ESG Newsletter – June 2023

Welcome to the Linklaters ESG Newsletter. This issue covers key developments from May 2023 – in the UK, EU, US, Asia, and globally – on the full range of ESG topics.


  • Due Diligence
  • Greenwashing & Litigation
  • Sustainable Finance
  • Disclosure & Reporting
  • Climate Change & Energy
  • Diversity, Equity & Inclusion
  • USA
  • Asia

Explore the key developments below

Due Diligence

EU: Parliament adopts its negotiating position on CSDDD proposal
On 1 June, the European Parliament agreed its negotiating position on the Commission’s proposal for a Corporate Sustainability Due Diligence Directive (CSDDD or CS3D). The Council reached its own negotiating position on the CSDDD in December 2022. This means the "trilogues" (i.e. official negotiations between the Parliament and the Council) can now begin, with the first trilogue scheduled for 8 June. The parties are hoping to be able to reach a final agreement on the CSDDD by the end of this year (although the timeline could possibly slip until early 2024). We are expecting more heated debate during the trilogues so there will no doubt be further changes to the wording of the CSDDD, in particular on key issues such as the inclusion of financial services and civil liability. For more information, see our blog post.


EU: Council adopts Deforestation Due Diligence Regulation

The Council has formally adopted the Deforestation Due Diligence Regulation (see Council press release). This follows the political agreement reached by the Parliament and Council in December 2022 (see our previous blog post) and the Parliament’s formal adoption on 19 April 2023. The Regulation is aimed at minimising the risk of deforestation and forest degradation associated with products that are imported into or exported from the EU. It requires mandatory due diligence for all operators and traders who place or export the from the EU palm oil, cattle, wood, coffee, cocoa, rubber and soy as well as a number of derived products such as chocolate, furniture, printed paper. The Regulation will now be published in the Official Journal of the EU (OJEU) and come into force 20 days after. We will report on the final Regulation in more detail once it has been published in the OJEU.

Greenwashing & Litigation

EU: ESAs publish progress report on greenwashing in financial sector

On 1 June, the European Supervisory Authorities (ESAs) – namely, the EBA, EIOPA and ESMA - published their progress reports on greenwashing in the financial sector. These reports are the ESAs’ interim responses to a request for input from the European Commission on greenwashing. The request relates to advice on: defining greenwashing and its most relevant types; the risks it poses to financial sector entities, investors and consumers; supervisory measures as well as improvements to the current legislative framework to be considered. The interim reports do not yet cover all of these topics and are rather a stock take of the current situation. However, it is worth nothing that the ESAs have already put forward a common high-level understanding of greenwashing across their respective remits (banking, insurance and pensions and financial markets). The final reports are due in May 2024. For more information, see our blog post.

EU: Next steps on proposal for a Directive empowering consumers for a green transition

On 11 May 2023, the Parliament adopted its negotiating position on the proposed Directive on empowering consumers for the green transition (see Parliament press release). This draft Directive is part of the first Circular Economy Package, which was published by the Commission on 30 March 2022 (see our previous blog post). The proposed Directive is intended to help consumers make more environmentally conscious decisions and encourage companies to offer them more durable and sustainable products. The Parliament’s position includes a prohibition of general environmental claims such as “environmentally friendly”, “natural”, “biodegradable”, “climate neutral” or “eco” unless they accompanied by detailed evidence. It also seeks to ban environmental claims that are based solely on carbon offsetting schemes. Other deceptive practices such as making claims about an entire product if it is true for only one part of it or stating that a product will last a certain amount of time or can be used at a certain level of intensity if this is not true, will also be prohibited.

The Council adopted its negotiating position on 3 May 2023, which means the trilogue negotiations can begin soon. The proposed Directive is closely linked with the Green Claims Directive proposed by the Commission on 22 March 2023 which is intended to supplement it and further specify conditions for making environmental claims (see our previous blog post).

UK: CMA to be given new enforcement powers to combat greenwashing in green claims

The Digital Markets, Competition and Consumer Bill, if adopted in its current form, will give the Competition and Markets Authority (CMA) the power to decide whether consumer law has been broken and impose directions or fines without having to go through the courts. The CMA would be able to fine businesses:

  • up to £300,000, or 10% of a businesses’ annual turnover (whichever is higher), for breaching consumer laws;
  • up to 5% of a business’s annual global turnover, with an additional daily penalty of 5% of daily turnover during non-compliance, for failing to comply with a direction. For more information, see our blog post.
UK: High Court rules derivative action against Shell’s Board cannot proceed

The High Court has ruled that ClientEarth’s proposed derivative action against the Board of Shell plc in relation to its management of climate risk will not be permitted to proceed on the basis that the NGO has failed to establish a prima facie case that Shell’s directors were not acting in the best interests of shareholders. The decision has emphasised that the High Court is reluctant to interfere in relation to directors’ management and commercial decision-making. The Court will generally take the approach that it is for the directors themselves to determine how best to promote the success of the company. This is one of the first climate-related derivative actions against a Board of Directors under the Companies Act 2006, and the first English case targeting corporate directors personally for a company’s energy transition strategy. However, as the decision was reached on the papers with no oral hearing, ClientEarth has asked for an oral hearing to request the High Court to reconsider its decision so the final outcome of this case is not yet known. For more information, see our blog post.

Sustainable Finance

EU: ESAs issue consolidated Q&As on SFDR

The European Securities and Markets Authority (ESMA) has published a consolidated Q&A on the SFDR, which includes the Commission Q&A published on 6 April 2023, the ESAs Q&A from 17 November 2022, the Commission Q&A from 17 May 2022 and the Commission Q&A from 14 July 2021. This consolidated document does not provide any new guidance or interpretation.

EU: Green bonds standard

We have obtained the consolidated text of the political agreement on the European Green Bond Regulation (including annexes), reached on 28 February 2023. The consolidated text confirms the headline information already in the public domain, as well as providing further details. The text may be subject to further change as it goes through legal and linguistic checks and is voted on by the Parliament. According to the current timetable, we can expect adoption to follow in autumn 2023. For more information, see our blog post.

EU: EBA consults on benchmarking of diversity practices under CRD and IFD

The European Banking Authority (EBA) has published a consultation paper on draft guidelines on the benchmarking of diversity practices under the CRD IV Directive 2013/36/EU and the Investment Firms Directive (EU) 2019/2034. The EBA considers that the guidelines are necessary to ensure a harmonised benchmarking of diversity practices, including the composition of the management body, diversity policies and the gender pay gap of institutions and investment firms at the management body-level. The consultation closes on 24 July 2023. The new reporting format is expected to apply for the collection of data in 2025 for the financial year 2024.

EU: EOIPA and ECB discussion paper on climate catastrophe

The European Insurance and Occupational Pensions Authority (EIOPA) and the European Central Bank (ECB) have jointly released a discussion paper on policy options to reduce the climate insurance protection gap. The climate insurance protection gap refers to the uninsured portion of economic losses caused by climate-related natural disasters. The discussion paper, which was published on 24 April 2023, sets out options to address this gap and mitigate catastrophe risks from climate change in the EU. These include enhancing private insurance and deepening catastrophe bond markets, developing possible shared resilience solutions between public and private entities at a national level as well as identifying risk pooling and diversification opportunities that could be explored at a European level. The discussion paper is open for comments until 15 June 2023.

Global: LMA publishes model provisions for sustainability-linked loans

The Loan Market Association (LMA) has released a new set of model provisions for sustainability-linked loans, providing guidance on the use of such loans with LMA loan documentation. The document, which was published on 4 May 2023, seeks to reflect current market practice and provide a drafting framework for sustainability-linked loan transactions. It includes explanatory notes on points for parties to consider when undertaking such transactions. Click here to access the document on the LMA website.

Disclosure & Reporting

UK: Department for Business and Trade seeks views on ways to streamline non-financial reporting

The Department for Business and Trade has published a call for evidence seeking views on the non-financial information UK companies are required to include in their annual reports. It focuses primarily on the requirements in Part 15 of the Companies Act 2006 and equivalent legislation for LLPs, although respondents are invited to comment on other reporting requirements that sit outside the annual report, including gender pay gap and modern slavery reporting. The call for evidence closes on 16 August 2023. The government will develop proposals for public consultation in 2024. For more information, see our client briefing.

UK: FRC proposes update to Corporate Governance Code to strengthen internal controls

The Financial Reporting Council (FRC) has launched a public consultation on revisions to the UK Corporate Governance Code. The most significant proposed changes affect the section of the Code dealing with audit, risk and internal control. They aim to strengthen internal control frameworks and align the Code with the government’s proposals for a new resilience statement and audit and assurance policy. Other proposed amendments aim to address areas of weak reporting identified by the FRC’s annual corporate governance reviews. In particular, the FRC is proposing that companies should focus more on outcomes to demonstrate the impact of their governance practices. The consultation closes on 13 September 2023 and the new Code will apply to accounting periods commencing on or after 1 January 2025. For more information, see our client briefing.

Global: ISSB consults on next priorities and on changes to SASB standards

The International Sustainability Standards Board (ISSB) is seeking views on the relative priority of its future work and is also consulting on a proposed methodology for making changes to the Sustainability Accounting Standards Board (SASB) standards to make sure references in those standards are internationally applicable. For more information, see our blog post

Climate Change & Energy

EU: CBAM, revised ETS and other related legislation published in the OJEU

On 16 May 2023, key legislative acts aimed at reducing carbon emissions by placing a price on carbon were published in the Official Journal of the EU: the Carbon Border Adjustment Mechanism (CBAM) and revised EU Emissions Trading System (ETS). This follows political agreement reached by the European Parliament and Council on 13 December 2022 (see our previous blog post). Legislative acts relating to the Maritime ETS, Aviation ETS and Social Climate Fund were also published in the OJEU on the same day. The Social Climate Fund will provide financial support to Member States for the measures and investments that will benefit households, micro-enterprises and transport users, which are affected by the inclusion of greenhouse gas emissions from buildings and road transport in the EU ETS. All these legislative acts form part of the “Fit for 55 package” aimed at ensuring the EU is able to reduce its greenhouse gas emissions by least 55% below 1990 levels by 2030. For more information on the CBAM, see our client briefing.  

EU: Council adopts negotiating position on Ecodesign Regulation

On 22 May 2023, the Council adopted its negotiating position on the proposed Regulation establishing a framework for setting ecodesign requirements for sustainable products (see Council press release). The Commission proposed the Regulation on 30 March 2022, which is designed to incentivise improved product sustainability, reduce waste and close loopholes in the current patchwork of sector- and product-specific acts to ensure maximum reach and compliance (for more information on the Commission’s proposal, see our previous blog post). The changes introduced by the Council include: (i) a ban on destroying textiles and apparel (with certain exemptions); (ii) exclusion of motor vehicles; (iii) a minimum transition period of 18 months after entry into force of the delegated act setting out ecodesign requirements; and (iv) two years for Member States to adopt the necessary national measures. As soon as the European Parliament has adopted its own negotiating position on the proposed Regulation, trilogue negotiations can then begin.

Global: IIGCC publishes net zero guidance for private equity

The Institutional Investors Group on Climate Change (IIGCC) has published a Net Zero Investment Framework Component for the Private Equity Industry. The IIGCC guidance aims to provide a consistent foundation for asset owners and asset managers to align portfolios with net zero emissions by 2050 or sooner. It focuses on buyout and growth equity investments, including related strategies such as co-investments, fund of funds, and secondaries. The guidance aims to help catalyse climate-related action across the private equity industry and become a private equity equivalent of the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. The IIGCC is the European membership body for investor collaboration on climate change with more than 400 members with over €65 trillion in assets under management.

Diversity, Equity & Inclusion

EU: Pay Transparency Directive published in the OJEU

The EU Pay Transparency Directive was published in the Official Journal of the EU on 17 May 2023. This means the Directive will be in force by 7 June 2023. Member States will have three years to transpose the Directive into national law, so by 7 June 2026. For more information, see our blog post.


Anti-ESG actions continue to gain momentum at the state level

Several states continue to pursue anti-ESG measures. In May 2023, Florida Governor Ron DeSantis signed House Bill 3 into law, which will go into effect on 1 July 2023 and will prohibit state and local governments and financial institutions from considering ESG factors when making decisions related to investing public funds, issuing bonds, and determining who receives government contracts, among other things. Less than a week later, the Ohio State Senate followed suit in passing a bill that will prohibit ESG considerations in the investments of the state’s retirement systems, state higher education endowments, and the $20.3 billion Ohio Bureau of Workers' Compensation.

States have taken various measures to prevent companies from considering ESG in their investments. In May 2023, 23 state attorneys general penned a letter directed at insurers that are members of the Net-Zero Insurance Alliance (NZIA) and Net-Zero Asset Owner Alliance (NZAOA), suggesting that the insurers are advancing an “activist climate agenda” and requesting that they provide information regarding any commitments made to NZIA and NZAO to determine whether actions that arise from these commitments violate federal and state law. Also in May, the Oklahoma State Treasurer announced an initial list of 13 large financial institutions determined to be engaged in boycotts of oil and gas companies. Pursuant to state law passed in 2022, the institutions on this list would be ineligible for state contracts and excluded from doing business with the state. As an example of boycotting laws at play, an international financial services company in Texas paid a settlement of $850,000 when the Texas State Comptroller determined that the company was an “energy boycotter” and therefore ineligible to work with a school district under Texas energy boycotting laws. The school district then had to re-bid the contract at a higher interest rate, causing it financial harm.

ESG litigation round-up

Greenwashing continues to be the subject of prominent lawsuits in the U.S. On 9 May, a putative class action complaint was filed in a Massachusetts State Court claiming that a big-box store chain sold a line of diapers in an unfair and deceptive manner by labelling them as “totally chlorine free” despite the product containing chlorine. The next day, a class action complaint was filed in a U.S. federal district court for the Eastern District of Missouri claiming that a major athletic clothing manufacturer engaged in unfair and deceptive business practices by marketing a “Sustainability Collection” as “made with recycled fibers” which it claims “reduce waste” and its “carbon footprint” despite its products being predominantly made out of virgin synthetic materials. On 15 May , a U.S. federal district judge for the Eastern District of Missouri dismissed a proposed class action claiming that a clothing retailer misled consumers by allegedly representing their recycled clothing line as “more sustainable and environmentally friendly.” The claims were dismissed for lack of personal jurisdiction and for failure to show that a “reasonable consumer” would be misled by the defendant’s claims.

May 2023 also saw an increased number of lawsuits related to the use of per- and polyfluoroalkyl substances (PFAS), which are also known as “forever chemicals”, because of their non-degradable quality and ability to be able to persist for extensive periods of time in the environment. On 8 May, a complaint was filed by a non-profit group in a U.S. federal district court for the Northern District of Georgia against a chemical and textile manufacturer for their discharge of PFAS into the local water pollution control plant, and from there into a major nearby river in violation of the Clean Water Act. The case settled only a day later, with the defendant manufacturer agreeing to pay $5,000 in civil penalties and to permanently eliminate all PFAS substances from its facility by or before 31 December 2023. Also in May 2023, a group of residents in Yakima, Washington filed a class action complaint in a U.S. federal district court for the Eastern District of Washington against various chemical manufacturers alleging they knowingly sold fire-fighting foam products containing PFAS to the U.S. Army for use at a training center. The complaint alleges that the PFAS seeped into the town’s drinking water supply, causing town residents to develop various health issues.

Supreme Court narrows Clean Water Act protections

On 25 May, the Supreme Court of the United States issued a unanimous opinion (9-0) in Sackett v. Environmental Protection Agency, finding that the Clean Water Act (CWA) only extends to wetlands that have a continuous surface connection with “waters of the United States” (WOTUS) (i.e. with a relatively permanent body of water connected to traditional interstate navigable waters). WOTUS defines the geographic reach and authority of the U.S. Army Corps of Engineers and the U.S. Environmental Protection Agency to regulate streams, wetlands, and other water bodies under the CWA.  For a project proponent, the scope of WOTUS is important in determining whether it needs a CWA permit prior to construction or modification. A broad definition of WOTUS leads to broad jurisdictional authority of the agencies under the CWA and the need for issuance of more CWA permits for project construction and modification to comply with the CWA, which requires time and resources. There have been multiple Supreme Court decisions and dueling regulatory definitions since 2006 (i.e. when SCOTUS issued the Rapanos v. United States CWA decision) concerning the proper standard for how to determine whether a wetland or stream is considered a WOTUS. This has resulted in the definition of WOTUS remaining in a state of continuous flux, which has led to confusion and uncertainty. With the Sackett decision, the Supreme Court has attempted to resolve the uncertainty by providing a clear WOTUS standard that substantially restricts the agencies' ability to regulate wetlands and streams unless they have a continuous surface connection with a relatively permanent body of water connected to traditional interstate navigable waters. This decision has interesting implications for cooperative vertical federalism as federal CWA standards represent the minimum permitting requirements states must abide by. The restriction may lead to some states changing permitting requirements to match the lower standard, whereas some states may keep or increase standards to align with previous CWA permitting requirements. Next, federal agencies will likely issue guidance interpreting the Court’s opinion to provide more certainty on how it will be implemented.

California considers Emissions Disclosure Bills

On 30 May, two California bills, the Climate Corporate Data Accountability Act and the Greenhouse Gases: Climate-Related Financial Risk, were approved by the California State Senate. If passed, the Climate Corporate Data Accountability Act would require the state board to adopt regulations requiring certain business entities to publicly disclose their independently verified Scope 1, 2, and 3 greenhouse gas emissions annually. The Greenhouse Gases: Climate-Related Financial Risk would require covered business entities to prepare and make publicly available an annual report disclosing their climate-related financial risks and the measures they have adopted to reduce and adapt to climate-related financial risks. Both bills are now pending in the California State Assembly. If passed, these bills would require more extensive disclosures then the U.S. Securities and Exchange Commission’s currently proposed emissions disclosure rule (see our previous briefing), which would only require Scope 3 emission disclosures if they are “material” or if the registrant has set a GHG emissions target including Scope 3 emissions.


ASIA Impact of EU Corporate Sustainability Reporting Directive on businesses in Asia

The EU’s Corporate Sustainability Reporting Directive (CSRD) was adopted at the end of 2022 and entered into force on 5 January this year. The CSRD aims to strengthen the current EU rules on social and environmental reporting that were introduced in 2014 by the EU Non-Financial Reporting Directive (NFRD). Under the CSRD, in-scope entities will have to report information on a wide range of ESG factors across their value chain, therefore requiring in-scope entities to make extensive sustainability disclosures in their annual reports. These regulatory developments do not only affect EU companies, but also non-EU companies with businesses operating in the EU. In our blog post we consider how the CSRD potentially impacts businesses in Asia.

Hong Kong Monetary Authority consultation on prototype of green classification framework for Hong Kong SAR

On 30 May 2023, the Hong Kong Monetary Authority (HKMA) published a discussion paper seeking market feedback on the “Prototype of a Green Classification Framework for Hong Kong”. The discussion paper outlines the HKMA’s current thinking on a local green classification framework (i.e. a taxonomy) for Hong Kong (the Green Classification Framework). The Green Classification Framework is, in effect, a taxonomy developed by the Green and Sustainable Finance Cross-Agency Steering Group – which is co-chaired by the HKMA. The HKMA also commissioned the Climate Bonds Initiative to support the development of the Green Classification Framework. The aim is for the Green Classification Framework to be adopted in the local market and provide a standardised framework for classifying and labelling financial products and investments based on their environmental sustainability. The Green Classification Framework is also intended as an analytical tool to compare how green activities are defined across the EU and China’s taxonomies. The consultation closes on 30 June 2023. For more information, see our blog post.

Indonesia plans to launch its carbon exchange in the second half of this year

It has been reported in the press (see Reuters coverage) that the Indonesian Financial Services Authority (Otoritas Jasa Keuangan) (OJK) has announced its plans to establish a carbon exchange in the second half of this year. We anticipate that the carbon exchange will be launched by the Indonesia Stock Exchange (IDX) in July 2023 with first trading commencing in September 2023. This follows the enactment by the Indonesian government in January 2023 of the “Law No. 4 of 2023 regarding the Development and Strengthening of the Financial Sector (Law 4/2023)”, which, among other things, sets out provisions for the creation of a carbon exchange. The Law 4/2023 effectively mandates the OJK as the entity responsible for preparing the regulations required to implement carbon trading. Only entities operating within Indonesia will be permitted to trade on the carbon exchange, which will operate under a cap-and-trade system. The carbon exchange is being established to support the increase of renewable energy use as well as facilitate the early retirement of coal-fired power plants. Indonesia has committed to a national target of net zero by 2060, 31.89% reduction in GHG emissions by 2030 (below business-as-usual) and 23% renewable energy in total energy supply by 2025 and 31% by 2050. The latest development follows the announcement in February 2023 by the Ministry of Environment and Forestry of the launch of the first phase of the mandatory national carbon market covering nearly 100 coal-fired power plants owned by the state utility Perusahaan Listrik Negara (PLN) (see our previous newsletter).

Japan: Act on Promotion of a Smooth Transition to a Decarbonized Growth-Oriented Economic Structure comes into force

On 12 May 2023, the “Act on Promotion of a Smooth Transition to a Decarbonized Growth-Oriented Economic Structure” (the GX Act) was enacted and will take effect within three months from the date of its promulgation. This follows the approval by the Japanese Cabinet in February this year of a basic policy aimed at implementing a “Green Transformation” (the GX Policy) (see our previous newsletter). The GX Act provides for: (i) a GX promotion strategy; (ii) GX economy transition bonds; (iii) growth-oriented carbon pricing; and (iv) GX promotion organisation. It also provides that the government will take necessary legislative measures in relation to fossil fuel charges and emissions trading within two years after the GX Act takes effect.

Mainland China: Revised Measures for Energy Conservation Review of Fixed Asset Investment Projects took effect on 1 June 2023

The revised “Measures for Energy Conservation Review of Fixed Asset Investment Projects” (Revised Measures), released by the National Development and Reform Commission of China, took effect on 1 June 2023. The Revised Measures govern the energy review procedures that enterprises seeking to make new fixed asset investment projects in China must complete. The amendments incorporated into the Revised Measures aim to streamline the energy conservation review process, optimise the implementation measures available to the authorities, and strengthen their powers of enforcement. One highlight of the Revised Measures is the introduction of a regional energy conservation review system, which entitles local authorities to conduct a more targeted review in their locality. As such, except for projects that must be reviewed by provincial authorities because they consume an aggregate of 10,000 or more tonnes of coal annually, regional projects subject to the new system can complete the review by a simple notification and statement of their energy conservation commitment. The Revised Measures, among others, also specify the situations where re-review of a project’s energy conservation credentials is required, strengthen the supervision of the projects under review and enhance the legal liabilities that may be imposed on project companies and energy review service providers.

Mainland China publishes Ecological and Environmental Administrative Penalty Measures

On 8 May 2023, the Ministry of Ecology and Environment of China published the “Ecological and Environmental Administrative Penalty Measures” (Penalty Measures), which will come into force and replace the currently effective Environmental Administrative Penalty Measures on 1 July 2023. The Penalty Measures focus on enhancing law enforcement powers, specifying law enforcement procedures, and protecting the legitimate rights and interests of relevant parties. Among others, the Penalty Measures expand the types of penalty, refine requirements on investigation and evidence collection, supplement the conditions and procedures for hearings, and add an information disclosure session which specifies the subject and the content of disclosure, the situations where non-disclosure is permitted, and privacy protections with respect to personal information, national security, and business secrets. Given the enhanced enforcement powers under the Penalty Measures, coupled with ongoing stakeholder scrutiny of businesses’ environmental and ecological obligations, enterprises operating in China should ensure that their operational protocols reflect the increasing compliance risk.

Mainland China: Guangdong publishes draft standard on Carbon Allowance Hypothecation and Pledge

From 17 April 2023 to 17 May 2023, a draft standard on Carbon Allowance Hypothecation and Pledge (Carbon Standard), proposed by the Department of Ecology and Environment of Guangdong and published by Guangdong Administration for Marketing Regulations, was published online for public comment. The Carbon Standard aims to construct a standard system of carbon peak and carbon neutrality, develop green finance, and facilitate the green development of financial institutions and enterprises in Guangdong province. The major highlights of the Carbon Standard include proposing evaluation indicators for carbon allowance hypothecation and pledge and a calculation method of valuation for this hypothecation and pledge. The Carbon Standard, among others, also sets out general qualifications applicable to borrowers and lenders, limitations on the use of the funds drawn under the scheme, and procedures for registration of any hypothecation and pledge given. Firms looking to participate in carbon trading are encouraged to review the Carbon Standard, which could be taken as a reference for their potential rights and obligations in schemes likely to be implemented in Guangdong and other provinces in the near future.

Asian Development Bank launches its climate finance initiative

On 2 May 2023, the Asian Development Bank (ADB) announced the Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP). IF-CAP is a new initiative which could create up to USD15 billion in new loans for climate projects across Asia Pacific. According to the press release, under the IF-CAP, six partner countries (Denmark, Japan, Korea, Sweden, UK, and US) are in discussions with ADB about providing a range of grants for projects along with guarantees for parts of ADB’s sovereign loan portfolios. The reduced risk exposure created by the guarantees will allow ADB to free up capital to accelerate new loans for climate projects. With a model of “USD1 in, USD5 out”, the initial ambition of USD3 billion in guarantees could create up to USD15 billion in new loans for climate projects across Asia Pacific. It is reported that a leveraged guarantee mechanism for climate finance has never before been adopted by a multilateral development bank. Separately, ADB and Korea will jointly establish an ADB-Korea Climate Technology Hub (K-Hub) in Seoul to help provide ADB’s developing member countries with climate technology, experts, service providers, and other stakeholders in the climate tech ecosystem to support developing countries’ efforts to decarbonise their economies.

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