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EU: Taxonomy Regulation – next steps on technical screening criteria for remaining four environmental objectives

With the end of Q1 2023 fast approaching, there is a glimmer of hope for those looking out for the Commission’s Delegated Act covering the technical screening criteria (TSC) for the remaining four environmental objectives under the Taxonomy Regulation: sustainable use and protection of water and marine resources; transition to a circular economy; pollution, prevention and control; and protection and restoration of biodiversity and ecosystem (also known as Taxo 4 or Taxo4). It is now understood that a long-awaited consultation on the draft TSCs could come as early as the end of March/April 2023 (with a push for adoption at the end of June 2023). A number of different scenarios remain under consideration - and there remains some disagreement among member states (particularly regarding the treatment of forestry and agriculture) - and as such a further delay is possible. For more information on the PSF’s recommendations to the Commission on the Taxo 4, see our previous blog post.

Sustainable Finance in Europe: regulatory state of play

AFME (Association for Financial Markets in Europe) and Linklaters have published an updated report on the regulatory state of play of the sustainable finance market in Europe, in light of rapid development in the regulatory framework and the very positive feedback received on last year’s version of the report. The new report reviews the latest developments and their impact on banks and capital markets, providing a practical guide to a wide range of initiatives in Europe.

EU: ELTIF 2.0 published in the Official Journal of the EU

On 20 March 2023, the revised ELTIF Regulation (also known as ELTIF 2.0) was published in the Official Journal of the European Union. It enters into force on 9 April 2023 and applies from 10 January 2024. European Long-Term Investment Funds (ELTIFs) are fund vehicles that can invest in assets such as energy and infrastructure, transport, public buildings, and can easily be distributed cross-border including to European retail investors. For more information, see the Linklaters ELTIFs materials.

EU: ESMA publishes final report on MiFID II guidelines on product governance

On 27 March 2023, the European Securities and Markets Authority (ESMA) published its final report on guidelines on product governance, which includes ESMA’s response to feedback on ESMA’s 2022 consultation paper (Annex IV). ESMA has retained the flexible approach from the consultation paper, allowing firms to specify sustainability-related objectives by reference to any of the buckets relevant to “sustainability preferences” or to whether the product is focused on environmental, social and/or governance criteria. ESMA has only made minimal changes in response to feedback. Not wanting to be too prescriptive in respect of sustainability at this early stage, ESMA has indicated that further guidance on certain concerns raised may follow through Q&A and other guidance as the new product governance requirements bed down. Notably, ESMA has rejected comments requesting changes to reflect the current lack of relevant ESG data, taking the view that the final guidelines allow firms sufficient flexibility, and that ESG data is, in any event, developing and improving already. More broadly, the final report contains helpful comments on how the principle of proportionality applies to different aspects of the product governance rules, including when applying a clustering approach for complex products. For more details, see our publication.

EU: Commission requests climate risk scenario analysis from the ESAs

On 8 March 2023, the European Commission asked the European Supervisory Authorities (ESAs) (i.e. ESMA, EIOPA and the EBA) to conduct, in cooperation with the European Central Bank (ECB) and the European Systemic Risk Board (ESRB), an EU-wide climate risk scenario analysis exercise, covering all relevant sectors of the financial system. The analysis aims to assess the financial system’s resilience to stress in the transition to the EU’s 2030 goals for reducing greenhouse gas emissions. The Commission has set a deadline for the authorities to provide the results of the exercise by the first quarter of 2025. The mandate from the Commission can be found here.

UK: What is on the FCA's ESG regulatory horizon?

The Financial Conduct Authority (FCA) has updated its Regulatory Initiatives Grid, setting out the UK’s regulatory pipeline for the next 24 months. The Grid was delayed from November 2022 to allow the regulators to consider the implications of the Edinburgh Reforms on the regulatory pipeline. Key updates in relation to ESG include the publication of the UK’s updated Green Finance Strategy (which was published on 30 March and included an update on the government's approach to the UK Green Taxonomy), more from the pensions regulator on climate-related requirements for pensions, an FCA policy statement on the sustainability disclosure requirements (SDR) and investment product labels for asset managers, consultation on ESG data and ratings, proposals to support diversity in the financial sector, and consultation on implementing the International Sustainability Standards Board (ISSB) disclosure standards into the FCA’s listing or transparency rules. For more information, see our blog post.

UK: Government publishes new Green Finance Strategy and consultation on regulation of ESG ratings providers

On 30 March 2023, the government published a new Green Finance Strategy. This is an update to the UK’s 2019 Green Finance Strategy and intends to place the UK at the forefront of the growing global market for green finance. The government sets out the measures it plans to take to achieve its green finance objectives. Many are not new announcements – but do provide a welcome update on the government’s plans. The new Strategy also includes a timetable of the government’s commitments for the coming year. See our client briefing for more information.

The government has also published a consultation setting out proposals on the scope for a potential regulatory regime for ESG ratings providers. For more information, see our client briefing.

Global: New ISO standards addressing carbon neutrality and sustainable finance

The International Organization for Standardization (ISO) is currently in the process of developing an international standard - ISO 14068 (the Carbon Neutrality IS) - which will provide a standardised approach towards carbon neutrality and communicating associated claims, in addition to an international standard on sustainable finance, in collaboration with the British Standards Institution. For more information, see our blog post.

UK: FCA publishes portfolio letter setting out their expectations on ESG benchmarks

The Financial Conduct Authority (FCA) has published a further letter to benchmark administrators setting out their expectations in the context of ESG benchmarks. In September 2022, the FCA sent a portfolio letter to benchmark administrators outlining its supervisory priorities and view of the risks of the sector – one of the FCA’s observations was that the subjective nature of ESG factors and how ESG data and ratings are incorporated into benchmark methodologies could increase the risk of poor disclosures. It also highlighted the FCA’s concern that the quality of benchmarks may not align with the expectations of users and end investors. Since publishing that portfolio letter, the FCA has completed its preliminary review on ESG benchmarks and in its March 2023 letter, the FCA has found that the overall quality of ESG-related disclosures has been poor and identified a number of issues. The FCA has warned that where firms fail to consider the FCA’s feedback, it commits to deploying its formal supervisory tools and, where appropriate, will consider enforcement action. For more information, see our blog post.

UK: FCA publishes Primary Market Bulletin 44 on diversity reporting

The Financial Conduct Authority (FCA) has published Primary Market Bulletin 44. One of the topics covered is the Listing Rules requirements on diversity reporting (which apply for financial years beginning on or after 1 April 2022). Listing Rules introduced last year require premium and standard-listed companies to state in their annual reports for financial years beginning on or after 1 April 2022 whether they have achieved specified diversity targets and to publish numerical data on the make-up of their board and senior executive teams. Where targets have not been met, companies should provide clear and meaningful reasons for this. The FCA has set out six steps issuers should take in preparation for this reporting and its enforcement approach. For more information, see our blog post.

UK: Review of climate-related disclosures by occupational pension schemes

The Pensions Regulator has published a review of the Task Force on Climate-related Financial Disclosures (TCFD) reports published by the first tranche of occupational pension schemes subject to these requirements. The review includes details of the areas where reports could be improved in the future. The Pensions Regulator says it expects trustees to carefully consider its findings when preparing future reports and has warned that it will consider issuing penalty notices where reports fail to meet the legislative requirements. Our client alert considers what trustees can learn from the Regulator’s review of TCFD reports.

European Commission publishes proposal for a Green Claims Directive

On 22 March 2023, the European Commission published a proposal for a Directive on the substantiation and communication of environmental claims. The proposal will now need to be debated by the European Parliament and Council before it can be adopted in final form so the current draft wording will likely change. The purpose of the Draft Green Claims Directive is to help combat greenwashing by setting minimum criteria that companies making claims to consumers in the EU about the environmental benefits and performance of their products or services need to meet, as well as minimum criteria for environmental labels. It’s about how green claims are substantiated and communicated, as well as controlling the proliferation of environmental labels. According to the Commission, there are more than 200 environmental labels currently in use and more than 50% of environmental claims are vague, misleading or unfounded and 40% are unsubstantiated - which is leading to consumer confusion and mistrust, as well as being unfair to those companies that are making genuine efforts to improve their environmental performance. The ultimate aim of the proposal is to ensure consumers are provided with environmental information that is reliable, comparable and verifiable. For more information, see our blog post.

EU: Commission publishes proposal for a “Right to Repair” Directive

On 22 March 2023, the Commission published its proposal for the Directive on common rules promoting the repair of goods. The premature disposal of repairable goods purchased by consumers leads to an increase in waste and generates greenhouse gas emissions and more demand for valuable resources in the production of new goods. The Directive aims to increase the repair and reuse of goods within and beyond the legal guarantee. Measures suggested by the Commission include: (i) the obligation of the seller, within the legal guarantee, to repair the goods where the costs for replacement are equal or greater than the costs for repair as well as beyond the legal guarantee; (ii) the right of consumers to request the repair of products that are technically repairable under EU law unless the repair is impossible; (iii) a producers' obligation to inform consumers about the products that they are obliged to repair; (iv) the right of consumers to request from the repairer a European Repair Information Form, containing conditions of the repair which should not be altered during 30 days; and (v) the creation of online platforms by Member States that allow consumers to find repairers. The proposal will now need to be debated by the European Parliament and Council before it can be adopted in final form so the current draft wording will likely change. see our blog post. 

EU: Commission publishes key parts of the Green Deal Industrial Plan

In March 2023, the Commission unveiled the following key components of the Green Deal Industrial Plan:

• On 9 March 2023, the Commission amended the General Block Exemption Regulation (GBER) which allows certain categories of state aid to be granted with only subsequent notification to the Commission. This gives Member States more flexibility to speed up investment and procure (additional) financing for clean tech production;

• On 9 March 2023, the Commission amended the General Block Exemption Regulation (GBER) which allows certain categories of state aid to be granted with only subsequent notification to the Commission. This gives Member States more flexibility to speed up investment and procure (additional) financing for clean tech production;

• The Commission’s proposals to reform the EU power market, published on 14 March 2023, include amendments to the Electricity Regulation, the Electricity Directive, and the REMIT Regulation. The reform aims to stabilise energy prices by providing more predictable long-term price signals. It also seeks to empower consumers and suppliers to participate more actively in the power and balancing markets, among other things through demand-response and storage solutions;

• On 16 March 2023, the Commission published proposals for a Net-Zero Industry Act (NZIA) and a Critical Raw Materials Act (CRMA). The proposals set out goals for the development of the green industry in the EU with the NZIA requiring that at least 40% of net-zero technologies be made in the EU by 2030. The CRMA sets goals for the extraction, processing, and recycling of raw materials necessary for the use and development of green technologies within the EU. It distinguishes between 16 “strategic raw materials” which are said to be crucial for the green transition and 34 “critical raw materials” (which receive a bit less support).

All these proposals (together with other parts of the Green Deal Industrial Plan) are considered in part to be a response to the US’ Inflation Reduction Act (IRA) which invests heavily in US domestic green technology. They form part of a concerted effort by the EU to upscale and speed up development of green technologies needed to meet the EU’s net-zero goals. The NZIA, CRMA and electricity market reform are now open to stakeholder feedback until mid-May 2023. For more details, see our blog post.

EU: Hydrogen Bank

On 16 March 2023, the Commission published its communication on the European Hydrogen Bank, which will introduce two new financing mechanisms to support the production of renewable hydrogen in the EU and internationally. One of the aims of the European Hydrogen Bank is to address the cost gap between renewable hydrogen and the fossil fuels it can replace. Additionally, the European Hydrogen Bank will enhance demand visibility by linking with off-takers, parallel Member State initiatives, and existing data centres. Finally, the European Hydrogen Bank will coordinate and facilitate blending with the existing financial instruments to support hydrogen projects. The Commission announced that domestic auctions to support the production of renewable hydrogen inside the EU are to be launched in autumn 2023. The auctions are to take place under the Innovation Fund with an indicative budget of EUR 800 million and might be opened to additional funding by the Member States. All other elements of the European Hydrogen Bank (including not yet defined import auctions) shall become operational by the end of 2023.

UK: Green Day announcements

On 30 March 2023, the government published a raft of documents and made a number of key announcements on green finance, net zero and energy security, including the Green Finance Strategy, the Powering Up Britain policy paper, the Net Zero Growth Plan, the Energy Security Plan and a consultation on options for dealing with carbon leakage including proposals for a UK carbon border adjustment mechanism (CBAM).For more information, see our blog posts here and here.

UK: Bank of England report on climate-related risks and regulatory capital frameworks

The Bank of England has published its latest report on climate-related risks and the regulatory capital frameworks for banks and insurers. The report summarises the Bank’s current thinking and the conclusions from work to date, including in the areas highlighted as needing further analysis in the Climate Change Adaptation Report (CCAR) of October 2021 published by the Prudential Regulation Authority. The report touches on capability gaps identified in the CCAR, as well as any gaps in the current prudential regulatory regime in respect of estimating and addressing climate risks. For more information, see our blog post.

UK: Government publishes response to review of electricity market arrangements consultation

The Department for Energy Security and Net Zero (DESNZ) has published its response to the July 2022 review of electricity market arrangements (REMA) consultation, which is the Government’s major review of the design of the UK’s non-retail electricity markets. REMA is intended to ensure that the power markets are fit for purpose for driving decarbonisation and shoring up security of energy supply in a cost-effective way. The Government’s response to feedback on REMA shows that this is very much a work in progress. There are significant challenges ahead, not least determining whether the sum of incremental improvements or a complete transformation of the electricity market is the better approach. The Government has ruled out a small number of options that were under consideration in its original consultation but most other options remain open for further consideration. A second consultation is expected during 2023. For more information, see our blog post.

UK: Spring Budget 2023 – energy highlights

The UK’s ongoing pursuit of net zero and a secure supply of clean energy are key themes of the Chancellor’s 2023 Spring Budget. The 2023 Spring Budget is a progression of the 2022 Autumn Statement, outlining the Government’s continued efforts to shield the UK from forecasted downturns, pursue inflation reduction measures, provide ongoing energy price relief and support critical long-term energy investment in homegrown green technologies. From an energy perspective, the Chancellor’s key announcements included the following areas: (i) carbon capture, utilisation and storage; (ii) nuclear power; (iii) extension of the Climate Change Agreement scheme; (iv) the Energy Price Guarantee; (v) the Energy Bills Discount Scheme; and (vi) capital allowances. From an energy perspective, the Chancellor’s key announcements included the following areas: (i) carbon capture, utilisation and storage; (ii) nuclear power; (iii) extension of the Climate Change Agreement scheme; (iv) the Energy Price Guarantee; (v) the Energy Bills Discount Scheme; and (vi) capital allowances. For more information, see our blog post.

Global: New UN “High Seas Treaty”

On 4 March 2023, a historic agreement was reached by the UN on the text of a new treaty to protect a third of international waters by 2030. The agreement reached by delegates of the Intergovernmental Conference on Marine Biodiversity of Areas Beyond National Jurisdiction (BBNJ) is the culmination of UN-facilitated talks that began in 2004. The “Draft agreement under the United Nations Convention on the Law of the Sea on the conservation and sustainable use of marine biological diversity of areas beyond national jurisdiction” (the BBNJ Treaty) creates a legal framework to put more money into marine conservation and covers access to and use of marine genetic resources, including a requirement to conduct environmental impact assessments on planned activities that may lead to substantial pollution or harmful changes to the marine environment. It also includes mechanisms for capacity-building and the transfer of marine technologies from developed to developing states. The BBNJ Treaty also creates a new ocean-related conference of the parties. The BBNJ Treaty needs to be ratified by individual countries before it is binding.

Global: IPCC publishes final instalment of its climate change assessment

On 20 March 2023, the Intergovernmental Panel on Climate Change (IPCC) published their Sixth Assessment Report (AR6) (the IPCC Report). The final part of the IPCC’s eight-year scientific assessment into the climate crisis undertaken with hundreds of scientists, and signed off by governments worldwide, provides a summary of the devastating consequences of rising greenhouse gas (GHG) emissions around the world and concludes that the average global temperature is “more likely than not” to reach the 1.5C rise in the near-term in what is described as a “rapidly closing window” to take action. The report also finds that a lack of political commitment is a key barrier to progress. The IPCC Report said that the pace and scale of what has been done so far, and current plans, were insufficient to tackle climate change, having found that the risks of warming were greater than previously thought. The IPCC Report, however, offers hope, highlighting pathways to avoid these intensifying risks. The IPCC Report said that increasing finance to climate investments was important to achieve global climate goals and that governments, through public funding and clear signals to investors, were key in reducing barriers. It also said investors, central banks and financial regulators must play their part. In response to the IPCC’s latest findings, UN Secretary General Antonio Guterres said he was launching an “all-hands-on-deck acceleration agenda” which “starts with parties immediately hitting the fast-forward button on their net zero deadlines to get to global net zero by 2050”. In advance of COP28 in November, he has asked leaders of the G20 to aim for net zero “as close as possible” to 2040 while emerging nations should set 2050 targets.

ESG Disputes Bulletin

In our spring edition of the ESG Disputes Bulletin, we cover some of the key developments in contentious ESG matters since our December 2022 edition. See our ESG Disputes Bulletin - March 2023 edition.

UK: Modern slavery in supply chains may be investigated under anti-money laundering provisions

When the UK’s Modern Slavery Act came into force in 2015, it was heralded as one of the first pieces of legislation in the world to specifically tackle modern slavery. Today, the UK’s regulatory regime is at risk of falling behind as other jurisdictions contemplate ambitious new measures to enhance corporate accountability. We continue to await the Modern Slavery Bill promised in the Queen’s Speech last year and the post of anti-slavery commissioner, mandated by the Modern Slavery Act 2015, has been vacant for 10 months and counting. However, in the meantime, a High Court judgment has turned attention to other legislative mechanisms UK enforcement agencies might use to hold businesses to account for criminal activity in their supply chains, namely the anti-money laundering provisions of the Proceeds of Crime Act. For more information, see our blog post.

International Women’s Day: Advancing gender equality through a regulatory lens

International Women’s Day on 8 March 2023 was a time to celebrate progress towards gender equality and to renew our commitment to achieving it. One area where significant strides have been made in recent years is in the realm of women’s rights legislation. Policymakers across the globe have taken steps to advance gender equality and ensure women have equal access to opportunities and protections under the law. See our newsletter which highlights some of the most important regulatory developments of the past year in Europe and the UK, from increased workplace protections to measures aimed at addressing the gender pay gap.

UK: Parker Review on ethnic diversity of UK boards

The latest Parker Review was released on 13 March 2023. The annual Review was set up by the government in 2015 to report on ethnic diversity of the boards of the UK’s biggest companies. It found that 96 FTSE 100 companies have at least one director, and 49 have more than one director, from an ethnic minority background. However, only two-thirds of FTSE 250 companies who provided data had met the voluntary target of one ethnic minority director. This year’s report also sets new objectives for companies and aims to bring the largest private companies in line with targets for FTSE 350 companies. For more information, see our blog post.

UK: Results of the four-day week pilot scheme

Between June and December 2022, 70 companies in the UK trialled a new way of working: a four-day week. Employees had their working time reduced to 32 hours, with no loss in pay. The pilot scheme run by 4 Day Week Global was premised on the idea that the standard 9-5, five-day working week is outdated, and that it is possible to achieve greater, or equivalent, productivity in shorter working hours. The pilot scheme was monitored by academics from the universities of Oxford and Cambridge and Boston College. They published their findings in February 2023, which showed an overwhelmingly positive outcome. The next stage in 4 Day Week Global’s campaign is to present the findings of the pilot scheme to MPs. This is likely to feed into the debate on the Working Time Regulations (Amendment) Bill, which is currently making its way through Parliament. For more information, For more information, see our blog post.

An update on greenwashing claims

Greenwashing litigation continues to gain momentum in the U.S., with a focus on false advertising in the product manufacturing space. In March 2023, a lawsuit was filed in the federal district court for the Western District of New York claiming that a major laundry detergent manufacturer engaged in greenwashing by misleading consumers through its product packaging. The complaint alleges that the manufacturer misrepresented its detergent by “making use of nature-evoking elements to artificially enhance its ecological image” despite the product containing high levels of toxic chemicals. Also in March 2023, an environmental advocacy group filed a brief with the D.C. Court of Appeals, challenging the lower court’s dismissal of its advertising claims against a major beverage retailer.

On 28 March 2023, the U.S. Securities and Exchange Commission (SEC) announced a settlement with a publicly traded Brazilian mining company, one of the largest iron ore producers in the world, in which the company agreed to pay $55.9 million to resolve charges stemming from the company’s allegedly false and misleading disclosures about the safety of one of its dams prior to the January 2019 collapse of the dam. The SEC’s complaint alleged the company’s public sustainability reports and other public filings fraudulently assured investors that all of its dams were certified as stable, despite knowing that the dam that eventually collapsed did not meet internationally-recognized standards for dam safety. The SEC’s Division of Enforcement stated the action against the company “illustrates the interplay between the company’s sustainability reports and its obligations under the federal securities laws” and “demonstrate[s] that public companies can and should be held accountable for material misrepresentations in their ESG-related disclosures, just as they would for any other material misrepresentations.”

Pro-ESG opposition to legislature and government decisions

The battle over whether ESG factors may be considered in certain retirement savings and other investments continued. On 23 March 2023, Republicans in the U.S. House of Representatives failed to override President Biden’s veto of a Republican-sponsored bill to roll back a U.S. Department of Labor’s (DOL) 2022 rule that allows investment plan fiduciaries to consider ESG factors when making investment decisions and to effectively re-instate a Trump-era policy banning the practice. This followed on the heels of a letter sent by attorneys general from 20 states and Washington, D.C to the relevant congressional committees requesting that Congress reject the bill, which they describe as part of a broader anti-ESG movement intended to deny climate change and its impacts on corporate operations and companies’ profit margins. Also in March, a federal district judge for the Northern District of Texas refused to transfer a lawsuit by Republican states seeking an injunction against the rule, rejecting the Biden administration’s claims that plaintiffs were attempting to manipulate the process by “judge shopping.”

Meanwhile, private plaintiffs continue to bring lawsuits against state and federal government agencies for policy impacts on the environment. In March 2023, various environmental groups filed a lawsuit in the federal district court for the District of Columbia to prevent the Bureau of Ocean Energy Management (BOEM) from offering drilling rights on 73 million acres along the Gulf of Mexico. Plaintiffs argued that BOEM violated the National Environmental Policy Act by failing to consider the environmental impacts of the sale, as well as more environmentally friendly alternatives.

Singapore: MAS revised Code on Collective Investment Schemes

On 9 March 2023, the Monetary Authority of Singapore (MAS) released the revised Code on Collective Investment Schemes (the Code), to include best practices for schemes which intend to be offered under the ASEAN Collective Investment Scheme (CIS) Framework as an “ASEAN Sustainable and Responsible Fund”. Specifically, the amendments to Chapter 10 of the Code (which apply to schemes offered under the ASEAN CIS Framework) include a requirement for (i) schemes constituted in Singapore that intend to be offered in other ASEAN jurisdictions, and (ii) schemes constituted outside Singapore which intend to be offered in Singapore, under the ASEAN CIS Framework as an ASEAN Sustainable and Responsible Fund to comply with the “ASEAN Sustainable and Responsible Funds Standards” (ASEAN SRFS). This requirement is in addition to the other best practices set out at Chapter 10 of the Code, which remain unchanged. The ASEAN SRFS set out minimum disclosure and reporting requirements for schemes that seek to qualify under the ASEAN SRFS, considering the rise of schemes with an ESG investment focus and the need for comparable, uniform and transparent disclosure of information to mitigate the risk of greenwashing. The ASEAN SRFS aim to assist investors in making more informed decisions while guiding the scheme or scheme operators (as the case may be) on the disclosure of information.

Japan approves a basic policy aimed at implementing a Green Transformation

The Japanese Cabinet approved a basic policy aimed at implementing a “Green Transformation” (the GX Policy). The GX Policy sets out the following two key initiatives to secure a stable energy supply and economic growth for Japan: (i) promote decarbonisation (including a shift to low carbon energy sources such as renewable energy and nuclear power), as well as promote energy efficiency and conservation; and (ii) implement the “Growth-Oriented Carbon Pricing Framework” (including upfront investment support using GX economic transition bonds, providing incentives for companies to work on GX, and using new financial instruments). The relevant legislation to implement the GX Policy is planned to be introduced in the current session of the Parliament.

Japan sets timeline for domestic implementation of ISSB standards

Japan sets timeline for domestic implementation of ISSB standards It has been reported that Japan will issue draft sustainability disclosure standards that build on the global baseline of sustainability-related disclosures established by the International Sustainability Standards Board (ISSB). The Sustainability Standards Board of Japan (SSBJ) and the ISSB representatives in Tokyo outlined plans to produce exposure drafts for Japanese sustainability disclosure standards by 31 March 2024, with a view to finalising the standards by 31 March 2025. The SSBJ will discuss at a later date as to when the new standards will become mandatory.

Japan establishes mandatory sustainability disclosures in the corporate disclosure rules

Amendments to the corporate disclosure rules – namely to the Cabinet Office Order on Disclosure of Corporate Affairs (Ministry of Finance Order No. 5 of 1973, as amended) (the Corporate Disclosure Order) – became effective on 31 January 2023, after public consultation initiated by Japan Financial Services Agency (the JFSA) (see our blog post). By virtue of the amendments, Japanese public companies are required to disclose sustainability-related information in their securities registration statements (yuuka shouken todokede sho) and annual securities reports (yuuka shouken houkoku sho) for the fiscal years ending on and after 31 March 2023. It covers the mandatory disclosure of the company’s attitude towards sustainability and related initiatives, information on human capital and diversity, including the company’s policies on human resource training, etc. The Guideline for the Disclosure of Corporate Affairs has also been amended accordingly and provides for detailed notes on the disclosure. For the amended corporate disclosure rules and JFSA’s responses to public comments see here.

China issues guiding opinions on accelerating the transformation and upgrade of products in major fields

On 20 February 2023, nine mainland Chinese ministries jointly published the “Guiding Opinions on Overall Planning for Energy Conservation, Carbon Reduction and Recycling Through Accelerating the Upgrade and Transformation of Products and Equipment in Major Fields” (the Guiding Opinions). The Guiding Opinions propose to increase the market share of energy-saving products in major fields by 2025 through comprehensive product upgrading, transformation, and recycling, and to benchmark Chinese products against advanced international standards on energy efficiency and carbon emissions in major fields by 2030. The first batch of products covered by the Guiding Opinions include boilers, power generators, power transformers, refrigeration equipment, lighting equipment, and household appliances, each of which the nine ministries have also published detailed product renovation and recycling implementation guidelines.

Hong Kong SAR: 2023-2024 Budget – Highlights

GreenTech was a key theme in the Hong Kong SAR’s 2023-2024 budgetoutlining the HKSAR Government’s vision to develop Hong Kong as a leading global green technology and financing hub. From a green and sustainable finance perspective, the key announcements in the budget included the issuance of no less than HKD 15 billion of retail green bonds in the next financial year and the expansion of the scope of the Government Green Bond Programme (GGBP) to cover sustainable finance projects. The budget speech also covered the recent issuance of the HK$800 million tokenised green bond - the first tokenised green bond issued by the HKSAR Government (see our press release). The HKSAR Government also launched five initiatives to foster innovation and facilitate fundraising for projects with environmental benefits. These initiatives include building a green-tech “ecosystem”; helping green projects obtain capital “more conveniently and flexibly” through innovative financing arrangements; facilitating the training of talent and cooperation with overseas and regional partners; making it easier for new ventures to obtain independent certification for their green credentials; and aligning with international certification standards. The Government will set up a “Green Technology and Finance Development Committee” to formulate an action plan to promote the development of Hong Kong into an international green technology and finance centre.

ASEAN Taxonomy for Sustainable Finance Version 2 is released

On 27 March 2023, the ASEAN Taxonomy Board (ATB), representing ASEAN finance sectoral bodies, published the ASEAN Taxonomy for Sustainable Finance Version 2(ASEAN Taxonomy Version 2). This follows the release of the ASEAN Taxonomy Version 1 in November 2021. The ASEAN Taxonomy is science-based, while being inclusive to cater to the different development stages of Association of Southeast Asian Nations (ASEAN) Member States (AMS). The ASEAN Taxonomy’s multi-tiered approach allows for different levels of adoption depending on individual AMS’ readiness. The principles-based Foundation Framework has been expanded in ASEAN Taxonomy Version 2 by providing guiding questions, decision trees and use cases that address all environmental objectives (EOs) and essential criteria (EC). ASEAN Taxonomy Version 2 also provides the methodology that will be applied in setting the technical screening criteria (TSC) tiers in the Plus Standard and contains the TSC for all four EOs for the Energy Sector, as well as the Carbon Capture, Utilisation and Storage (CCUS) enabling sector. The approach to setting the TSC addresses both the principles of credibility and inclusiveness. The “Green” tier is benchmarked to the 1.5C Paris Agreement target and the “Amber” tiers promote inclusivity.

Regional ESG Legal Outlooks 2023 – Access our materials

EU energy agenda in 2023 – indicative timeline – Access our materials

UK Fintech Legal Outlook 2023 series #7 - ESG in fintech - a problem and a solution – Access the recording

UK corporate governance update: recent developments and what’s coming up – Access the recording

Empowering women: Navigating the legal changes and practical implications of China’s amended Women's Protection Law – Access the recording