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Clifford Chance

Clifford Chance

Climate, sustainability, green finance and renewables

Future-proofing our clients' businesses

The profile of corporate sustainability has been growing steadily and pressure on businesses is increasing from multiple angles.

Climate change and the transition to a low carbon economy are top of the political agenda. Governments and regulators are responding to the need to mobilise green, climate smart, environmentally friendly financing. These issues present a range of challenges for businesses and innovation and technology are key to success in the future. We help clients to future-proof their businesses and identify risks and opportunities.

Sustainability

ESG: Legal Risk or Business Opportunity?

ESG – ‘Environmental, Social and Governance’ issues – sometimes referred to as sustainable or responsible business issues are of increasing importance to businesses for the opportunities they bring, but also the reputational and economic risks that come with making the wrong decisions. Read more about ESG: Legal Risk or Business Opportunity?

Sustainable Finance: European Commission consults on how insurers and asset managers integrate 'sustainability' into their operations

The European Union has taken another step to promote sustainable finance by the publication on 8 June 2020 of draft legislation requiring insurers and asset managers to integrate ‘sustainability’ - environmental, social and governance (ESG) considerations - into their investment, advisory and disclosure processes. Six draft delegated acts have been published for consultation, which would amend the UCITS, AIFMD, MiFID, IDD and Solvency II frameworks. The consultation closes on 6 July 2020. Read more about Sustainable Finance: European Commission consults on how insurers and asset managers integrate 'sustainability' into their operations.

Sustainability-Linked Bonds - Making Sense of SLBs, KPIs and SPTs

On 9 June, the International Capital Market Association (ICMA) published the Sustainability-Linked Bond Principles (the Principles), a set of voluntary guidelines aimed at fostering the development of a sustainability-linked bond (SLB) market. SLBs are "any type of bond instrument for which the financial and/or structural characteristics can vary depending on whether the issuer achieves predefined sustainability/ ESG objectives" – the typical example would be a change in interest rate depending on whether a target sustainability key performance indicator (KPI) is met. We take a look at the basics of the Principles and how they might be used. In addition, we discuss some of the points issuers and underwriters should consider when bringing this product to market. Read more about Sustainability-Linked Bonds - Making Sense of SLBs, KPIs and SPTs.

EU finalises Sustainable Finance Taxonomy: New obligations for financial market participants and large public-interest entities

This briefing analyses the changes in the Taxonomy Regulation, sets out the impacts for different entities, and in an Annex, provides an overview of the Taxonomy. Read more about the EU finalising Sustainable Finance Taxonomy.

ESG issues for corporates: risks and opportunities

Sustainability and environmental, social, and governance (ESG) factors have fast risen towards the top of the board agenda — corporates are increasingly aware that a failure to address these matters can be detrimental to their businesses, both financially and reputationally. This briefing examines reporting frameworks, standards and requirements, highlights key issues for boards to consider and action to take to ensure they are doing everything to mitigate ESG risks and seize ESG opportunities. Read more about the ESG issues for corporates.

Sustainability Snapshot: UK FCA signals next steps in its strategy on climate change and green finance

The UK financial services regulator has signalled the steps it intends to take over the next few months in order to meet its strategic objectives on climate change and green finance. Promoting sustainable finance is a key issue for governments, policy makers, regulators and businesses internationally. Given how serious regulators and policy makers appear to be about tackling this issue, industry players should expect to see more climate-related regulatory initiatives in the pipeline in the short to medium term. In this briefing, we outline the four priority areas the FCA has identified and note some of the issues that may arise. Read more about the UK FCA's strategy on climate change and green finance.

Another step towards sustainability: ESMA consultation on short-termism in financial markets

Another step has been taken towards fostering sustainable growth in the EU with the publication by ESMA of a survey on undue short-term pressure on corporations from the financial sector. This development relates to Action Point 10 of the European Commission’s Sustainable Finance Action Plan, which was published in March 2018. Action Point 10 focused on “fostering sustainable corporate governance and attenuating short-termism in capital markets”. In this briefing, we outline the key areas covered by the survey and some of the issues they may raise for asset managers. Read more about the ESMA consultation on short-termism in financial markets.

The EU's sustainable finance action plan: Clarifying duties - what asset managers need to know

The Sustainable Finance Action Plan was adopted by the European Commission in March 2018 as part of the EU’s efforts to connect finance with the specific needs of the European and global economy for the benefit of the planet and society. Several of the 10 high-level Action Points are particularly relevant to asset managers. This briefing focuses on Action Point 7: clarifying institutional investors’ and asset managers’ duties. Read more about the EU's sustainable finance action plan.

Sustainable Infrastructure: The financing challenge

The recently published IPCC special report on the impact of global warming predicts that an unprecedented level of sustainable infrastructure investment will be needed every year until 2050 and beyond to limit global warming to the Paris Climate Agreement’s target of 1.5 °C. Here we explore the challenges facing infrastructure investment and the potential role of the ‘green finance’ market, governments and multi-laterals in achieving this objective. Read more about Sustainable Infrastructure.

Green Finance

Blue Bonds: Expanding to The Oceans

The blue economy is of growing importance and gaining momentum amongst policymakers across the world.

The earth’s surface is made up of 71% water, and billions of people rely on the oceans for their livelihoods and socioeconomic well‑being. However, the effects of climate change and human activities are destroying the biodiversity of our oceans. Read more about Blue Bonds.

Greater China Region: The Development of The Green Bond Market

The governments and agencies within the greater China region have continued at their respective pace with the advancement of China’s green financing. Over the course of the past five years, regulators in the greater China region, including those of Mainland China and the Special Administrative Regions of Hong Kong and Macau, have announced and implemented a number of policies and guidelines in support of the overall policy direction on green financing. Read more about the development of the the Green Bond Market in the Greater China Region.

Middle East: the evolution of sustainable capital markets

In keeping with global trends which have seen sustainable finance continue to expand to the level where, at the start of 2018, global sustainable investment in five major markets across the globe amounted to roughly USD30.7 trillion (source: Global Sustainable Investment Alliance), the development of sustainable finance, including through the use of green bonds, green sukuk and green loans, continues to evolve across a region more readily associated with its conventional energy resources, oil and gas. Read more about the evolution of sustainable capital markets in the Middle East.

Sustainability linked loans: the star performer of the loan markets?

The growth of sustainability linked loans has been the success story of the European loan markets over the last 12 months. We explore what this means and how the market has developed. Read more about sustainability linked loans.

Sustainable finance: the impact for banks and investment firms

The focus of financial markets regulators and central banks is increasingly falling on climate change and the green economy, and in particular the resilience of the financial system to climate-related risks. Regulators in both the UK and the EU have turned their attention to environmental, social and governance (ESG) factors, their impact on banks' and investment firms' businesses and the role of the financial sector in supporting the transition to a low-carbon and sustainable economy. This is leading to the introduction of a broad range of new ESG-related regulatory requirements for banks and investment firms, including new product disclosure requirements for issuers and product manufacturers, ESG-related policies and disclosure requirements for investment advisers and managers and requirements for firms to assess their exposures to ESG-related financial risks. Read more about sustainable finance.

EU Sustainable finance action plan: status table

The European Commission launched its Action Plan on Financing Sustainable Growth (the Action Plan) in March 2018. The breadth of the Action Plan and the pace of development can make tracking progress on specific points challenging. Our status table aims to draw together the different strands of the Action Plan and reflects progress made to date on each of the 10 action points. Read more about the EU sustainable finance action plan.

From junk bonds to just bonds - the increasing importance of ESG financing in European high yield

In this article, we discuss the emerging demand from investors for Environmental, Social and Governance (ESG) financing and its potential effects for stakeholders in the leveraged finance market. Read more about the increasing importance of ESG financing in European high yield.

The EU Sustainable Action Plan - an update report

As the current European Parliament's term draws to a close it is an opportune time to take stock of the progress made under the Commission's Sustainable Action Plan (the "SAP"). The SAP published in March 2018 is ambitious with three broad aims (1) to reorient capital flows towards a more sustainable economy, (2) to mainstream sustainability in risk management and (3) to foster transparency and long-termism. These aims are scoped in further detail in 10 separate action points. Some of the action points have been more fully realised than others but the progress made in a year is impressive and reflects the EU's commitment to the sustainability and low-carbon transition agenda. Read more about the EU Sustainable Action Plan.

Renewables

Focus on Hydrogen: Time for New Energy in Europe and France

2020 is proving to be an extraordinary year for a number of reasons. On a positive note, would one of these reasons be that clean hydrogen has left the zone of hype and entered the territory of hope? There are certainly a number of political signals and industry reactions which, together with technological advances in fuel cells and electrolysis, falling renewable energy and fuel cell prices and stringent climate change requirements, would support such hope. Read more about Focus on Hydrogen: Time for New Energy in Europe and France

Focus on Hydrogen: Accelerating the Energy Transition in Latin America

Latin American countries have an opportunity to leverage their significant renewable energy resources by scaling up green hydrogen production. Green hydrogen could support existing local electricity and transportation demands, and it could be commercialized and exported. Given the range of potential benefits of green hydrogen and Latin America's history of innovative approaches to energy markets, Latin America could be a pioneer in the field. In this briefing, we highlight current market conditions, next steps to support industry development, and pilot projects from across the region. Read more about Focus on Hydrogen: Accelerating the Energy Transition in Latin America

The European Commission's Hydrogen Strategy for a Climate-Neutral Europe

After several EU Member States have announced their national hydrogen strategies, the European Commission has shared its vision of how a union-wide hydrogen economy can contribute to the reduction of greenhouse gas emissions and to the recovery of Europe's economy. This briefing provides an insight into the European Commission's newly published roadmap for building a hydrogen economy for a climate-neutral Europe. Read more about The European Commission's Hydrogen Strategy for a Climate-Neutral Europe

Corporate Energy and Carbon Reporting Framework – A Primer

As from 1 April 2020 the first businesses covered by the UK's new carbon and energy reporting framework began preparing disclosures for their annual reports. The framework imposes more significant carbon and energy reporting obligations on UK quoted companies and UK Large unquoted companies and LLPs than the pre-existing reporting schemes. This primer explains the key obligations under this new framework. Read more about Corporate Energy and Carbon Reporting Framework – A Primer. 

 

Clean Hydrogen in Australia - an export opportunity

The Council of Australian Governments Energy Council agreed to a National Hydrogen Strategy on 22 November 2019, which outlines an export-oriented approach to clean hydrogen in Australia. This briefing highlights the key aspects of the National Hydrogen Strategy and identifies a number of actions that will be required to facilitate a clean hydrogen industry in Australia – including responsive regulation and community confidence. Read more about Clean Hydrogen in Australia - an export opportunity

 

National Hydrogen Strategy – Germany takes the lead

The German Federal Government has adopted its National Hydrogen Strategy. Germany, which will hold the Presidency of the Council of the European Union in the second half of 2020, intends to take a leading role in the development of hydrogen technologies. The strategy provides a number of ambitious measures and goals – 38 in total – underscoring that hydrogen, and in particular green hydrogen, is key for the future of a clean, secure and affordable energy supply. Read more about National Hydrogen Strategy – Germany takes the lead

 

Belgium - Potential of CH in Belgium and Europe

Clean hydrogen is on the rise as a viable alternative for fossil fuels and an energy storage reservoir for renewable energy. The term clean hydrogen refers to initiatives which are either based on renewable or low-carbon hydrogen technologies. Unlike grey hydrogen (which is produced using fossil fuels such as natural gas), renewable (or "green") hydrogen is produced entirely from renewable sources. This method builds on existing green infrastructure by using energy from other renewable sources in an electrolysis process that produces hydrogen without carbon emissions. As it also does not release harmful emissions at the point of use, renewable hydrogen could become a vital technology in tackling climate and environmental-related challenges and accelerating the energy transition. To satisfy demand for hydrogen during a transition phase in which large-scale production of renewable hydrogen is gradually being achieved, renewable hydrogen is likely to be complemented by the production of low-carbon hydrogen. Low-carbon (or "blue") hydrogen is based on natural gas, combined with carbon capture and storage (CCS) technologies, or other low-emission pathways if they are commercially available. Read more about Belgium - Potential of CH in Belgium and Europe

 

Key developments in clean energy: Part 1: Repowering renewable power projects

The repowering of existing renewable energy projects, by replacing, refurbishing or updating existing generation technology with fresh investment to extend project life and increase project capacity and efficiency, is becoming a reality rather than a distant future prospect. Read more about Key developments in clean enerygy: Part 1: Repowering renewable power projects

Clean Energy for all Europeans – New EU Rules for Renewable Energy and Energy Efficiency

Three acts of the Clean Energy for all Europeans Package, covering renewable energy, energy efficiency and governance, have entered into force at the end of 2018 and will reshape the renewable energy landscape in Europe over the coming years. Read more about the new EU rules for renewable energy and energy efficiency.

Renewable Incentives Guide: Towards a Subsidy-Free World? - new 6th Edition

The 6th edition of our Renewables Incentives Guide covers renewable incentives in 21 major countries. Read the 6th edition of the Renewable Incentives Guide.

Climate Change

U.S. Presidential Candidate Joe Biden Sets out $2TN Clean Energy, Infrastructure and Climate Plan

Last week, Democratic Presidential Candidate Joe Biden released a major update to his original 2019 climate plan for an overhaul of the U.S.'s clean energy and infrastructure policies and practices. Biden's updated plan is more far reaching than his previous proposal, and, among other things, commits to an accelerated investment of $2 trillion in sustainable infrastructure and clean energy over four years. Former Vice President Biden has positioned his Climate Plan as a central part of his proposed policies and efforts for reviving the American economy in the wake of the coronavirus public health crisis, while achieving a goal of net-zero emissions by 2050 and combating climate change. Below we have outlined a few key tenants of Biden's Climate Plan and how, if enacted, Biden's Climate Plan could present potential opportunities in the clean energy sector. Read more about U.S. Presidential Candidate Joe Biden Sets out $2TN Clean Energy, Infrastructure and Climate Plan.

Carbon Price Clarity: A New UK Emissions Trading System from 2021

The UK Government has confirmed that it intends to establish a UK emissions trading system ("ETS") from 1 January 2021. The ETS could operate either as a standalone system or be linked to other systems such as the EU ETS. The design of the system has borrowed heavily from the EU ETS but it is more ambitious in its climate targets, adopting an initial emissions cap that will be 5% lower than the UK's notional share of the EU ETS cap for Phase IV of the EU ETS. This briefing sets out the key points to note from the proposal. Read more about Carbon Price Clarity: A New UK Emissions Trading System from 2021.

Carbon Offsetting: Coronavirus and beyond

Until the economic impacts of coronavirus started to bite, the voluntary carbon market had been experiencing something of a rebirth. In the preceding twelve months, we saw a significant increase in demand for carbon credits, from airlines, industry and other businesses looking to offset their emissions. 

This was being driven in large part by the growing pressure on businesses to reduce their greenhouse gas emissions and to commit publicly to carbon reduction  targets. Carbon offset providers were scrambling to find enough credits and to develop new offset projects as quickly as possible to meet the increasing demand. Read more about Carbon Offsetting: Coronavirus and beyond.

European Commission proposes Net Zero Climate Law

The European Commission has published its proposed 'European climate law' setting a binding EU target of net zero greenhouse emissions by 2050.

The proposal also provides for the Commission to review its current 2030 climate targets and includes a controversial power allowing the Commission to set a trajectory for emissions reductions from 2030 to 2050. This law will entail the strengthening of renewable energy, energy efficiency and interconnection targets and will lead to the introduction of more stringent measures at EU and national level designed to cut emissions. This briefing considers the detail of the proposal. Read more about the Commission's proposed European climate law.

Climate Change in the 2020s: The decade for insurers to lead

Climate change is at the top of the agenda for policy makers, regulators and globally significant companies. It is an unprecedented risk and is under increasing scrutiny by shareholders and regulators. For insurers, climate change also presents opportunities for the industry to do what it does best – assessing and providing protection against risk – both in managing their own business and providing innovative products for policyholders to protect them against some of the economic implications.

The 2020s will be a decisive decade in the race to deal with climate change and insurers may well play a key role in deciding the outcome of these efforts. Read more about climate change in the 2020s.

COP25: Disappointing lack of progress at Madrid Climate Conference

The COP 25 Madrid International Climate Change Conference has finished with a disappointing lack of progress in key areas of international action on climate change. In particular, agreement on a new carbon trading mechanism remained elusive, giving cause for concern over the timing of a replacement for the Kyoto Protocol mechanisms. Read more about the lack of progress in key areas of international action at the climate conference in Madrid.

European Green Deal - Resetting the Environmental and Climate Change Agenda

The European Commission has published a bold package of climate change and environmental policies with ambitious aims including climate neutrality by 2050, a zero pollution environment, and a halt to biodiversity loss.The 'European Green Deal' Communication contains a wide range of sector-specific and economy-wide measures to be put in place over the next 2 years.

In this briefing we consider some of the key measures proposed. Read more about the European Green Deal.

A vision for the future of the UK financial system: the van Steenis report – how financial services might evolve in response to technological, social and environmental changes

The Bank of England published a report in June 2019 on the future of the UK financial system and what that means for the Bank. The report, authored by Huw van Steenis, examines how financial services might evolve over the medium term in response to technological, social and environmental changes and how the Bank should respond. It sets out an ambitious vision for the future of the UK financial system and the role of the Bank as a leader of global regulatory standards supporting a global economy.

The van Steenis report identifies wide-ranging drivers of change that are shaping the UK economy, from big data and cyber-crime to climate change and an ageing population. It considers the role of finance in this changing environment and how a responsible and resilient finance industry can serve and support these changes. Finally, the report sets out recommendations for the Bank of England, identifying areas where it could take action to enable innovation, empower competition and build resilience in the financial system. Read more on the van Steenis report.

Climate change disputes: an overview on developments and drivers

Climate change has been dominating the public debate for some time now. The increasing number of lawsuits underlines that legal risks relating to climate change are increasing for companies acting in the oil, gas, energy and even the financial sector. This newsletter provides an overview on the developments and drivers in the field of climate change disputes. It highlights which legal challenges companies face due to the impact of climate change on the society in general and the business operations in particular. Read more about climate change disputes.

Climate change litigation: tackling climate change through the courts

Litigation is becoming an important element of efforts to combat climate change. The number of climate change-related actions now stands at about 1,500 worldwide.

This article looks at some of the major trends and cases involving corporations and governments, outlines the challenges to pursuing climate change litigation, and considers what corporations, financial institutions and other businesses need to do next. Read more about tackling climate change through the courts.

Government commits to 'Net Zero by 2050' Target

The UK Government has committed to reducing UK Greenhouse Gas emissions to net zero by 2050, following the recent recommendations of the advisory Climate Change Committee. However, significant uncertainty about detailed implementation remains. Read more about the Government commiting to 'Net Zero by 2050' Target.

UK climate advisor recommends 2050 net zero carbon emissions target

A report by the UK Climate Change Committee has recommended that the UK toughens its climate target to net zero greenhouse gas emissions (GHG) by 2050. Read more about the report.

Climate change and the pressure on coal - latest developments

This briefing explores some of the action being taken by the public and private sectors and the impact on the industry. Read more about the latest developments on climate change and the pressure on coal.

A green and sustainable round up

Against the well-publicised backdrop of the IPCC Report there have been a number of other papers and publications in recent weeks that also continue to shape the regulatory environment on green and sustainable finance. This briefing summarises the TCFD Status Report, the PRA and FCA papers on climate change and green finance and the European Parliament’s proposed amendments to the Commission’s benchmark regulation proposals from June. It also looks briefly, in the context of the Green GB Week, at some of the key UK government’s proposals on green finance and climate change. Read more about the green and sustainable round up.

New energy and carbon reporting rules: UK Clean Growth Strategy

These briefings look at the proposals published as part of the UK Government's new Clean Growth Strategy, which sets out its plans to promote growth using a low carbon economy. the Government's thinking on corporate reporting on carbon and energy. In the UK Clean Growth Strategy - New energy and carbon reporting rules, we consider the Government's thinking on corporate reporting. In the UK Clean Growth Strategy – Drawing The Strands Together, we consider the broad scope of the Clean Growth Strategy and its key elements. In the future UK corporate energy and carbon reporting framework and the end of the CRC scheme, we look at the BEIS response to the consultation on the proposals.

Hydrogen

Focus on Hydrogen: Time for New Energy in Europe and France

This briefing looks at the key features of clean hydrogen and its potential and provide an overview of the related European and French policy and regulatory frameworks. Read more about time for new energy in Europe and France.

Focus on Hydrogen: Accelerating the Energy Transition in Latin America

Latin American countries have an opportunity to leverage their significant renewable energy resources by scaling up green hydrogen production. Green hydrogen could support existing local electricity and transportation demands, and it could be commercialized and exported. Given the range of potential benefits of green hydrogen and Latin America's history of innovative approaches to energy markets, Latin America could be a pioneer in the field. In this briefing, we highlight current market conditions, next steps to support industry development, and pilot projects from across the region. Read more about accelerating the energy transition in Latin America.

The European Commission's Hydrogen Strategy for a Climate-Neutral Europe

After several EU Member States have announced their national hydrogen strategies, the European Commission has shared its vision of how a union-wide hydrogen economy can contribute to the reduction of greenhouse gas emissions and to the recovery of Europe's economy. This briefing provides an insight into the European Commission's newly published roadmap for building a hydrogen economy for a climate-neutral Europe. Read more about the European Commission's Hydrogen Strategy for a Climate-Neutral Europe.

National Hydrogen Strategy – Germany Aims to Take the Lead

The German Federal Government has adopted its National Hydrogen Strategy. Germany, which will hold the Presidency of the Council of the European Union in the second half of 2020, intends to take a leading role in the development of hydrogen technologies. The strategy provides a number of ambitious measures and goals – 38 in total – underscoring that hydrogen, and in particular green hydrogen, is key for the future of a clean, secure and affordable energy supply. Read more about National Hydrogen Strategy – Germany Aims to Take the Lead.

The Potential of Clean Hydrogen: European and Belgian Opportunities

This briefing looks at the main benefits of clean hydrogen as well as the remaining barriers to its successful roll-out within the industries where it can be used most effectively. We benchmark the current European and Belgian legal and regulatory framework against the potential of clean hydrogen, finding that there is a need for greater harmonisation and policy coherence (e.g. in terms of a common classification and taxonomy) to create a genuine level playing field with established technologies and energy sources. Despite these barriers, the recent surge in pilot projects is a reason to be optimistic about the future prospects of clean hydrogen. Read more about the potential of clean hydrogen: European and Belgian opportunities.

Clean Hydrogen in Australia – a New Export Opportunity

The Council of Australian Governments Energy Council agreed to a National Hydrogen Strategy on 22 November 2019, which outlines an export-oriented approach to clean hydrogen in Australia. This briefing highlights the key aspects of the National Hydrogen Strategy and identifies a number of actions that will be required to facilitate a clean hydrogen industry in Australia – including responsive regulation and community confidence. Read more about clean hydrogen in Australia – a new export opportunity.