EU: Deforestation Regulation published in the Official Journal

The EU Deforestation Regulation was published in the Official Journal of the EU on 9 June 2023 and comes into force on 29 June 2023. The Regulation prohibits operators and traders from placing or making available on the EU market, or exporting from the EU, certain commodities (cattle, cocoa, coffee, oil palm, rubber, soya and wood) and derived products, unless they are “deforestation-free”, have been produced in accordance with the relevant legislation of the country of production, and are covered by a due diligence statement. Its main obligations will apply to all in-scope companies (other than micro-undertakings or small undertakings) from 30 December 2024, and to micro-undertakings or small undertakings from 30 June 2025. There are significant penalties for non-compliance. For more information, see our blog post.

Running the greenwashing gauntlet

Discover our new greenwashing podcast series, Running the greenwashing gauntlet: exploring the litigation and regulatory risks, which looks at the many forms greenwashing risk can take, how these risks can evolve and how they can be mitigated. Listen to our second episode which looks at greenwashing in the competition, consumer and advertising sphere in the UK and recent developments at the Adverting Standards Authority (ASA) and the Competition and Markets Authority (CMA).

EU: ESAs publish progress reports on greenwashing in the financial sector

The European Supervisory Authorities (EBA, ESMA and EIOPA) have published their progress reports to the European Commission on greenwashing in the financial sector. The reports follow a request from the Commission in May 2022 to each ESA to provide input on the phenomenon of greenwashing. In the reports, the ESAs developed, in particular, common high-level understanding of greenwashing, identified the high-risk areas within their sectors that are exposed to greenwashing and set out preliminary remediation actions to help firms prevent and mitigate greenwashing. For more information, see our blog post.

UK: Advertising regulator cautions against the use of ‘greenhushing’

Recent greenwashing rulings by the UK’s Advertising Standards Authority (ASA) has sparked increased debate about the merits of “greenhushing” (i.e. downplaying your green credentials), prompting the ASA to clarify why it does not think that is the correct approach and providing some useful pointers on how to avoid falling foul of the rules. See our blog post for our key takeaways.

EU: Commission publishes sustainable finance package

On 13 June 2023, the European Commission published a package of sustainable finance measures to ensure the EU sustainable finance framework continues to support companies and the financial sector, while encouraging the private funding of transition projects and technologies. The package includes: (i) a Communication with an overview of the sustainable finance framework; (ii) a staff working document with an overview of the key pillars of the regulatory sustainable finance framework; (iii) a Recommendation on Transition Finance that contains guidance and practical examples for companies and the financial sector on how they can use the various tools in the EU sustainable finance framework (including the Taxonomy) to approach transition finance; (iv) a Proposal for the regulation of ESG ratings providers (see below); (v) two Taxonomy Delegated Acts (see below); (v) an FAQ on the EU Taxonomy and links to the SFDR; and (vi) a Taxonomy User Guide. For more information, see our blog post.

EU: Commission publishes Taxonomy Delegated Acts with criteria for remaining four environmental objectives and additional criteria for climate

The European Commission has approved, in principle, two Delegated Acts under the Taxonomy Regulation as follows:

• a Delegated Act with the technical screening criteria (TSC) for the remaining four environmental objectives (circular economy, water and marine resources, pollution prevention and control, and biodiversity and ecosystems - also known as Taxo4) and which also makes the necessary amendments to the existing Taxonomy Disclosure Delegated Act; and

• a Delegated Act which amends the existing Taxonomy Climate Delegated Act to include climate adaption and mitigation TSC for additional economic activities and some changes to existing climate TSC.

The two Delegated Act will now need to be formally scrutinized by the European Parliament and Council before they can come into force. For more information, see our blog post.

EU: Commission proposal on the regulation of ESG rating providers

The European Commission has published a legislative proposal on the regulation of ESG rating providers. Under the proposals, there is an obligation for EU entities wishing to provide ESG ratings in the EU to be authorised to do so by ESMA. For third country ESG rating providers, the proposals allow for entities authorised or registered in their home state to provide ESG ratings in the EU, but this route is contingent upon the home state having been granted equivalence. Given most other jurisdictions do not regulate ESG ratings, equivalence could therefore be limited. Whilst overall the proposals will not be a surprise, some of the provisions relating to the requirements for third country ESG rating providers, and the currently projected timetable and transitional periods, will prove challenging for those having to grapple with the new regulatory framework. The proposal will now go through the EU legislative process, which generally takes at least one year to complete (and may be delayed due to the European Parliament elections in May 2024). For more information, see our blog post.

EU: ESAs public hearing on draft amendments to SFDR RTS

The European Supervisory Authorities (ESAs) held a public hearing on 6 June 2023 in which they presented their proposals and answered questions about the draft amendments to the Regulatory Technical Standards (RTS) under the Sustainable Finance Disclosure Regulation (SFDR) (see presentation and recording here). The consultation paper was published on 12 April 2023 in response to a mandate by the Commission to review those disclosures (see our previous blog post). The ESAs mentioned, in particular, that they expect to submit their final report to the Commission around the end of October 2023 and that the changes would likely enter into force in 2024 or later, probably with a transitional period.

EU: ESMA launches call for evidence on MiFID II sustainability in product governance

On 16 June 2023, the European Securities and Markets Authority (ESMA) launched a call for evidence on MiFID II suitability and sustainability. According to the press release, the objective of the call is to provide answers on how firms apply the MiFID rules on sustainability. It is not proposing any specific changes to the guidelines. The aim is to help ESMA: (i) develop a better understanding of how MiFID II requirements are being implemented and applied by firms across the EU and the challenges firms face in their application; (ii) gain a better understanding of investor experience and reactions to the inclusion of sustainability factors in investment advice and portfolio management services; and (iii) collect information, views and data on main trends on aspects related to the provision of sustainable investment products and services to retail clients. The call for evidence closes on 15 September 2023.

ICMA releases new resources on Green, Social, Sustainability and Sustainability-Linked Bond Principles

On 22 June 2023, ICMA held its ninth Annual General Meeting on its Green, Social, Sustainability and Sustainability-Linked Bond Principles (the Principles) and its collection of voluntary frameworks which were referenced in 2022 by an estimated 97% of sustainable bonds issued internationally as well as translated into 26 languages. New materials and resources were released to support the Principles, including the 2023 edition of the Climate Transition Finance Handbook (being the first update since its original publication in 2020) and a 2023 update of the Sustainability-Linked Bond Principles and related tools. Further guidance on specific areas was also released. For more information, see our blog post.

EU: Commission publishes draft Delegated Act with first set of sustainability reporting standards under the CSRD

On 9 June 2023, the European Commission published for consultation a draft Delegated Act (DA) with the first set of European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD). The ESRS specify the sustainability information that companies will need to report on in accordance with the Accounting Directive as amended by the CSRD, including the information that financial market participants need in order to comply with their disclosure obligations under the Sustainable Finance Disclosures Regulation (SFDR). The ESRS in the draft DA include significant revisions to the draft standards recommended by the European Financial Reporting Advisory Group (EFRAG) in November 2022, including additional phase-ins, making certain disclosures voluntary, and making all disclosure requirements (apart from a set of general disclosures) subject to materiality assessments. The consultation closes on 7 July 2023. For more information, see our blog post.

UK: New data reporting requirements for packaging producers under EPR regime

The Packaging Waste (Data Reporting) (England) Regulations 2023 came into force on 28 February 2023. It aims to tackle excessive waste and address the lack of recycling and collection infrastructure by legally requiring packaging producers in England to collect information on the amount and type of packaging they supplied in a calendar year. The data will then be used to calculate the fees that producers will be required to pay to cover the costs of managing their packaging. For more information, see our blog post.

Global: ISSB publishes final version of first two global sustainability disclosure standards

The International Sustainability Standards Board (ISSB) has published the final version of the first two global sustainability disclosure standards covering general disclosures and climate change. As the standards are voluntary, much will depend on whether individual countries decide to adopt the ISSB standards and make these disclosures compulsory. The aim is to provide investors globally with more consistent, complete, comparable and verifiable sustainability-related financial information and help companies reduce the risk of greenwashing. IFRS S1 and S2 will apply to annual reporting periods beginning on or after 1 January 2024, with the first set of reports published in 2025. In the first year of reporting using the ISSB standards, companies will be incentivised to prioritise putting in place reporting practices and structures to provide information about climate-related risks and opportunities. In the second year, companies will be required to provide full reporting on other sustainability-related risks and opportunities beyond climate. The ISSB has also decided that an entity need not disclose its Scope 3 GHG emissions in the first year of reporting. A number of countries (UK, Canada, Japan, Singapore, Nigeria, Chile, Malaysia, Brazil, Egypt, Kenya and South Africa) have indicated they are considering adopting the ISSB standards and the ISSB is actively discussing with various regulators global uptake of the new framework. For more information, see our blog post.

Global: SBTi publishes for consultation three draft financial sector resources

On 15 June 2023, the Science Based Targets initiative (SBTi) published for public consultation the following draft documents:

• “SBTi Financial Institutions Net-Zero Standard – Conceptual Framework and Initial Criteria” - the SBTi is developing a Financial Institutions Net Zero (FINZ) Standard to provide criteria and guidance that enable financial institutions to establish robust near-term and long-term targets consistent with achieving net-zero emissions by 2050. The draft consultation provides the conceptual framework and initial criteria to be incorporated into a FINZ Standard, described as “the first building block of the framework”.

• “Near-Term Financial Sector Science Based Targets Guidance – Version 2.0” and “SBTI Near-Term Criteria and Recommendations for Financial Institutions – Version 2.0” - this draft guidance updates the SBTi’s existing near-term framework to align financial institutions’ near-term emissions reduction targets with 1.5°C pathways. It marks an increase in ambition, as previous near-term guidance was aligned with well-below 2°C pathways. The second document covers the same criteria and recommendations in the full guidance document but as an excerpt for ease of reference.

• “SBTi Fossil Fuel Finance Position Paper” - the SBTi Fossil Fuel Finance Position Paper presents both near- and long-term criteria to address financial institutions’ activities with respect to fossil fuel companies.

The consultation on each of the above documents closes on 14 August 2023.

Global: VCMI publishes Claims Code of Practice to enhance integrity of voluntary carbon credits

The Voluntary Carbon Markets Integrity Initiative (VCMI) has launched its new Claims Code of Practice on Market Utilisation, to provide guidance for companies on the use of carbon credits and associated claims, and to facilitate more demand-side credibility in the voluntary carbon markets. The Claims Code seeks to enable companies to use carbon credits in a way which is internationally recognised as being robust and of high integrity by meeting the requirements set out in the Code. It aims to give credibility to companies’ claims that the carbon credits used are of good quality. The Code has three tiers of claims that companies can make: Platinum, Gold and Silver. The VCMI will be publishing related guidance in November. For more information, see our blog post.

EU: Commission call for evidence and consultation on industrial carbon management and CCUs

Carbon capture, usage and storage (CCUS) are all crucial carbon management technologies in the global effort to reduce greenhouse gas emissions. In some hard to abate industrial sectors, such as the production of cement, iron, steel and chemicals, use of one or more of these technologies is the only means by which significant reductions in greenhouse gas emissions can be made.

On 8 June 2023, the European Commission published a call for evidence and public consultation on CCUS, the results of which will feed into a Communication which will propose a comprehensive strategy to create an industrial carbon management market in the EU by 2030. The Commission has identified that the infrastructure needed to allow the transport and storage of captured carbon underground is not developing fast enough. Upfront costs to develop and licence long-term storage sites are too high for many storage operators to justify when customers are hesitant to commit long-term where an operational storage site is not yet secured. Further, the EU does not currently have a dedicated regulatory environment for carbon transport and storage infrastructure, compounding the uncertainty which carbon management companies and hard-to-abate businesses are navigating. The Commission is seeking to protect the emergence of a single market in carbon management and prevent fragmentation through national regulations; particularly important given that potential capture and storage sites are not spread evenly throughout the EU. The call for evidence and consultation will also help assess which applications of carbon usage will align with the EU’s climate policy objectives and whether further incentives to add to existing schemes such as the EU ETS, the Renewables Energy Directive, the Innovation Fund and Horizon Europe will be needed to facilitate the deployment of captured carbon usage at scale. The call for evidence closes on 31 August 2023.

EU: Commission proposes new labelling rules for smartphones and tablets

The Energy Labelling Regulation empowers the Commission to adopt delegated acts in relation to specific products. On 16 June 2023, the Commission proposed a Delegated Regulation on the energy labelling and product information for smartphones and slate tablets. The aim is to facilitate repair and increase durability of these products and their key components, foster product designs aimed at achieving cost-efficient material and energy savings, and help consumers make informed and sustainable choices. The draft Delegated Regulation introduces an energy label that contains information on the energy efficiency which is determined in accordance with an energy efficiency index. The label should also contain information on the material efficiency that includes the battery endurance per cycle and in cycles, the repeated free fall reliability (i.e. how many falls the device can withstand while remaining operational), the dust and water ingress protection, a reparability score, based on scoring criteria set out to rate the extent to which products are reparable. The Delegated Regulation has been submitted to the European Parliament and Council for a two-month scrutiny period, after which it will be formally adopted if there are no objection from the co-legislators.

The draft Delegated Regulation came out on the same day as the proposed Commission Regulation laying down ecodesign requirements for smartphones, mobile phones other than smartphones, cordless phones and slate tablets under the Ecodesign Directive. It provides for the measures to make these devices more energy efficient, durable and easier to repair. According to the Commission’s press release, to align the entry into force of these two pieces of legislation concerning the same category of products, their publication in the Official Journal of the EU will occur on the same day, after the Delegated Regulation is adopted. The requirements set out in both proposals will apply 21 months from their entry into force.

EU: Commission publishes updated guidelines for horizontal cooperation agreements

More than a year after its public consultation, the European Commission has published updated guidelines for horizontal cooperation agreements, which include new guidance on sustainability agreements (see our previous blog post). These updated guidelines offer written clarity on the Commission’s approach to collaboration towards sustainability objectives, including safe harbours for unproblematic conduct and a basis for businesses to evaluate consumer benefits for the purpose of exemption under Article 101(3). The Commission’s open-door policy under the guidelines creates scope to seek further informal comfort. However, the Commission has maintained a more conservative approach compared with other regulators, including the Dutch and UK competition regulators – e.g. in respect of identifying pro-environmental benefits. The Dutch authority has, however, responded by indicating that it will bring its draft guidelines on sustainability agreements in line with the Commission’s guidelines. Businesses will be watching closely to see how this works out in practice.

Recommendations for reform of Australia's Modern Slavery Act

On 25 May 2023, the Attorney-General’s Department released the outcomes of the statutory review of the Australian Modern Slavery Act 2018. The report makes 30 recommendations for change which, if adopted, will mark a substantial strengthening in Australia's efforts to combat modern slavery, as well as creating more onerous due diligence and reporting requirements for companies caught by the regime. The review reflects the trend of governments looking to voluntary frameworks such as the UN Guiding Principles on Business and Human Rights when considering how to uplift due diligence and reporting requirements for business. For more information, see a blog post written by our colleagues at our alliance firm, Allens.

OECD announces updates to Guidelines for Multinational Enterprises on Responsible Business Conduct

On 8 June 2023, the OECD launched a revised version of its Guidelines for Multinational Enterprises on Responsible Business Conduct, 12 years after they were last updated. The OECD Guidelines, which cover all key areas of business responsibility, including human and labour rights, the environment, bribery, corporate disclosure, competition and taxation, have been revised to include new or updated recommendations relating to: (i) climate change (including adopting decarbonisation targets and prioritising emissions reductions over offsetting); (ii) biodiversity; (iii) supply chain due diligence; and (iv) the Just Transition (amongst other topics). For more information, see our blog post.

EU: Council agrees its negotiating position on the Platform Workers Directive

On 12 June 2023 the Council agreed on its negotiating position on a proposal for a Directive on improving working conditions in platform work. The Commission’s proposal was published on 9 December 2021 (see our previous blog post). On 2 February 2023, the European Parliament adopted its negotiating position on the Directive (see press release). According to the Council’s press release, they are seeking two key improvements: (i) to help determine correct employment status of people working for digital platforms; and (ii) to establish the first EU rules on the use of artificial intelligence in the workplace. In particular, the workers will be legally presumed to be employees of a digital platform (as opposed to self-employed) if their relationship with the platform fulfils at least three of seven criteria which include: (i) upper limits on the amount of money workers can receive; (ii) restrictions on their ability to turn down work; and (iii) rules governing their appearance or conduct. The Council also wants to ensure that workers are informed about the use of automated monitoring and decision-making systems. These systems should be monitored by qualified staff who enjoy special protection from adverse treatment. The first trilogue negotiations are scheduled for 11 July 2023.

U.S. Executive and Legislative ESG Policies

On 3 June 2023, U.S. President Joe Biden signed the bipartisan Fiscal Responsibility Act of 2023 (FRA) into law. The FRA includes, among other things, notable reforms to the National Environmental Policy Act (NEPA), including streamlining the federal approval process for projects, setting time limits for agency review, and clarifying the scope of NEPA review. Federal agencies must now evaluate “reasonably foreseeable environmental impacts of the proposed agency action,” “reasonably foreseeable adverse environmental effects,” and “a reasonable range of alternatives to the proposed action that are technically and economically feasible and meet the purpose and need of the proposed action.” For further information, please see our briefing here. On 20 June 2023, President Biden announced two major climate mitigation initiatives: (i) the U.S. Department of Commerce will launch the first and largest competitive Climate Resilience Regional Challenge to provide US$600 million to coastal and Great Lake communities building projects to protect against the impacts of climate change from sea-level rise, flooding, and storm surge and (ii) the U.S. Department of Energy will invest more than US$2 billion to modernise the U.S. electric grid to be more climate resilient.

At the same time, anti-ESG laws continue to advance in the U.S. legislature. On 21 June 2023, two U.S Representatives from Kentucky and Georgia reintroduced the Ensuring Sound Guidance (ESG) Act, which would amend the Employee Retirement Income Security Act of 1974 to require account fiduciaries to make investment decisions based solely on pecuniary factors. The bill aims to limit account managers’ considerations of non-financial factors when making investment decisions on behalf of their clients and refocus their interests to prioritise financial returns. Also in June 2023, the U.S. House Committee on Financial Service’s ESG Working Group released a memorandum titled “Preliminary Report on ESG Climate Related Financial Services Concerns.” The memorandum notes that the purpose of the ESG Working Group is to “develop[] a policy agenda designed to protect the financial interest of everyday investors from progressive activists who are using our institutions to force far-left ideology on Americans” and outlines its “key priorities,” which include: “Reform the proxy voting system to safeguard the interests of retail investors” and “Protect U.S. companies from burdensome EU regulations, safeguarding American interests in global markets.”

New actions from U.S. agencies

On 14 June 2023, the U.S. Internal Revenue Service (IRS) issued proposed regulations on Sections 6417 and 6418, which permit, respectively, certain tax-exempt taxpayers to obtain cash from the federal government in lieu of renewables tax credits (“direct pay”) and non-exempt taxpayers to transfer renewables tax credits to unrelated parties for cash (“transferability”). The proposed regulations are open to public comment until 14 August 2023. For further information, please see our briefing here.

Also in June 2023, the U.S. Commodity Futures Trading Commission’s (CFTC) Whistleblowers Office issued an alert notifying the public on how to identify and report potential violations of the Commodity Exchange Act (CEA) connected to fraud or manipulation in the carbon markets, including “[f]raudulent statements relating to … quality, quantity, additionality, project type, methodology substantiating the emissions claim, environmental benefits, the permanence or duration, or the buffer pool” of carbon credits. The alert, which includes a form that can be used to submit reports of potential misconduct, notes monetary awards will be paid to those who voluntarily provide original information leading to a successful CFTC enforcement action resulting in more than one million US$ in monetary sanctions.

PFAS litigation

Litigation involving per- and polyfluoroalkyl substances (PFAS), otherwise known as “forever chemicals”, continues to increase. Consistent with their moniker, these toxic non-degradable substances can persist for extensive periods of time in the environment and exposure to these chemicals over time can be damaging to human health. In June 2023, two separate settlements were reached in the U.S. federal district court for the District of South Carolina in litigations involving negligence claims against chemical companies with respect to PFAS contamination of groundwater and drinking water supply. The cases claim that the companies manufactured firefighting foam containing PFAS and contaminated water supplies across the country when used by firefighters. Funds from the $1.185 billion and $10.3 billion settlements will be used to remediate public water systems impacted by PFAS and provide more testing. Also in June 2023, the New Jersey Department of Environmental Protection and a chemical manufacturer reached a historic proposed settlement of US$392.7 million, arising out of claims that the chemical manufacturer’s facility in New Jersey discharged PFAS and other hazardous substances into the environment for over 30 years.

GFANZ APAC publishes consultation on financing the managed phaseout of coal-fired power stations in Asia Pacific

On 5 June 2023, the Asia-Pacific Network of the Glasgow Financial Alliance for Net Zero (GFANZ) published its consultation on “Financing the Managed Phaseout of Coal-Fired Power Plants in Asia Pacific”. The consultation sets out GFANZ’s proposed set of voluntary guidelines for financing the early retirement of coal-fired power plants in Asia-Pacific. The final guidance is intended to set out practical steps that financial institutions can take to support the financing of coal phaseout transactions with the aim to strengthen the credibility of these transactions. The draft guidance sets out a three-step process in which financial institutions apply ten recommendations to assess an entity-produced coal phaseout plan. The steps are (i) ensuring the credibility of relevant energy transition and coal phaseout plans at the governmental, entity and asset levels; (ii) optimising “meaningful” impact across climate impact, financial viability and socio-economic considerations; and (iii) achieving transparency and accountability for coal phaseout plans in line with the GFANZ Net Zero Transition Plan (NZTP) framework. This guidance builds on other frameworks for the managed phaseout of coal-fired power plants, including GFANZ’s Managed Phaseout of High-Emitting Assets guidance released in June 2022. The consultation closes on 4 August 2023.

The impact of the EU’s Corporate Sustainability Due Diligence Directive on businesses in Asia

In February 2022, the European Commission published its proposal for the Corporate Sustainability Due Diligence Directive (CSDDD) (see our client briefing). Since then, the EU Council and the European Parliament have both agreed their negotiating positions on the Commission’s proposal in December 2022 and June 2023 respectively (see our blog posts here and here). The CSDDD will impose on companies of a certain size operating in the EU far-reaching due diligence obligations covering the adverse human rights and environmental impacts of their own operations, and those of their subsidiaries and their upstream and downstream value chain. The forthcoming new regime will not only affect EU companies, but also non-EU companies with businesses operating in the EU and non-EU companies that are part of a value chain of a company to which the CSDDD applies. In our blog post we consider how the CSDDD is likely to impact businesses in Asia.

Shareholder activism and ESG-related shareholder resolutions continue to increase in Japan

Japanese banks continue to receive ESG-related shareholder resolutions, particularly in relation to energy transition plans and governance, most recently at Mizuho Financial’s annual shareholders’ meeting on 23 June 2023, as reported in the press. Similar shareholder resolutions are currently before MUFG and Sumitomo Mitsui. It has also been reported that earlier this month, Toyota faced an investor proposal seeking further disclosure on Toyota’s lobbying efforts regarding climate change. We are increasingly seeing shareholder resolutions being used by activists and investors in Japan to engage with companies and financial institutions in relation to ESG issues, as we have seen for a number of years already in Europe.

The Monetary Authority of Singapore publishes consultation on a code of conduct for ESG rating and data product providers

On 28 June 2023, the Monetary Authority of Singapore (MAS) published a consultation on the “Proposed Code of Conduct for Environmental, Social and Governance (“ESG”) Rating and Data Product Providers” (the Proposal). The Proposal sets out a voluntary industry code of conduct for ESG rating and data product providers which aims to establish minimum industry standards of transparency in methodologies and data sources, governance, and management of conflicts of interest. The intention is to set baseline industry standards on the providers through a set of industry best practices based largely on good practices set out in the IOSCO Call for Action paper published in November 2022. The MAS will first implement a voluntary industry code of conduct for ESG rating and data product providers. Subsequently, MAS will monitor global regulatory developments in this areas so that when there is greater regulatory consensus globally, it will conduct a more detailed public consultation to develop a local regulatory regime. Japan’s Financial Services Agency has already finalised a code of conduct for ESG data providers and the UK’s Financial Conduct Authority is also consulting on a regulatory regime for ESG ratings (see here and here). The consultation closes on 22 August 2023.

The Monetary Authority of Singapore publishes consultation on the criteria for early phase-out of coal-fired power plants under the Singapore-Asia taxonomy

On 28 June 2023, the Monetary Authority of Singapore (MAS) published a consultation on the “Criteria for early phase-out of the coal-fired power plants” under the (re-named) Singapore-Asia taxonomy. This builds on three earlier rounds of consultations by the MAS on the development of Singapore’s “traffic light” taxonomy which proposed thresholds and criteria for the energy, transport and real estate sectors, as well as for the following five sectors - agriculture and forestry / land use, industrial, waste and water, information and communication technology, and carbon capture and sequestration (see here). This fourth consultation sets out the criteria (at both the facility and entity level) against which the managed phase-out of a coal fired power plant can be considered aligned with the Singapore-Asia Taxonomy. The consultation closes on 28 July 2023.

The Monetary Authority of Singapore to set supervisory expectations on “Credible Transition Planning for Financial Institutions”

On 8 June 2023, the Monetary Authority of Singapore (MAS) announced that it will set out supervisory expectations to help guide financial institutions’ transition planning processes (see MAS press release). The guidance on transition planning will cover financial institutions’ governance frameworks and client engagement processes to manage climate-related financial risk and enable transition in the real economy toward net-zero. The MAS stated that it will be issuing a consultation paper setting out guidelines on credible transition planning later this year. The MAS also announced that they will collaborate with the financial industry to establish the Singapore Sustainable Finance Association (SSFA). The SSFA will initially focus on initiatives to scale voluntary carbon markets, transition finance, and blended finance and will be one for industry to watch.

Singapore’s Climate Impact X commences trading

On 8 June 2023, Climate Impact X - the joint venture among Singapore Exchange, Temasek, DBS and Standard Chartered Bank, launched CIX Exchange, its global spot trading platform. CIX Exchange aims to boost the liquidity of carbon offset trading and set a benchmark price for nature-based carbon credits. In the first day of trading, seven transactions totalling 12,000 carbon credits were traded and cleared on the exchange. The launch of CIX Exchange represents another step in the growth of Singapore’s carbon market, where Singapore is trying to leverage its status as a business hub in Asia to be the main carbon trading platform in the region.

The Monetary Authority of Singapore, UNDP and GLEIF launches an initiative to digitise ESG credentials for MSMEs

On 22 June 2023, the United Nations Development Programme (UNDP), Global Legal Entity Identifier Foundation (GLEIF) and the Monetary Authority of Singapore (MAS) signed a statement of intent to collaborate on an initiative – named Project Savannah – to develop digital ESG credentials for micro, small and medium-sized enterprises (MSMEs) globally (see MAS press release). Project Savannah aims to leverage on digital initiatives such as Project Greenprint (see here) to simplify the process of ESG reporting for MSMEs, through the generation of key ESG data credentials that can be housed in the MSME’s “Legal Entity Identifier” records. MSMEs can then transfer verified entity information and key ESG data to their business partners, with the aim of strengthening their ability to gain access to global financing and supply chain opportunities. The UNDP, GLEIF and MAS will be consulting the industry to refine the project’s scope and execution. The parties are aiming to launch a “proof of concept” at COP28 in November / December 2023.  

Mainland China reveals ESG-related agenda in its 2023 legislative plan

On 6 June 2023, the State Council of China published its Legislative Work Plan for 2023 (Legislative Plan). The Legislative Plan covers a wide range of ESG-related workstreams for Mainland China’s top executive body, including: (i) submission of a draft amendment to the Mineral Resources Law and the draft Energy Law for review by the Standing Committee of the National People’s Congress, the national legislature; (ii) formulation of the Ecological Protection Compensation Regulations and Water Conservation Regulations; and (iii) deliberation on formulating the Interim Regulations on the Management of Carbon Emission Rights Trading and revising the Regulations on the Management of Ozone Depleting Substances. While no specific timelines are set, the legislative agenda signifies China’s intention to further enhance its environment-related legal regime and promote green development.

First portfolio carbon asset repurchase transaction executed in China

On 18 June 2023, the first portfolio carbon asset repurchase transaction in China was executed between CITIC Securities Company Limited and Shenzhen Topband Co. Ltd. (Topband). These repurchase transactions comprise arrangements in which one company sells carbon assets to a counterparty and agrees to repurchase them at the agreed price in the future. In this inaugural transaction, Topband traded its carbon emission quotas and national-certified voluntary carbon emission reductions for several million renminbi for the purpose of investment in intelligent equipment which will help, among others, reduce the carbon emissions generated during manufacturing. Guided by the Shenzhen Ecology and Environment Bureau and the Shenzhen Emission Rights Exchange, this particular transaction sets a precedent for companies participating in the carbon market and has already been recognised as a nationwide benchmark for carbon finance innovation.

IFRS Foundation opens ISSB office in Beijing

On 19 June 2023, the International Financial Reporting Standards (IFRS) Foundation’s International Sustainability Standards Board (ISSB) officially opened its Beijing office (see our previous newsletter). The office will execute the ISSB’s strategy for emerging economies, act as a hub for stakeholder engagement in Asia, and undertake capacity-building activities for emerging economies and small- and medium-sized enterprises. For more information, see the announcement on the IFRS Foundation website.

The fifth phase of Solar Park launched in Dubai

Dubai has launched the 5th phase of the Mohammed bin Rashid Al Maktoum Solar Park (the Solar Park) - the largest single-site solar park in the world. It is part of the ambitious planned project by Dubai Electricity and Water Authority that will produce 5,000 MW of power for Dubai by the end of 2030. The 5th phase has a capacity of 900 MW and will provide clean energy to around 270,000 residences, reducing 1.18 million tonnes of carbon emissions annually. The Solar Park is expected to reduce 6.5 million tonnes of carbon emissions annually when fully operational. The Dubai Electricity and Water Authority implemented the phase using the latest solar photovoltaic bifacial technologies.

Construction of the first large-scale wind farm in the Gulf Cooperation Council underway in Oman

Abu Dhabi’s renewable energy company, Masdar, has signed an engineering, procurement and construction (EPC) contract with a global consortium comprising General Electric (GE) and TSK to build the Dhofar Wind Power Project in Oman. The Dhofar Wind Power Project is the intended to be the first large-scale wind farm in the Gulf Cooperation Council (GCC). The 50 MW project in Oman is set to electrify around 16,000 homes and offset 110,000 tonnes of CO2 annually. Backed by the Abu Dhabi Fund for Development, it marks a significant shift in clean energy projects in the region. The wind farm is expected to contribute to the diversification of Oman's energy mix, and its success could pave the way for similar renewable energy initiatives across the GCC.

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