Global: ISSB’s next steps on biodiversity and human capital

The International Sustainability Standards Board (ISSB) has said (see ISSB press release) that it will commence projects to research disclosure about risks and opportunities associated with biodiversity and human capital. The ISSB will look at how it might build from existing initiatives, including the SASB standards, CDSB guidance and the work of the Task Force on Nature-related Financial Disclosures (TNFD). The research projects will enable the ISSB to assess the limitations with current disclosure in these areas and decide whether it needs to develop any disclosure standards on these two topics. The ISSB has indicated that its priority for the next two years will be supporting the implementation of the ISSB’s first two standards - IFRS S1 and IFRS S2. The two new research projects, as well as work to enhance the SASB standards, will be the ISSB’s other key focus areas. For more information on the ISSB’s first two sustainability disclosure standards, see our previous blog post.

Global: Which countries are adopting the ISSB standards?

The IFRS has launched a webpage listing which countries are consulting on integrating the International Sustainability Standards Board (ISSB) standards into national law. The webpage is divided into open/ongoing consultations and closed consultations and is a helpful resource for tracking global developments.

Global: NGFS publishes reports on climate transition plans

On 17 April 2024, the Network for Greening the Financial System (NGFS) published three thematic reports for banks that are developing climate transition plans to meet prudential requirements. These reports aim to enhance micro-prudential authorities’ understanding of the broader context within which financial institution transition planning takes place. The first report, “Tailoring Transition Plans: Considerations for EMDEs”, examines the perspectives, priorities, and challenges in emerging markets and developing economies (EMDEs) financial institutions’ transition plans and planning. The second report, “Connecting Transition Plans: Financial and non-financial firms”, looks into how financial institutions can use real economy transition plans to inform their own climate-related risk management, and facilitate transition finance. The third report, “Credible Transition Plans: The micro-prudential perspective”, explores key elements of credible transition plans and how micro-prudential authorities could assess credibility and related concerns. The NGFS also published a Cover Note that highlights the key findings and provides cross-cutting recommendations based on the reports.

Global: IFRS and EFRAG publish Interoperability Guidance on ISSB Standards and ESRS

On 2 May 2024, the IFRS Foundation and EFRAG, the body advising on European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD), published Interoperability Guidance to illustrate the alignment between the International Sustainability Standards Board’s IFRS Sustainability Disclosure Standards (ISSB Standards) and the ESRS. The Guidance explains how companies can efficiently comply with both sets of standards, with a specific focus on climate-related reporting. Importantly, the Guidance is not intended to be a formal statement of equivalence. The goal of the guidance is to increase efficiency for entities that report under ESRS and the ISSB Standards by describing how the standards are interoperable. For more information, see our blog post.

EU CSRD: Commission given power to delay sector-specific ESRS and ESRS for non-EU companies by two years until 2026

The European Commission has been given the power, under the Corporate Sustainability Reporting Directive (CSRD), to delay the sector-specific sustainability disclosure standards and the sustainability disclosure standards for non-EU companies by two years, until 30 June 2026. The Directive has been formally approved by both the European Parliament and Council and now just needs to be published in the Official Journal of the EU. For more information, see our blog post.

EU: Corrigendum to CSRD ESRS

On 19 April 2024, a corrigendum to the first set of the European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD) was published in the Official Journal of the EU. The corrigendum makes a number of minor amendments to ESRS 1 (General requirements), ESRS 2 (General disclosures) and the topical ESRS.

EU: EFRAG seeks companies to engage in transition plan implementation guidance

Under the Corporate Sustainability Reporting Directive (CSRD), companies are required to disclose their climate transition plans. The European Financial Reporting Advisory Group (EFRAG) is working on implementation guidance to assist companies in disclosing their transition plans in accordance with the European Sustainability Reporting Standards (ESRS). EFRAG have announced that they will conduct interviews throughout April and May with 20-30 European companies that are reporting under the CSRD to learn about practices and challenges associated with the disclosure of transition plans. During a technical workshop on 22 April 2024, titled “Financing the Transition to a Climate-Neutral Economy”, a representative of the European Commission mentioned that the guidance is expected to be published in the latter half of 2024.

UK: TPT publishes final version of sector-specific guidance on climate transition plan disclosures

On 9 April 2024, the UK Transition Plan Taskforce (TPT) published the final versions of its sector-specific guidance, covering the following sectors: (i) banks; (ii) asset owners; (iii) asset managers; (iv) electric utilities & power generators; (v) food & beverage; (vi) metals & mining; and (vii) oil & gas. To recap – the TPT published its final recommendations on climate transition plan disclosures, along with implementation guidance in October 2023. The TPT Disclosure Framework and accompanying implementation guidance which are sector-neutral (i.e. not aimed at any particular sector) provide a set of good practice recommendations aimed at facilitating high-quality, consistent, and comparable transition plan disclosures. They provide a roadmap for organisations in the private sector to formulate and disclose credible and robust climate transition plans. The sector-specific guidance is intended to be complementary and to help preparers in specific sectors interpret the TPT Disclosure Framework. For more information, see our blog post.

UK: Government confirms plans to increase company size thresholds and reduce company reporting

A written ministerial statement confirms the UK government’s intention to lay legislation this summer to lift the monetary thresholds that determine company size and, later this year, to consult on further changes to the corporate reporting requirements for medium-sized companies. In addition, the Department for Business & Trade (DBT) has published a summary of responses to its May 2023 call for evidence on the non-financial information UK companies are required to include in their annual reports and a summary of the main findings, including that respondents expressed strong support for greater comparability in sustainability related reporting and the UK’s pursuit of International Sustainability Standards Board (ISSB) standards as a solution to issues caused by reporting against a variety of standards. For more information, see our blog post.

Global: European Court of Human Rights rules that Switzerland’s failure to implement sufficient measures to combat climate change violates human rights

On 9 April 2024, the European Court of Human Rights (ECtHR) issued its long-awaited rulings in three landmark climate change cases against Portugal (as well as 32 other States), France and Switzerland. The Court was asked to decide whether the Contracting States’ allegedly insufficient measures to combat climate change amounted to a violation of the individual human rights of European citizens as guaranteed by the European Convention on Human Rights. While dismissing two of the three cases on procedural grounds, the ECtHR relied on the right to private life and family life (Article 8 of the Convention) to decide, in the third case, that Switzerland had failed to fulfil its obligations to provide protection against the adverse effects on human health caused by climate change. For more information, see our blog post.

EU: Parliament gives final approval to CSDDD

On 24 April 2024, the European Parliament formally adopted the Corporate Sustainability Due Diligence Directive (CSDDD or CS3D). The Parliament did not make any further changes to the text of the Directive so what has been formally adopted today is the same text that the Council endorsed on 15 March which included some significant concessions, especially on the scope of application. The Directive now needs to be formally endorsed by the Council and published in the EU Official Journal. For more information, see our blog post.

EU: Parliament gives final approval to the forced labour ban

On 23 April 2024, the European Parliament formally adopted a new Regulation prohibiting products made with forced labour on the EU market. The Forced Labour Regulation will prohibit placing and making available on the EU market, or exporting from the EU market, products made with forced labour. The ban on products made with forced labour will have a far-reaching scope of application, as it will apply to (i) all products, (ii) made in whole or in part with forced labour and (iii) across all sectors (irrespective of the provenance of the goods, including those made within the EU). While this new Regulation does not aim to impose additional reporting or due diligence requirements in addition to the ban, economic operators will still need to conduct a thorough assessment of their supply chains to identify potential violations of the Regulation. The text now needs to be formally approved by the Council and then be published in the Official Journal of the EU. EU countries will have to start applying it in three years. For more information on this Regulation, see our previous blog posts here and here.

Global: Navigating the risks of greenwashing in the voluntary carbon market

Together with the International Swaps and Derivatives Association (ISDA), in April 2024 we published a report which unpacks the risk of greenwashing in the context of the voluntary carbon market (VCM), including addressing the use of carbon credits against climate targets. In the report, we: (i) provide an overview of verified carbon credits (VCCs); (ii) explain greenwashing; (iii) describe the origin, causes and risks of nature- and technology-based VCC methodologies at both the credit and system level; (iv) discuss the effects of greenwashing on primary and secondary carbon markets; (v) highlight market reforms to minimize the risk of greenwashing (both regulatory and industry-led efforts); and (vi) provide recommendations.

EU: Greenwashing in the aviation industry: what can we learn from district court of Amsterdam’s decision?

On 20 March 2024, the district court of Amsterdam ruled against a Dutch airline in what has been described as the first decision on greenwashing claims in the aviation industry. The district court ruled that fifteen of the nineteen statements made by the airline in relation to three marketing campaigns and/or products were misleading and unlawful, and that the airline had thereby acted in violation of the Dutch Unfair Commercial Practices Act (which is the Dutch implementation act of the EU Unfair Commercial Practices Directive 2005). For more information, see our blog post.

EU: Commission and CPC authorities launch greenwashing investigation in respect of green claims made by 20 airlines

The European Commission announced on 30 April 2024 that EU consumer authorities (the CPC Authorities), coordinated by the Commission, have sent letters to 20 airlines identifying several types of potentially misleading green claims and inviting them to bring their practices in line with EU consumer law within 30 days. The names of the airlines have not been disclosed at this stage of the investigation. The investigation focuses on claims made by the airlines that the CO2 emissions caused by a flight could be offset by climate projects or through the use of sustainable fuels, to which the consumers could contribute by paying additional fees. The authorities are concerned that these practices can be considered as misleading actions/omissions, prohibited under the Unfair Commercial Practices Directive (UCPD). The Commission and CPC authorities have invited the companies to provide a response within 30 days, outlining their proposed measures to address the concerns. For more information, see our blog post.

EU: New legislation targets strategic lawsuits seeking to curtail public participation

Directive 2024/1069 on protecting persons who engage in public participation from manifestly unfounded or abusive court proceedings (so-called “strategic lawsuits against public participation directive” or “SLAPPs Directive”) was published in the Official Journal of the EU on 16 April 2024. In the context of rising litigation seeking to curtail ESG activism, the Directive provides safeguards against manifestly unfounded claims or abusive court proceedings brought against natural and legal persons due to their involvement in public participation. This includes journalists, publishers, media organisations, whistleblowers and human rights defenders, as well as civil society organisations, NGOs, trade unions, artists, researchers and academics. EU Member States, including Ireland but excluding Denmark, will have to transpose the minimum requirements foreseen in the Directive into their national law within two years from the date of its entry into force, i.e. by 7 May 2026. The Directive will be applicable from this date. For more information, see our blog post.

UK: FCA confirms anti-greenwashing guidance

Ahead of the anti-greenwashing rule (AGR) coming into force on 31 May 2024, the FCA has published its finalised guidance to support industry in meeting the standard. This builds on the FCA consultation back in November 2023. If you were already familiar with that consultation, it is worth noting that the FCA guidance has not changed significantly since that version. The FCA has kept the finalised guidance quite principles-based and as such has not specifically commented on some key scoping questions that we know have emerged with some clients and industry participants, and so there remains a degree of ambiguity, albeit some comfort is provided in the confirmation within the guidance that the intention is not to create new obligations. For more information, see our blog post.

Global: LMA publishes new sustainability coordinator letter

On 24 April 2024, the Loan Market Association (LMA) published a new sustainability coordinator letter, which is intended to provide a starting point for negotiation where a sustainability coordinator is to be appointed in connection with a sustainability-linked loan agreement. The letter sets out the terms on which the sustainability coordinator is willing to act and is aligned with the Model Form Provisions for Sustainability-Linked Loans published by the LMA on 4 May 2023.

Climate scenario analysis: EU and UK developments

On 16 Aprill 2024, the Basel Committee on Banking Supervision (BCBS) published a discussion paper on the role of climate scenario analysis (CSA) in strengthening the management and supervision of climate-related financial risks. It first published principles for the effective management and supervision of climate-related financial risks in June 2022. Since the implementation of the principles, the BCBS has found that differences in the scope, features and approaches of CSA exercises across jurisdictions and banks limit the harmonisation of supervisory expectations and the comparability of results. It is therefore seeking stakeholder feedback that, in conjunction with the work under way in other global forums such as the Financial Stability Board (FSB) and Network for Greening the Financial System (NGFS), may lead to additional complementary work to strengthen the regulation, supervision and practices of banks worldwide.

Relatedly, the Bank of England published an article on 17 April 2024 exploring how financial institutions can use CSA to quantify climate change risks, providing examples of its application to sovereign bonds, corporate bonds and residential mortgages. The Bank of England reiterates the important role CSA should play in the risk assessment toolkit and restates its expectation, originally made by the PRA to banks and insurers in its 2024 “priorities” letter. This confirmed that firms need to make further progress on climate scenario analysis and that banks should consider the use of tailored and ambitious stress scenarios in relation to climate change impacts.

EU: Proposal to integrate ESG factors into credit ratings

In response to the European Commission’s request last year, the European Securities and Markets Authority (ESMA) has now launched its consultation on proposals to integrate ESG factors in credit ratings and to improve transparency in respect of the inclusion of ESG risks in credit ratings and rating outlooks. This is in contrast to the work being done in the EU in relation to the regulation of ESG rating providers - indeed credit ratings are expressly carved out of the EU's ESG Ratings Regulation. For more information, see our blog post.

EU: Banking Package – ESG risks embedded in the EU prudential framework

In its last session, the European Parliament adopted amendments to the EU banking rules (CRR/CRD) that aim, among other objectives, to contribute to the transition to climate neutrality and to ensure that ESG considerations become an integral part of banking operations. For the first time, clear definitions of ESG risks have been integrated into financial supervisory laws. The sustainability-related requirements of CRD6/CRR3 not only show parallels with previously communicated regulatory expectations but also introduce more stringent measures. Institutions will be required to systematically identify, disclose, and manage such risks as part of their risk management processes. Furthermore, they must develop transition plans and consider a longer time horizon for their strategic planning. See here for the amended CRR text and here for the amended CRD text. For background information on the banking package, see the Parliament’s press release from when political agreement was reached last summer.

EU: EIOPA reassesses treatment of natural catastrophe risk in the standard formula

The European Insurance and Occupational Pensions Authority (EIOPA) has launched a consultation in which it proposes some adjustments to the way that natural catastrophe risks are treated in the standard formula. EIOPA has reviewed the natural catastrophe parameters in the standard formula to see if they need to be updated for new insights, data and models that have become available since the last reassessment in 2018. It has also assessed whether new perils or regions should be included. As a result of this work, EIOPA is proposing new risk factors for various perils and regions and has suggested including more countries in the standard formula for which certain natural catastrophe risks were previously not covered. It is also considering including wildfire, coastal flood and drought in the future as new perils to be covered under the standard formula. Comments on EIOPA’s consultation are requested by 20 June 2024.

UK: FCA consults on extending UK SDR to portfolio management services

As it promised when releasing its policy statement (PS23/16) on the UK sustainability disclosure regime (SDR) and labelling regime, the FCA has published a consultation paper on extending the regime to portfolio management services. With the expectation that final rules will be published in the second half of 2024, and will begin to come into force from 2 December 2024, firms will need to begin their work now to get to grips with the proposed regime in order to meet the tight application timeline. For more information, see our blog post. See also the “Greenwashing & Litigation” section above for the FCA’s guidance on the UK’s anti-greenwashing rule.

UK: Overseas funds and the UK SDR

On 1 May 2024, HM Treasury and the FCA issued their Roadmap on the Overseas Funds Regime (OFR), setting out the government's plans for the coming months. A key question for the market is whether the UK's sustainability disclosure regime (SDR) will also be extended to apply to OFR funds. The roadmap does not confirm the policy position but does set out the timeline for that decision to be made - with the first step being a Treasury consultation. The consultation is expected to open in Q3 2024. If the government decides to extend the SDR to overseas funds, it aims to lay legislation this year and the FCA will then consult on its related rules and guidance in 2025. For more information, see our blog post.

Global: IETA publishes guidelines for high integrity use of carbon credits

The International Emissions Trading Agency (IETA) has issued further guidance on how to use carbon credits as part of a decarbonisation strategy, urging companies not delay investing in the market – see Guidelines for High Integrity Use of Carbon Credits. To help companies incorporate carbon credits into their climate strategies, it has set out six guidelines for using the voluntary carbon market:

• Demonstrate support for the Paris Agreement goals;
• Quantify and publicly disclose Scope 1, 2 and 3 emissions profiles;
• Establish a net zero decarbonisation pathway and near-term targets;
• Use carbon credits in line with the mitigation hierarchy;
• Ensure that only high-quality carbon credits are use; and
• Transparently disclose use of carbon credits.

Global: Nature Action 100 launches multi-sector guide on nature engagement

On 26 March 2024, Nature Action 100 (NA100) in collaboration with sustainability non-profit Ceres published a Field Guide to Eight Key Sectors. The guide provides investors with a framework to understand nature-related impacts and dependencies based on various sectors, including: biotechnology and pharmaceuticals; chemicals; consumer goods retail; food; food and beverage; forestry and packaging; household and personal products; and metals and mining. The guide includes a general description and a diagram of each sector’s typical production stages and processes. It lists significant nature-related activities in companies’ direct operations and summarises the material nature-related impacts and dependencies across those operations. The guide aims to increase investor capacity and knowledge and proposes key questions for investor-company interactions and related resources.

EU: Parliament votes for withdrawal from the Energy Charter Treaty

On 24 April 2024, the European Parliament voted in favour of withdrawing the European Union from the Energy Charter Treaty (ECT), following a recommendation by the Parliamentary Committees on International Trade and on Industry, Research and Energy. The ECT entered into force in 1998 and was designed to protect foreign investments in the energy sector. However, the treaty is now increasingly viewed as an obstacle to climate action as it allows conventional fossil fuel companies to make claims against states adopting clean energy transition policies. Several EU Member States and the UK have already taken steps to withdraw from the ECT (see our previous blog post). Previous efforts at modernising the treaty were unsuccessful and, in 2022, the European Parliament resolved to make a “coordinated exit” from the ECT (see our previous blog post). The ECT contains a sunset clause which allows investors to sue states for 20 years even after their effective withdrawal from the treaty. The recommendation to the European Parliament noted that “as of 1 December 2023, there were 162 known investment arbitration cases initiated under the Energy Charter Treaty, out of which around 70% are intra-EU ECT-based investment arbitration cases”. A coordinated withdrawal is aimed at limiting the effect of the sunset clause and preventing intra-EU disputes from being adjudicated under the ECT. The European Court of Justice has already held that intra-EU proceedings under the ECT are incompatible with EU law and several EU domestic courts have declined enforcement on this basis. The European Commission has also proposed that EU Member States adopt an updated, modernised version of the ECT at the Energy Charter Conference later this year, which incorporates (among others) an amendment to exempt intra-EU disputes from the ECT’s investor-state arbitration provisions.

EU: Revised Energy Performance of Buildings Directive nears the finish line

One of the proposals that formed part of the EU’s “Fit for 55” package was a revision of the existing Energy Performance of Buildings Directive (the EPBD) in order to align with the European Green Deal. The revised EPBD seeks to decarbonise the EU's building stock by 2050 and facilitate the renovation of homes, schools, hospitals, offices and other buildings across Europe to reduce greenhouse gas emissions and energy bills, improving the quality of life of those living in the EU. The proposal was initially met with great scepticism by Member States. However, after lengthy negotiations, in December 2023, the European Parliament and the Council reached provisional agreement on the text, and on 12 March 2024, the European Parliament formally adopted the amended proposal. The revised EPDB now needs to be formally agreed by the Council and then published in the Official Journal of the EU. While still ambitious, the final agreed text is far less ambitious than the initial proposal tabled by the Commission. For more information on the revised EPBD, see our blog post.

EU: Revised Environmental Crime Directive introduces new offences and increased penalties

The revised Environmental Crime Directive (revised ECD) was published in the Official Journal of the EU on 30 April 2024. The revised ECD provides for new environmental crimes and introduces a so-called “qualified offence” which is comparable to “ecocide”, as well as increased imprisonment sentencing and fines. The revised ECD will replace the existing Environmental Crime Directive 2008, as well as Directive 2009/123/EC on ship-source pollution. Member States will need to adopt the necessary national measures to transpose the revised ECD by 21 May 2026. For more information, see our blog post.

UK: CMA publishes guidance on sustainable collaboration

The UK Competition and Marketing Authority (CMA) has published a second piece of informal guidance under its Green Agreements Guidance, giving WWF-UK and five UK supermarkets the go ahead on their latest emissions reducing initiative. The Green Agreements Guidance was published in October last year. Sustainability professionals and advisers believe it gives more confidence in what is and isn’t permitted under the competition rules (see our survey results here) especially when taken together with this type of informal guidance which shows how the CMA approaches the analysis in real world situations. For more information, see our blog post.

UK: Pensions regulator publishes review of climate-related disclosures by occupational pension schemes

The UK Pensions Regulator has published its second review of climate-related disclosures by occupational pension schemes. The review sets out the Regulator’s observations and feedback to the pensions industry based on its review of a selection of reports from the second year that climate reporting duties have applied. Pension scheme trustees should take into account the Regulator’s findings and comments when preparing their next climate change reports.

EU: Parliament gives final approval for Platform Work Directive

On 24 April 2024, the Platform Work Directive was adopted by the European Parliament. The Directive now needs to be formally adopted by the Council before it can be published in the Official Journal of the EU and enter into force. The Directive follows a surge in the number of workers in the digital platform sector over the last decade, expected to exceed 42 million next year. People working through platforms are overwhelmingly classified as self-employed, even if that might not be the true nature of their working relationship. This has raised concerns that many are missing out on basic worker rights, such as paid leave and minimum wage, because of being wrongly labelled as self-employed. The Platform Work Directive aims to tackle this. For more information, see our blog post.

UK: Supreme Court makes declaration of incompatibility in relation to trade union legislation

On 17 April 2024, the Supreme Court (SC) handed down its judgment in Secretary of State for Business and Trade v Mercer. It held that section 146 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) does not provide protection for detriment short of dismissal for workers taking part in lawful strike action. This lack of protection places the UK in breach of its obligations under Article 11 (right to freedom of association) of the European Convention on Human Rights (ECHR) because workers are unable to strike without exposing themselves to detrimental treatment, effectively nullifying the right to strike. Since it was not possible to interpret section 146 in a manner that conformed with Article 11, the SC made a declaration of incompatibility with the ECHR.

Climate change and greenhouse gas litigation

Climate change suits continue to gain traction in the U.S. On 19 April 2024, the Pennsylvania Attorney General charged a major oil subsidiary in state court with “failures to report drilling issues that caused industrial waste [and] potential pollution of water,” alleging the company failed to notify the Pennsylvania Department of Environmental Protection about multiple environmental incidents, including oil spills, it encountered during construction of a 45-mile pipeline in the state as required by the state’s Clean Streams Act. Also in April, a group of youth litigants filed a brief in the Central District of California opposing the federal government’s motion to dismiss their claims that the U.S. Environmental Protection Agency (EPA) permits unsafe levels of climate pollution to enter and accumulate in the nation’s air. For further information, see our January 2024 ESG Disputes Bulletin.

Also in April 2024, four real estate and landlord groups filed a complaint in the U.S. District Court for the District of Colorado against the city of Denver and its officials seeking relief against the enforcement of two regulations that establish and impose energy conservation standards on buildings and their appliances and equipment. The plaintiffs argue that the rules are pre-empted by the Energy Policy and Conservation Act and request that the court enjoin the defendants from enforcing the regulations as applied to new buildings. The same month, an environmental group and a youth advocacy organization filed a complaint in state court in Maine against the Maine Department of Environmental Protection and the Maine Board of Environmental Protection, alleging that the defendants failed to address emissions in the transportation sector and rejected three transportation decarbonization rules in the past five years. The plaintiffs seek to compel the defendants to carry out their statutory obligations to promulgate regulations necessary to ensure compliance with Maine’s climate regulations, including rules to address high emissions in the transportation sector.

Corporate disclosure litigation

On 12 April 2024, the U.S. Supreme Court (SCOTUS) unanimously ruled that “pure omissions” were not actionable under a federal securities law that makes it illegal “[t]o make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading” in relation to the purchase or sale of a security. The petitioner, a large corporation that owns and operates bulk liquid storage terminals in the U.S. that store petroleum and high-sulfur fuel oil products, was sued by a shareholder enterprise in the Southern District of New York for failing to disclose an impending global regulation on sulfur in fuel oil - a “near-cataclysmic ban” on the corporation’s largest product - and its impact on the business in its public offering documents. On appeal, the Second Circuit held that a failure to disclose information can amount to an actionable “omission” under federal securities law, splitting with rulings from the Third, Ninth, and Eleventh Circuits. SCOTUS vacated the Second Circuit’s ruling and resolved the circuit split, holding that a “duty to disclose ... does not automatically render silence misleading under Rule 10b–5(b)” and that a company’s failure to disclose a trend or uncertainty which could harm their business can support a claim against them “only if the omission renders affirmative statements made misleading[.]”

On 4 April 2024, the U.S. Securities and Exchange Commission (SEC) announced a voluntary stay of its new disclosure rules, the Enhancement and Standardization of Climate-Related Disclosures for Investors, which would require companies to disclose the financial harm caused by extreme weather events and climate-related risks to their business. Shortly after they were finalized, the rules faced several legal challenges by numerous parties with varying interests, including state governments, business groups, non-profit organizations, and climate advocates, which were consolidated into one case in the Eight Circuit. In its order issuing a stay, the SEC emphasized that the rules are “consistent with applicable law and within the Commission’s long-standing authority to require the disclosure of information important to investors in making investment and voting decisions” and it will “vigorously defend” the rules in court, but that a stay would facilitate “the orderly judicial resolution of those challenges and allow the [Eight Circuit] to focus on deciding the merits.” On the legislative side, a resolution has been unveiled in the U.S. Senate, which if passed, would overturn the rules.

Executive actions

On 4 April 2024, the EPA announced recipients for US$20 billion in grant awards under two competitions within the Greenhouse Gas Reduction Fund, created by President Biden’s Inflation Reduction Act. The grants, spread across the eight recipient programs, will go towards financing thousands of projects, creating a national clean financing network for energy and climate solutions across various sectors, with the hope of mobilizing private capital to reduce pollution while also reducing energy costs and creating well-paying clean energy jobs. Later in the month, the EPA also announced four final rules aimed to reduce pollution from fossil fuel-fired power plants, including a rule that would ensure all coal-fired power plants that plan to run in the long-term and all new baseload gas-fired power plants control 90 percent of their carbon pollution, a rule for coal-fired power plants which tightens the emissions standard for toxic metals, a rule to reduce pollutants discharged through wastewater from coal-fired power plants, and a rule that will require safe management of coal ash placed in areas previously unregulated at the federal level.

Also in April, the U.S. Department of the Interior finalized the Management and Protection of the National Petroleum Reserve in Alaska (NPR-A) rule, which codifies various protections for wilderness in the state, including prohibiting drilling on 13.3 million acres of land currently managed by the U.S. Bureau of Land Management. Also, the Bureau of Ocean Energy Management released a final rule which significantly increases the level of financial assurances that current and future oil and gas operators must provide to prevent the cost of decommissioning oil and gas wells from falling on taxpayers. On 25 March 2024, the Biden-Harris Administration published the second National Action Plan (NAP) on Responsible Business Conduct, aiming to leverage the U.S. government’s resources “to strengthen [responsible business conduct] and encourage business[es] to address adverse business impacts, including on human and labor rights and the environment.” Within its three sections, the NAP outlines the U.S. government’s expectations for businesses to conduct human rights due diligence (HRDD) throughout their value chains in order to assess, prevent, and mitigate potential adverse impacts on human rights.

Oil and gas litigation

In April 2024, an environmental non-profit and an ecology professor filed a complaint in the U.S District Court for the District of Columbia against the U.S. Fish and Wildlife Service (FWS), alleging that the agency failed to adequately protect and mitigate the risk of offshore oil and gas activities in the Gulf of Mexico in violation of the Endangered Species Act and the Administrative Procedure Act. The plaintiffs claim that the FWS issued a “biological opinion” analyzing oil and gas leasing in the Gulf of Mexico that failed to quantify greenhouse gas emissions, ignored climate change as part of the environmental baseline, and omitted analysis of the impacts of greenhouse gas pollution on threatened and endangered species and their critical habitat.

Also in April 2024, four states filed a complaint in the U.S. District Court for the District of North Dakota against the United States Department of Interior and the Bureau of Land Management (BLM), petitioning the court for review of a final rule promulgated by the BLM entitled “Waste Prevention, Production Subject to Royalties, and Resource Conservation” that seeks to reduce the waste of natural gas from venting, flaring, and leaks during oil and gas production activities. The plaintiffs seek a vacation of the rule, claiming that the defendants are attempting to promulgate greenhouse gas emissions controls disguised as a rule to reduce industry waste.

Greenwashing and PFAs litigation

Greenwashing and per- and polyfluoroalkyl substances (PFAs) litigation continue to rise in the U.S. In March 2024, a federal court for the Eastern District of Missouri dismissed a proposed class action against a major sportswear retailer that alleged the company misled consumers about its “Sustainability” clothing collection. The court held that the plaintiff’s amended complaint “fail[ed] to plead factual content that allows the Court to draw the reasonable inference that Defendants are liable for the [false and misleading statements] alleged.” For more information, see our July 2023 ESG Disputes Bulletin.

On 19 April 2024, the State of California filed a lawsuit in state court against several major chemical manufacturers for contamination caused by the manufacture of and sale of PFAs and aqueous film-forming foam (AFFF) containing products. The complaint alleges that the defendants “designed, manufactured, marketed, distributed, and/or sold AFFF/PFAS Containing Products despite knowing that PFAS are toxic, persist indefinitely, and would be routinely released in the environment during their intended uses,” causing potential harms to human health and the environment. The plaintiff seeks compensatory and punitive damages, equitable relief, and abatement of public nuisance. On 2 April 2024, the Michigan Department of Environment, Great Lakes, and Energy (EGLE) filed an appellate brief in Michigan Supreme Court, requesting leave to appeal the state Court of Claims and Court of Appeals’ holdings that EGLE violated the Administrative Protection Act (APA) by issuing new rules regulating PFAs substances in drinking water. The brief argues that both courts erred in their ruling as it is contrary to the plain language of the APA and sets an impossible standard that no agency will be able to meet—creating a path for endless legal challenges to agency rules. The appellant requests leave to appeal or alternatively, reversal of the Court of Appeals’ decision.

Anti-ESG actions and legislation

Anti-ESG sentiment and legislation continue to proliferate in several states. In South Carolina, lawmakers are considering legislation which would prohibit a financial institution from denying financial services to agricultural producers on the basis of ESG factors—such as greenhouse gas emissions, use of fossil-fuel derived fertilizer, or use of fossil-fuel powered machinery. On 8 April 2024, the West Virginia State Treasurer announced that it added four banks to West Virginia’s Restricted Financial Institution List for their ESG policies. According to the announcement, the state reviewed each financial institution’s ESG policies and other public statements, finding that the banks are engaged in boycotts of fossil fuel companies. Banks on the Restricted Financial Institution List are ineligible for state banking services contracts. On 26 March 2024, the Mississippi Secretary of State issued a Summary Cease and Desist Order and Notice of Intent to Impose Administrative Penalty (the Order) against a multinational investment company and asset manager related to its ESG investment strategy. The Order alleges that the investment company “made express and implied material misrepresentations and omissions about its investment strategies related to ESG,” to deceive Mississippi’s investors in violation of state securities law.

Hong Kong Stock Exchange to introduce new climate-related disclosure requirements for listed issuers

On 19 April 2024, the Hong Kong Stock Exchange (the Exchange) published the conclusion paper to its April 2023 climate disclosures consultation and the accompanying implementation guidance (see our previous blog post). After considering feedback from the market and the ISSB Adoption Guide Preview, the Exchange will adopt a phased approach to implement mandatory climate-related disclosures by introducing new climate-related disclosure requirements (the New Climate Requirements) in the ESG Code that align closely with IFRS S2 (see our previous blog post on the ISSB standards). The Hong Kong SAR Government issued a vision statement in March 2024 which outlined the goal for Hong Kong SAR to be among the first jurisdictions to align its sustainability disclosure requirements with the ISSB Standards, with a longer term view where the Hong Kong Institute of Certified Public Accountants (HKICPA) will serve as the sustainability reporting standard setter and develop local sustainability reporting standards (the HK Standards) (see our previous blog post). It is the intention of the Exchange that when the HK Standards are available, listed issuers will transition towards reporting in accordance with those standards. However, whether and when this migration may take place will be subject to further public consultation. Until then, the New Climate Requirements are to be introduced via amendments to the current ESG Code and will serve as an interim phase to prepare listed issuers. In a nutshell - a new Part D will be introduced to Appendix C2 to the Hong Kong Listing Rules which sets out disclosure requirements for climate-related risks and opportunities to which issuers are exposed – these follow the IFRS S2 approach of being aligned with the four core pillars – (i) governance, (ii) strategy, (iii) risk management and (iv) metrics and targets. Hong Kong listed issuers will be subject to the New Climate Requirements depending on which category they fall under i.e. (i) LargeCap issuers (which are defined as Hang Seng Composite LargeCap Index (HSCLI)); (ii) Main Board issuers (other than LargeCap issuers); and (iii) GEM issuers. Depending on which category applies, the listed issuer is required to report on the New Climate Requirements on either a mandatory, “comply or explain” or voluntary basis.

Japan consults on adopting sustainability disclosure standards modelled on the ISSB standards

On 29 March 2024, the Sustainability Standards Board of Japan (SSBJ) published exposure drafts of the sustainability disclosure standards to be applied in Japan (the Exposure Drafts). The SSBJ is seeking feedback from market participants and other interested organisations on the content of such sustainability disclosure requirements and the proposal to adopt mandatory sustainability disclosure standards for Japan. The Exposure Drafts incorporate all the requirements in the sustainability disclosure standards published by the IFRS’ International Sustainability Standards Board (ISSB), with some additional jurisdiction-specific options the entity can choose to apply. The SBBJ is soliciting the views from market participants, in particular, as to the need for such jurisdiction specific options. The consultation periods started on 29 March 2024 and will end on 31 July 2024. For more information, see our blog post.

China’s stock exchanges release final version of new sustainability reporting guidelines

On 12 April 2024, each of Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE) and Beijing Stock Exchange (BSE) finalised the guidelines on corporate sustainability reporting two months after they were issued in draft. These guidelines will become effective from 1 May 2024. Compared to the drafts, the guidelines implement several changes in response to the market comments, e.g. extending the deadline for publishing sustainable reports, imposing different reporting requirements based on the materiality of the issue to be reported, and introducing a “comply or explain” mechanism. The new guidelines lay out China’s first set of mandatory sustainability reporting requirements for listed companies and have been heralded by the market as a milestone marking China’s progress into an era of standardised sustainability disclosure. For more information, see our previous blog post.

China’s regulators release new guidelines to strengthen financial support for green and low-carbon development

On 10 April 2024, seven of China's government departments jointly released the Guiding Opinions on Further Strengthening Financial Support for Green and Low Carbon Development (the Guidance). According to the Guidance, China will build a world-leading financial support system for green development in the next five years and make green and low-carbon policies more coordinated, effective and mature by 2035, with better resource allocation, risk management and market pricing. Under the Guidance, authorities will focus on further standardising the green finance system in China, advancing policy coordination and safeguards, enhancing information disclosure, and expanding international cooperation. The Guidance also seeks to promote the development of green financial products and markets; in particular, the Guidance emphasises broadening the scope of trading entities suitable for developing China's carbon market, increasing credit support for green and low-carbon transformation in energy, industry, transportation, construction and other fields, and supporting eligible enterprises to list at home and abroad for financing or refinancing.

China’s National Development and Reform Commission announces fund to support green and low carbon technologies

On 16 April 2024, the National Development and Reform Commission (NDRC) announced a list of the first batch of demonstration projects featuring green, low-carbon technologies. The 47 listed projects leverage the technologies of carbon reduction and carbon fixation. The release of the list of projects follows the Implementation Plan for Green and Low Carbon Advanced Technology Demonstration Project jointly published by the NDRC and other government departments in August 2023. According to the plan, focus will be on several key sectors including non-fossil fuels, the fields of industry and construction, new and efficient types of power grids and energy storage, as well as carbon dioxide capture. Qualified projects will receive greater funding support, such as investment from the central budget and financial and tax incentives.

Singapore announces the launch of a new “Emissions Factors Registry”

A new registry, the Emissions Factors Registry (EFR), has been launched in Singapore to enable local businesses to track and report their carbon emissions more easily and accurately. The EFR was set up in response to difficulties highlighted by Singapore companies in reporting Scope 3 emissions based on local conditions. The EFR will offer a repository of emission factors tailored to Singapore's context. These emission factors will act as conversion rates, translating various business activities (e.g. business travel, waste disposal and water consumption) into corresponding greenhouse gas emissions. The EFR’s database will be developed in phases, with the initial set of data (relating to transportation, water, general waste and energy) ready by the end of 2024. New categories and activities will be developed and released based on industry consultations and demand.

Singapore launches of a sustainable finance jobs transformation map

On 17 April 2024, the Monetary Authority of Singapore (MAS) launched the Sustainable Finance Jobs Transformation Map (the JTP) to prepare the workforce for opportunities in the sustainable finance space. The JTM looks at key sustainability trends driving changes to jobs and skills in the financial services sector, the impact of these trends on individual job roles, and the skills required as job roles evolve. The MAS will also set aside S$35 million in the Financial Sector Development Fund to support upskilling and reskilling and develop specialist talent in sustainable finance.

Hong Kong SAR takes steps to regulate disposable plastic products and enhance producer responsibility schemes

It is reported that on 22 April 2024, the first phase of the scheme regulating Hong Kong’s disposable plastic products commenced. The Product Eco-responsibility (Amendment) Ordinance 2023 aims to regulate the sale, manufacturing and distribution of disposable plastic tableware and other plastic products. Implementation will occur in two phases. Phase one regulates certain types of disposable plastic tableware that are small and difficult to recycle or for which there are well-developed alternatives. The first phase also regulates the sale and provision of other plastic products that either have non-plastic alternatives or are not necessities. The timing of implementation of the second phase is tentatively set for 2025, subject to the availability and affordability of the relevant non-plastic or reusable alternatives. In addition, the regulations aim to enhance two existing producer responsibility schemes (PRS) that involve electric equipment and glass beverage containers. These amendments are expected to be implemented on 1 July 2024.

Employment: Updates from Singapore and mainland China

The Government of Singapore has accepted final recommendations for mandatory Tripartite Guidelines on Flexible Work Arrangements (the Guidelines) which will come into effect on 1 December 2024. The Guidelines (i) will provide minimum standards for the process for submitting and handling formal requests for flexible work arrangements (FWAs) from employees, including (among others) how employers should manage and respond to such requests, and will cover all employees who have completed their probation; and (ii) will not mandate the outcomes of FWA requests but employers will be expected to abide by the Guidelines and properly consider such requests, in line with the approach the Government has taken in other areas of employment law where similar guidelines have been issued. For further information, see our blog post.

Separately, our employment team provides an update on emerging trends impacting companies operating in mainland China including in the labour disputes, ESG and AI space in this video.

Linklaters announces partnership with European Women on Boards to foster gender diversity in leadership– Read our press release

How should companies prepare for the EU's Green Claims Directive?– Read our article

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