EU: ESA Joint Committee Proposes Amendments to SFDR Level II

Following the publication earlier in April of “Joint Q&As,” which addressed public questions on the Sustainable Finance Disclosure Regulation (“SFDR”), the Joint Committee of European Supervisory Authorities (the “ESAs”) published a consultation paper (the “Consultation”) proposing technical amendments to the SFDR framework.

The Consultation addresses certain issues with the Regulatory Technical Standards (“RTSs”), specifically:

• Extending the list of social indicators for principal adverse impacts;
• Reporting under the ‘do no significant harm’ principle; and
• Amending the disclosure regime to explicitly include certain greenhouse gas emissions reduction targets.

The Consultation further notes the European Commission’s concern that transparency and comparability on the sustainability impact of certain financial products are not matching the increased demand for more comprehensive information on issuers’ sustainability profiles and ESG-related methodologies. Thus, amendments to the RTSs should aim to remove the risk of “false certainty” and “safeguards washing,” ensuring disclosures are proportionate and feasible for financial market participants.

Stakeholders are able to provide comments on the Consultation until July 4, 2023.

For further insight and detail on the Consultation, please see our in-depth article here.

Links:
Consultation paper
Debevoise update – ESAs Propose Amendments to SFDR Level II

Global: Latest Climate Change Litigation Developments in the U.S. and UK

On April 24, 2023, the United States Supreme Court dismissed five appeals filed by oil and gas companies, including Exxon Mobil Corp., B.P. Plc, Suncor Energy, Inc. and Chevron Corp., against lower courts’ decisions finding that claims at issue must be heard in state courts rather than federal courts, as sought by the appellants. The claims were brought by Rhode Island and municipalities and counties in California, Colorado, Hawaii and Maryland in relation to damages for climate change-related injuries caused by the companies’ alleged contribution to GHG emissions. The decision is considered a victory for the state and local authorities because state courts are often seen as a venue more favorable to plaintiffs.

On April 25, 2023, the UK High Court granted permission to Greenpeace to proceed with a judicial review of the UK government’s decision to grant oil and gas licenses in the North Sea. The licensing round was launched in September 2022 and is expected to result in over 100 new licenses. Pursuant to the UK Net Zero Strategy, a climate compatibility assessment must be carried out before any oil and gas exploration licenses are granted. The North Sea Transition Authority, the authority overseeing the licensing round, determined at the time that the licenses are compatible with the government’s target to reach net zero by 2050, among other requirements. Greenpeace asserts that the government did not take into account Scope 3 GHG emissions when making that assessment.

These developments are part of a broader increase in ESG litigation, before both national and international courts. Last month, we reported on climate-related cases brought before the European Court of Human Rights.

Links:
SCOTUS Order (PDF)
Greenpeace Press Release

U.S.: Louisiana Opens Investigation of ESG Investors

Several sources reported that Louisiana Attorney General Jeff Landry has opened an investigation into Climate Action 100+, a coalition of investors supporting efforts to reduce GHG emissions. The investigation is directed at Frank Templeton and CalPERS, the California Public Employees’ Retirement System, and includes allegations related to possible breaches of fiduciary duties. In particular, Attorney General Landry is examining the firms’ role on the steering committee of Climate Action 100+.

News reports indicate that Attorney General Landry intends to take a “multi-pronged” approach to the investigation, examining whether “the groups breached their obligations to investors by prioritizing climate initiatives.” According to the Washington Times, in describing the investigation, Attorney General Landry stated that “ESG investing puts politics over people and raises significant concerns that companies guided by these green-energy fantasies may be engaging in unfair and deceptive practices that harm Louisiana consumers.” He stated further that “Franklin Templeton is deeply embedded in Climate Action 100+; and we are troubled that, by focusing on the radical ESG agenda, it may be violating its fiduciary duties to shareholders in our state.”

Links:
Washington Times
Climate Action 100+