The Sustainable Trade Forum Monthly ESG and Sustainability Update January 2024

We’re pleased to bring you this comprehensive update on the latest developments in environmental, social, and governance (ESG) regulations worldwide. Here’s the roundup of the key changes and insights:

Global Trends:

• The Wall Street Journal recently critiqued ESG, stirring debate about its role in corporate America.
  
  • The ESG Investing Backlash Has Begun: https://www.wsj.com/business/the-latest-dirty-word-in-corporate-america-esg-9c776003
  • Why the Backlash Against ESG Is a Distraction: https://www.bloomberg.com/news/articles/2022-09-13/an-abc-on-esg-and-the-kinds-of-backlash-it-s-facing-quicktake
• Interest in Small Modular Reactors (SMRs) is surging as nations seek efficient, scalable nuclear solutions for energy needs.
  • Small Modular Reactors: What You Need to Know: https://nucleus.iaea.org/sites/smr/Shared%20Documents/Small%20Modular%20Reactors%20a%20new%20nuclear%20energy%20paradigm.pdf
  • Small Modular Reactors Offer Big Potential for Energy Transition: https://www.forbes.com/sites/kensilverstein/2023/02/15/small-modular-nuclear-reactors-may-become-the-go-to-energy-source/
• EU importers must brace for the impact of the Carbon Border Adjustment Mechanism (CBAM), affecting operations and supply chains.
  • Carbon Border Adjustment Mechanism: https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en)
• Deliberations on seabed mining rules by the International Seabed Authority (ISA) show a reluctance to finalize regulations.
  • International Seabed Authority: https://www.isa.org.jm/
• Public companies preparing for the 2024 proxy season should note recent regulatory and disclosure changes.
  • SEC: Proxy Rules and Shareholder Proposals: https://www.sec.gov/education/smallbusiness/goingpublic/annualmeetings)
• The SEC continues to scrutinize ESG-related claims with enhanced climate-related disclosures pending. The agency faces a growing backlash against ESG investing, particularly in certain US states introducing “anti-ESG” legislation.
  • SEC Division of Examinations 2023 Priorities: https://www.sec.gov/files/2023-exam-priorities.pdf
  • States Take Aim at ESG Investing: https://www.bloomberg.com/opinion/articles/2022-10-11/anti-esg-can-be-good-business
• Lawsuits related to ESG claims, particularly those alleging greenwashing, are increasing, underscoring the need for robust, data-backed ESG reporting.
  • Greenwashing Litigation on the Rise: https://corpgov.law.harvard.edu/2023/10/10/reducing-the-risk-of-greenwashing-litigation-and-defending-actions-that-are-filed/

Regional Insights:

• Japan: Climate change discussions are intensifying, affecting national policies.
  • Ministry of the Environment, Japan: https://www.env.go.jp/en/
• Australia & NZ: Organizations face challenges with the tightening of ESG legislation and standards.
  • Standards Australia: https://www.standards.org.au/
  • New Zealand Sustainable Finance Forum: https://www.theaotearoacircle.nz/news/sustainable-finance-forum-sets-out-roadmap-for-a-sustainable-financial-system-by-2030
• China & HK: ESG banking products, such as Green Deposits, align with China’s sustainability goals, while HKMA sets sales standards for sustainable investment products. 
  • China Banking and Insurance Regulatory Commission: https://www.cbirc.gov.cn/en/view/pages/index/index.html)
  • Hong Kong Monetary Authority (HKMA): https://www.hkma.gov.hk/eng/
• Malaysia: Six emerging ESG trends are likely to influence Malaysia’s landscape in 2024.
  • ESG Trends in Malaysia: https://www.eco-business.com/events/sharpening-the-esg-focus-understanding-asias-key-developments-in-2024/
• Thailand: Thai businesses must understand the implications of EU’s CBAM on their operations.
  • Thailand Board of Trade: https://www.thaichamber.org/
• Ireland: The government proposes a Climate Action Plan for 2024, aiming to meet climate targets.
  • Department of Environment, Climate and Communications, Ireland: https://www.gov.ie/en/organisation/department-of-the-environment-climate-and-communications/
• UK: The UK plans to implement a CBAM by 2027 and introduces mandatory biodiversity net gain measures.
  • Department for Environment, Food and Rural Affairs (DEFRA), UK: https://www.gov.uk/government/organisations/department-for-environment-food-rural-affairs

EU Developments:

• Draft guidance for the Corporate Sustainability Reporting Directive’s materiality assessment is out.
  • European Commission Guidance on CSRD: https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en)
• The European Central Bank prioritizes governance and management of climate-related risks.
  • European Central Bank on Climate-related and environmental risks: https://www.ecb.europa.eu/ecb/climate/html/index.en.html)
• Key legislative measures like the Net-Zero Industry Act and the Critical Raw Materials Act are advancing.
  • Check the most recent updates on the European Parliament’s website (https://www.europarl.europa.eu/infographic/legislative-procedure/index_en.html)
• The European Supervisory Authorities report on the review of financial product disclosures under SFDR.
  • European Supervisory Authorities (ESA): https://finance.ec.europa.eu/regulation-and-supervision/european-system-financial-supervision_en)
• Expectations for ESG compliance and supply chain due diligence are set to tighten in the EU and Germany.

  • ELEVATE Limited: Supply Chain Due Diligence Legislation Map (https://www.elevatelimited.com/insights/publications/supply-chain-due-diligence-legislation-map/). This interactive map offers a global overview of various due diligence laws, including those in the EU and Germany.

  • Business & Human Rights Resource Centre (https://www.business-humanrights.org/en/). Search their website for analyses and articles specifically related to the German Supply Chain Due Diligence Act and the broader EU directive.

• The asset management industry should prepare for the FCA’s Sustainability Disclosure Requirements in 2024.
  • Financial Conduct Authority (FCA): https://www.fca.org.uk/

Important Resources

• International Sustainability Standards Board (ISSB): https://www.ifrs.org/groups/international-sustainability-standards-board/
• SEC: https://www.sec.gov/
• FTC: https://www.ftc.gov/
• EUR-Lex: https://eur-lex.europa.eu/homepage.html