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Clifford Chance

Clifford Chance

ESG

Environmental, social and governance issues

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.

Explore our insights below:

Sustainability

Green Shoots: Sustainable Capital Markets in the Middle East

The development of sustainable finance continues to evolve across the Middle East – a region more readily associated with conventional energy resources such as oil and gas. Governments around the world continue to focus on climate policies and transition targets and the spotlight remains on green bonds and sustainable finance. Increasingly, however, the 'S' and 'G' facets of ESG (environmental, social and governance) finance are gaining momentum. The COVID-19 pandemic highlighted glaring disparities, such as income inequality, between populations and has precipitated a host of issuances with the proceeds earmarked for social purposes. In a report published in February 2021, Moody's anticipates global debt capital markets issuances of US$375 billion in green bonds, US$150 billion in social bonds and US$125 billion in sustainability bonds in 2021 – i.e., ESG issuances of approximately US$650 billion compared with US$491 billion in 2020. Read more about Green Shoots: Sustainable Capital Markets in the Middle East.

ESG: European Commission Finalises Taxonomy 'Technical Screening Criteria' for Climate Mitigation and Adaptation

The European Commission has finalised legislation containing the Technical Screening Criteria (TSC) for climate mitigation and adaptation activities supporting the Sustainable Finance Taxonomy Regulation. While the Commission has broadly retained the approach taken in its November 2020 draft, in some cases its approach to the details of the criteria has differed. This briefing looks at the finalised position. Read more about ESG: European Commission Finalises Taxonomy 'Technical Screening Criteria' For Climate Mitigation.

European Commission Adopts Long-Awaited Amendments for Asset Managers, Insurers and Insurance Distributors on ESG Integration

On 21 April 2021 the European Commission adopted a package of measures to help improve the flow of money towards sustainable activities across the European Union. The package comprised:

  • The European Taxonomy Climate Delegated Act;
  • A proposal for a Corporate Sustainability Reporting Directive (you can read our briefing on this development here); and
  • Six amending Delegated Acts (Delegated Acts) on fiduciary duties, investment and insurance advice covering amendments to the AIFMD, UCITS, MiFID II, IDD and Solvency II frameworks.

This briefing provides an overview of what the Delegated Acts entail, and their impact on UK-based asset managers, insurers and insurance distributors. Read more about the European Commission Adopts Long-Awaited Amendments for Asset Managers, Insurers and Insurance Distributors on ESG Integration.

ESG: European Commission Proposes Corporate Sustainability Reporting Directive

The European Commission has published a proposal for a Corporate Sustainability Reporting Directive (CSRD) as part of a package of measures aiming to direct capital flows towards sustainable activities. Many organisations are already required to carry out non-financial reporting under the Non-Financial Reporting Directive (NFRD). However, current requirements lack detail so levels and standards of reporting vary enormously. As well as making it difficult for organisations to determine what information to report, it makes it almost impossible for investors and stakeholders to compare performance between different organisations. The CSRD also proposes amendments to existing requirements under the Transparency Directive, the Audit Directive and the Audit Regulation. Read more about the European Commission Proposes Corporate Sustainability Reporting Directive.

Industrial Decarbonisation Strategy: The path to net zero

The Department for Business, Energy & Industrial Strategy (BEIS) has published its strategy setting out the path to decarbonising industry, aiding the goal of a net zero economy by 2050. This is the first strategy of its kind and sets out a series of actions across the next three decades, which will deeply decarbonise the UK economy, whilst still placing an emphasis on remaining competitive, creating jobs and avoiding pushing emissions abroad (carbon leakage). Read more about Industrial Decarbonisation Strategy: The path to net zero.

APAC ESG Perspectives: Australian Key Considerations

Environmental, Social and Governance (ESG) considerations are important to businesses for the opportunities they bring, and for the reputational and economic risks that come with making the wrong decisions. This briefing identifies a number of ESG considerations that may be relevant when doing business in Australia. Read more about APAC ESG Perspectives: Australian Key Considerations.

ESG Initiatives - From Politics to the Lending Market

Environmental, Social and Governance ("ESG") initiatives are at the forefront of today's market economy as government and corporate leaders are urging advancements in sustainable investing. These broad-sounding terms have specific implications for the economy and corporate world, influencing the public and private sector, corporate behavior, new regulations, disclosure mandates and the lending market. In our series of articles covering the evolving ESG landscape we explore the changing discourse of leadership (both political and corporate), how such discourse presents opportunities in finance, and how legislative action may force the hand of holdouts in industry, all with a view of producing tangible milestones to measure progress of ESG initiatives. Read more about ESG Initiatives - From Politics to the Lending Market.

 

ESG: Sustainable Corporate Governance and New Due Diligence Duties in Europe

The European Union is currently consulting on sustainable corporate governance in the context of the European Green Deal. In this extract from a recent Clifford Chance webinar, our experts explore the scope of the proposed legislation, including new requirements on mandatory human rights and environmental due diligence, and its impact on directors and their duty of care. We will also discuss how to influence the consultation process and how best to prepare for the next stage. Read more about Sustainable Corporate Governance and New Due Diligence Duties in Europe.

 

Energy transition and renewables

10 Questions on the Proposed Carbon Border Adjustment Mechanism

The European Commission has published a proposal for a Regulation on a Carbon Border Adjustment Mechanism (CBAM) to deal with the long-standing problem of 'carbon leakage' that impedes the EU's decarbonisation plans.

It is part of the Commission's 'Fit for 55' initiative published today that will help it achieve the EU's new target for a 55% reduction in greenhouse gas emissions by 2030 (against 1990 levels). In this briefing we answer 10 key questions about the proposal. Read more about the 10 Questions on the Proposed Carbon Border Adjustment Mechanism.

ESG - Enhanced exposure draft of enhanced decommissioning framework in Australia's offshore oil & gas sector - part 2

In May 2021, the Federal Government released an exposure draft Bill to the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) proposing to introduce significant reforms to the legal framework regulating Australia's Offshore Oil & Gas sector. The regulatory changes will likely impact companies involved in or planning future offshore petroleum activities in Australia, specifically in respect of their management of environmental, health and safety risks, their procedures concerning decommissioning of maturing assets and environmental remediation.

The proposed amendments are intended to enhance both the government and industry's ability to manage decommissioning, remediation obligations and liabilities. This will bring Australia's decommissioning regime in line with comparable international jurisdictions, which have legal mechanisms imposing decommissioning and remediation obligations and liabilities on current/former titleholders. Read more about the enhanced exposure draft of enhanced decommissioning framework in Australia's offshore oil & gas sector - part 2.

Clifford Chance Collaborates with Taskforce on Scaling Voluntary Carbon Markets - Public Consultation Phase

The Taskforce on Scaling Voluntary Carbon Markets ("TSVCM") is working to establish the necessary infrastructure for a scaled and high-integrity voluntary carbon market that will address issues around fragmentation and carbon credit quality. As a core collaborator on the TSVCM, Clifford Chance is sharing our deep experience and insights into the voluntary carbon market.

The TSVCM will publish a report in mid-July summarising its findings (to date) of how best to scale up voluntary carbon markets. As part of this process, the TSVCM has recently concluded a public consultation focusing on the establishment of a voluntary carbon market governance body, progressing the standardisation of legal principles and contracts within the market and further consolidating carbon credit requirements. This briefing is intended to assist banks, financial institutions and corporates in summarising the key concerns of the recently concluded TSVCM public consultation. Read more about Clifford Chance Collaborates with Taskforce on Scaling Voluntary Carbon Markets - Public Consultation Phase.

The Renewable Energy Transition and Solving the Storage Problem: A Look at Japan

The rapid growth of renewable energy in Japan raises new challenges regarding intermittency of power generation and grid connection and stability. Storage technologies have the potential to resolve these issues and help advance Japan into the next stage of its renewable energy transition. This briefing examines the regulatory framework for energy storage in Japan, draws comparisons with the European markets and seeks to identify the regulatory developments necessary to attract private sector investment in utility-scale energy storage. Read more about the Renewable Energy Transition and Solving the Storage Problem: A Look at Japan.

Climate Change

FCA consults on extending climate related disclosure requirements and certain ESG matters

On 22 June the FCA published CP21/18 consulting on proposals to extend the application of their climate-related disclosures listing rule to standard listed companies and also seeking views on broader environmental, social and governance (ESG) topics in capital markets.

This consultation has two limbs. The first, is focused on the extension of the FCA's TCFD aligned 'comply or explain' listing rule and the second, is a more discursive fact finding request seeking views on ESG prospectus disclosure for debt securities and possible regulatory oversight of third party ESG verifiers and ESG rating agencies. The consultation is open until 10 September 2021. We have prepared another briefing considering the FCA's other consultation paper, Enhancing climate-related disclosures by asset managers, life insurers and FCA-regulated pension providers. Read more on the FCA consults on extending climate related disclosure requirements and certain ESG matters.

ESG Trends: The rise of climate litigation and the challenges for business

Activist shareholders and NGOs targeting governments and businesses in relation to climate change are increasingly turning to litigation. Read more about ESG Trends: The rise of climate litigation and the challenges for business.

Climate change litigation in Italy: The dawn of a new era?

Italy had seemed to be one step behind other countries where climate change litigation is concerned, with no climate-related litigation having been commenced in Italy in the past years. However, things may be about to change. Read more about climate change litigation in Italy: The dawn of a new era?

ESG: Dutch Court's Landmark Decision on Climate Change, Human Rights and Corporate Duties

In a landmark judgement, Royal Dutch Shell (RDS) has been ordered by the District Court of The Hague to reduce it CO2 emissions by 45% by 2030, as compared with 2019 levels. The case was brought by the Dutch branch of Friends of the Earth (Milieudefensie), a number of other NGO's, and over 17,000 individual claimants. The ruling sets a precedent for other companies that could face similar lawsuits. Read more about the Dutch Court's Landmark Decision on Climate Change, Human Rights and Corporate Duties.

Financial Institutions, Financial Investors and the Biden Administration's Policy Priorities

How might the Biden Administration's policies around climate change and social and racial justice be reflected in its financial regulatory policy proposals? In this briefing, Clifford Chance experts look at the interplay between climate priorities and financial regulation; corporate disclosure of climate risks; the rapid growth of retail and institutional demand for environmental, social and governance (ESG) investment strategies; and the renewed urgency of efforts to address the racial wealth gap in financial services. Read more about Financial Institutions, Financial Investors and the Biden Administration's Policy Priorities.

ESG Trends: What the latest Paris Agreement commitments mean for U.S. climate policy

With COP26 (the United Nations climate change talks) fast approaching, the U.S. has announced its new Nationally Determined Contribution (NDC) under the landmark 2015 Paris Agreement, pledging to reduce greenhouse gas emissions by 50-52% below 2005 levels by 2030. The announcement was made at the President Biden's Leaders Summit on Climate, a virtual gathering of world leaders and representatives of civil society and the private sector, aimed at raising global ambition on climate action. The new NDC, along with a bundle of climate-focused government policies announced this week, are the Biden Administration’s latest efforts to reestablish the U.S. as a global leader on climate in the aftermath of the country’s official withdrawal from the Paris Agreement under the Trump Administration. With the U.S having rejoined the Paris Agreement in February 2021, the announcements are a crucial step in rebuilding America's credibility on climate. Read more about the latest Paris Agreement commitments mean for U.S. climate policy.

ESG: Staying ahead of the Regulatory Curve in Europe

Central banks, financial regulators and governments around the world are focusing on the risks that climate change poses to the global economy. There are a number of factors in managing those risks, including the need for a robust categorisation system for "green" or "sustainable" investments, as well as reliable data on how companies and assets are performing against that categorisation. In this extract from a recent webinar, Clifford Chance experts discuss the latest developments in green and sustainable financial products and the impact of upcoming European legislation. Read more about ESG: Staying ahead of the Regulatory Curve in Europe.

Sanctions

Latest trends in economic sanctions and trade controls

In this extract from a recent Clifford Chance webinar, we explore the latest trends in US, EU and UK policy on economic sanctions and trade controls, including compliance and enforcement risks and potential changes under the Biden Administration. We examine efforts to roll-back Trump era US secondary sanctions on Iran; current US trade controls on China; US, EU and UK sanctions on Russia; Europe’s new human rights sanctions and the impact of the existing US Magnitsky sanctions; and post-Brexit UK sanctions. Read more about the latest trends in economic sanctions and trade controls.

Focus on Hydrogen

Germany implements first pure hydrogen midstream regulation

On 25 June 2021, the German parliament and upper house passed a transitional regulation for hydrogen transportation networks. The parliament has also defined "green hydrogen" for the purposes of support under the German Renewable Energy Act (EEG). Read more about Germany's hydrogen regulation.

EU funding programmes for energy projects

The EU has recently approved the budget for a number of funding programmes which could help kick-start the clean hydrogen economy in Europe. In this briefing, we outline the potential sources of financial support for developers of hydrogen projects. Read more about the EU funding programmes for energy projects.

US Energy Challenges and Opportunities

Against the background of a global surge in interest in hydrogen over the past year, the US is now beginning to take active steps to develop the framework for a future hydrogen market across the country. In this briefing, we examine the current impediments to developing a hydrogen economy in the US and potential legislative 'fixes'. Read more about US Energy Challenges and Opportunities.

Strategy for Hydrogen Energy in the Netherlands

This client briefing deals with key topics in relation to the development of clean hydrogen in The Netherlands. Read more about Strategy for Hydrogen Energy in the Netherlands.

Belgian Energy Industry in the Starting Blocks

In this briefing we set out the latest developments on hydrogen in Belgium in anticipation of a national strategy on hydrogen later this year. Read more about Belgian Energy Industry in the Starting Blocks.

Poland sets Ambitious Clean Energy Goals in its Draft Hydrogen Strategy

The Polish Ministry of the Climate and the Environment has published the long-awaited draft 'Hydrogen Strategy 2030'. The draft sets out objectives and actions to be taken to build a hydrogen economy focused on three areas of hydrogen use – the energy sector, transport and industry. Read more about Poland sets Ambitious Clean Energy Goals in its Draft Hydrogen Strategy.

Role of Hydrogen in Turkey's Energy Transition

Turkey is one of the most dynamic regions in the world for renewables. In just over a decade, Turkey has tripled its installed renewable generation capacity to around 45 gigawatts and invested nearly USD 40 billion in renewable energy projects. Building on this momentum, will Turkey be ready to stay ahead of the pack in renewable energy leadership – this time with hydrogen? Read more about Role of Hydrogen in Turkey's Energy Transition.

A New Energy Frontier for Africa

As African economies continue to further their green ambitions, clean hydrogen is increasingly viewed as an important pathway to reducing imports of fossil-based fuels and chemicals. In this briefing, we examine why Africa is well-placed for the development of a green hydrogen economy, and provide an overview on the various initiatives, strategies and partnerships in play across the continent. Read more about A New Energy Frontier for Africa.

Recent Energy Regulatory Developments in Germany

Germany and the European Commission as well as almost all major European economies published roadmaps for the development of a hydrogen economy over the summer of 2020. Since then, Germany has taken the first steps to implement its National Hydrogen Strategy with various amendments to the German Renewable Energy Act (EEG 2021) which we highlight below. Read more about the recent energy regulatory developments in Germany.