing to disclose under the ESRS, highlighting the opportunities and challenges faced by these entities. Shortly thereafter, on the 26th of July, EFRAG issued new explanations of the ESRS as part of its Compilation of Explanations. 

3- Turning point for ESG in the UK as Labour gains power

On the 4th of July, the general election in the UK saw a Labour government gain power for the first time in 14 years, shepherding in a new era for sustainability in the UK. The elections are expected to have significant consequences for ESG in the UK, as the Labour government differs significantly from the preceding Conservative governments on multiple policy outlooks relating to this front. Indeed, the new government has demonstrated a sustained commitment to the energy transition agenda and net-zero policy, highlighting these issues as a key priority during their election campaign. The government is also expected to undertake significant action in relation to Diversity, Equality and Inclusion. The prominence of these issues in the new government’s agenda is promising for the future of ESG in the UK. 

4- New Zealand finalises groundbreaking trade deal to eliminate tariffs on sustainable goods 

On the 2nd of July, New Zealand concluded a pioneering trade deal with Costa Rica, Iceland and Switzerland that will see tariffs removed from hundreds of sustainable and eco-friendly products, according to Trade and Agriculture Minister Todd McClay. The Agreement on Climate Change, Trade and Sustainability (ACCTS) sets an example for multilateral action on climate change, demonstrating how sustainability-enhancing initiatives can simultaneously boost states’ economies.

- Content prepared with the help of Defne Fresko Tasci.

June 2024: EU elections put Green Deal at risk, ISSB harmonization roadmap, Denmark's carbon tax on agriculture & more

Key highlights from June 2024 in the sustainability space.

1-Right swing in European Parliament elections

European Parliament elections took place between 6-9th of June, resulting in heavy losses for Green parties and associated concerns about the future of the EU Green Deal. It is not expected that existing protections would be rolled back, as the centre of the political spectrum still commands a majority in the Parliament, but its ability to pass new measures to advance the sustainability agenda is put into question. Surprisingly, on June 17, the environment ministers passed a landmark nature restoration law (Regulation on Nature Restoration). While this vote does not negate the fact that it will certainly be more difficult to get ambitious environmental legislation off the ground in the next five years, the Green Deal may well survive. 

2-ISSB promises further harmonisation of global sustainability disclosure reporting 

The 2024 IFRS Foundation Conference, which took place in London on the 24-25th of June, saw an announcement from the International Sustainability Standards Board (ISSB) to the effect that the Board will deliver further harmonisation and consolidation of the disclosure reporting landscape in the next two years, as part of their new work plan. This goal will complement the ISSB’s priority of supporting the implementation of IFRS S1 and S2. As part of this new agenda, the IFRS will assume responsibility for disclosure-specific materials developed by the UK Transition Plan Taskforce, effectively bringing the technical work of the TPT to an end. 

3-Denmark introduces Europe’s first CO2 emissions tax on agriculture

On the 24th of June, the Danish Government agreed to introduce Europe’s first carbon tax on agriculture, at the conclusion of a five-month negotiation with farming and conservation groups. The move is significant, as Denmark is one of the world’s foremost pork and dairy exporters, and is expected to enable the Nordic country to reach its target of cutting 70 percent of its total emissions by 2030. There seems to be broad-based consensus around the tax in Denmark, while New Zealand had to end plans to price agricultural emissions just this month due to widespread pressure from farmers. 

4-Market activity around carbon credits

Throughout the month of June, there was significant market activity around carbon credits, with many million tons of carbon removal credits being sold. Among these is an 8 million tonne removal agreement signed by Microsoft with investment group BTG Pactual, one of the largest nature based carbon removal deals, if not the largest.

- Content prepared with the help of Defne Fresko Tasci.

May 2024: New ESMA guidelines against greenwashing, ISSB/ESRS interoperability & Climate change litigation in France

Key highlights from May 2024 in the sustainability space.

1- EU finalises rules for combatting greenwashing in fund names

On the 14th of May, the European Securities and Markets Authority (ESMA) released final guidelines for the use of ESG/sustainability-related terms in investment fund names. These guidelines are intended to combat the risk of greenwashing in the naming of investment funds, as increased investor demand for sustainable investing has incentivised asset managers to use such labels liberally to attract capital. The document defines thresholds to satisfy before a fund can be called “sustainable”, and establishes a “transition” category for investments that are on the path to becoming green even if they don’t qualify as such just yet. It also specifies exclusion criteria for these different funds, applying stricter Paris-Aligned Benchmark (PAB) exclusions to funds using environmental terms while covering funds using transition related terms with lighter EU Climate Transition Benchmark (CTB) exclusions. To comply with these new guidelines, over 40% of investment funds in the EU may be required to change names or sell certain assets, according to an analysis released by sustainability technology platform Clarity AI. 

2-IFRS Foundation and EFRAG publish interoperability guidance

On the 2nd of May, the IFRS foundation and EFRAG published guidance material to illustrate the interoperability between the ISSB and ESRS* standards. The publication is intended to provide practical support to explain “how companies can efficiently comply with both sets of standards.” The guidance elaborates on the alignment of key concepts such as materiality and explains how a company starting to disclose with either set of standards can ensure compliance with the other. The document was designed to reduce complexity and fragmentation in the market for sustainability disclosure standards, in alignment with the ISSB’s founding ethos of providing a comprehensive global baseline for such standards. This is a welcome development as the disclosure requirements faced by companies are increasingly heavy and difficult to navigate. The guidance should enable companies to better collect, govern and control data, contributing to the comparability of data across the board and enhancing companies’ accountability in this respect. 

*The European Sustainability Reporting Standards are the benchmark followed by companies to disclose under the Corporate Sustainability Reporting Directive. (CSRD) 

3-Criminal complaint against French energy company 

On May 21, three NGOs and eight individuals filed a criminal complaint in Paris against TotalEnergies’ board of directors and main shareholders for their contribution to climate change and its fatal impact on human and non-human lives. The lawsuit relies on articles 223-1, 221-6, 223-7 of the French criminal code and article L. 415-3 of the French environment code. The claimants argue that TotalEnergies’ strategic direction contributed to climate change by expanding fossil fuel extraction as the company figures among the top emitters of greenhouse gases globally. The case comes amid the rising frequency of criminal proceedings related to alleged climate change wrongdoings globally. Notably, the complaint targets natural persons along with the company itself. French courts have previously admitted the liability of a director in involuntary manslaughter cases under specific circumstances. It remains to be seen whether such an argument will be successful in this case, as a direct causal relationship will be difficult to prove. 

- Content prepared with the help of Defne Fresko Tasci.