Skip to main content

Clifford Chance

Clifford Chance

ESG

Talking Tech

Sustainability: Recent ESG Developments

December 2021

23 December 2021

Environmental, Social and Governance ("ESG") factors have fast risen to the top of the board agenda across all sectors, with increasing awareness that a failure to address these matters can be detrimental both financially and reputationally.  Investor pressure, internal governance and the proliferation of regulatory requirements and voluntary standards across the globe makes this a complex area to manage.

This newsletter is intended to assist banks, financial investors and corporates in keeping up to date with ESG developments.

This regular newsletter is a digest of key developments on Sustainability and ESG from around the Clifford Chance network, including:

  • Legal and Regulatory Requirements 
  • Official Publications 
  • Industry Guidance, Voluntary Codes and Publications 
  • COP26 
  • Advocacy Group Publications 
  • Rating Agency, Index Provider and Data Services 
  • Clifford Chance Resources

The Section on Legal & Regulatory requirments is published below

Read whole issue of Sustainability: Recent ESG Developments - December 2021

Legal and regulatory requirments

European Union

  • (25 November 2021) The European Securities and Markets Authority published a letter from the European Commission to the European Parliament and Council on the status of the draft regulatory technical standards (RTS) under the Sustainable Finance Disclosure Regulation (SFDR). The Commission informs the European Parliament and Council that it has been unable to adopt the draft RTS, which are to be bundled into a single delegated act, within the three-month period due to their length and technical detail, and that the date of application of the RTS will be further deferred from 1 July 2022 to 1 January 2023.
  • (22 November 2021) The Council of the European Union published its overview on the progress of the 'Fit for 55' package revealing that good progress at a technical level had been achieved. The package of legislative proposals aims to align the EU’s climate and energy policy framework with its new economy-wide climate target for 2030 of reducing net greenhouse gas emissions by at least 55% and to put it on track to reach its objective of becoming climate neutral by 2050.
  • (12 November 2021) The European Commission published a consultation paper entitled 'Strengthening of the quality of corporate reporting and its enforcement' seeking views on the quality of EU corporate reporting by listed companies and public interest entities and its enforcement, to help it to assess the quality of reporting and compare possible remedies, which are likely to include a proposal for a directive amending the Transparency Directive, Accounting Directive, Statutory Audit Directive and Audit Regulation. In the context of this consultation, corporate reporting comprises the financial statements of companies, their management report that includes the non-financial and corporate governance statements and country-by-country reporting. It would also include sustainability information pursuant to the proposed Corporate Sustainability Reporting Directive. Responses must be received by 4 February 2022. The Commission intends to prepare an impact assessment in 2022. 

Italy

  • (26 October 2021) The Italian Senate Committee on Employment and Social Security Matters passed the Equal Pay Bill, legge 05/11/2021 n 162, (in Italian) which will broaden gender equality reporting obligations and introduces a 'Gender Certification' for companies with 50+ employees with effect from 1 January 2022. The minimum parameters for attaining gender equality certification will be established by Prime Ministerial Decrees and will address remuneration paid, career progression opportunities and work/life balance. The same law will also widen the scope of application of gender quotas within boards of directors. 

Japan

  • (26 October 2021) The Japanese Financial Services Agency announced the publication of its Social Bond Guidelines. The guidelines are intended to promote the wider adoption of social bonds (i.e. bonds that limit the use of proceeds to social projects that contribute to solving social issues) by the private sector in Japan by ensuring the credibility of the social benefits of social bonds while reducing the cost to and administrative burden on issuers. 

The Netherlands

  • The Government of Netherlands published a law (in Dutch) introducing a diversity quota for new appointments to the supervisory boards of Dutch listed companies with effect from 1 January 2022. This law also requires 'large companies' to set ambitious and appropriate goals to promote gender diversity in the management board, supervisory board, categories of senior management that are to be determined by the company itself, and related reporting obligations. See our briefing of February 2021 (when the bill was adopted by the Dutch House of Representatives) for further detail. | Press release (in Dutch) | Press release (in English)

Spain

  • (2 November 2021) The Government of Spain launched a consultation (in Spanish) on the draft Royal Decree in relation to the development of article 32 of Law 7/2021 (in Spanish) on climate change and energy transition. The consultation aimed to specify the content of the annual reports that companies have to publish assessing their impact and risks associated to climate change and providing measures to mitigate those risks. The consultation ended on 15 November 2021. 

United Kingdom

  • (9 November 2021) HM Treasury published a further consultation setting out proposals for reform as part of its Financial Services Future Regulatory Framework Review aimed at developing the UK's long-term regulatory approach to financial services post-Brexit. The consultation sets out the Government's response to the feedback received on its October 2020 Phase II consultation and makes a series of proposals, including new secondary objectives on growth and international competitiveness for the Prudential Regulation Authority and Financial Conduct Authority, and amending the regulatory principle for sustainable growth to reference climate change and a net zero economy.
  • (3 November 2021) The Financial Conduct Authority (FCA) launched a discussion paper on proposals intended to make it easier for investors to identify and understand the environmental, social and governance (ESG) characteristics of investment products. In particular, the FCA is seeking views on new sustainability disclosure requirements (SDR) for asset managers and FCA-regulated asset owners, supported by a new classification and labelling system for sustainable investment products. Responses are due by 7 January 2022

United States of America

  • (15 November 2021) Judge Andrews of the United States District Court for the District of Delaware granted Qualcomm's motion to dismiss a shareholder lawsuit against the board of directors. The shareholders alleged that the board of directors issued misleading statements in their proxy statements by stating that they would increase their board diversity, but then failing to put forward diverse candidates onto the board of directors. According to the ruling, the allegations in the complaint failed to identify misleading statements, as the statements about the board's goals were 'inactionable puffery', though the judge allowed shareholders to amend their complaint. 
  • (15 November 2021) President Biden signed into law the Bipartisan Infrastructure Law (Infrastructure Investment and Jobs Act). The Act seeks to modernize the U.S. infrastructure landscape with an estimated allocation of $1.2 trillion in total funding over ten years and it focuses on five key areas, such as improving and rebuilding roads, bridges, public transit, rail, ports, and airports, ensuring safe, lead-free drinking water for everyone, supporting climate friendly car and bus transport, transitioning to clean energy, and providing access to high-speed internet.
  • (3 November 2021) On 3 November 2021 and 17 November 2021, the Securities and Exchange Commission issued two regulatory actions that demonstrate its commitment to advancing the Commission's ESG agenda. On 3 November, the Division of Corporation Finance issued a bulletin instructing the staff to focus on 'broader societal impact' when reviewing companies' no-action requests thereby making it more difficult to exclude shareholder proposals on topics like ESG. On 17 November, the Agency approved new rules requiring the use of a 'universal proxy card' by management and shareholders soliciting proxy votes for candidates in contested director elections. By issuing such rules, the Agency hopes to ensure that shareholders voting by proxy can elect directors consistent with their right to vote in person at a shareholder meeting.