ESG Weekly Update – March 16, 2022

16 March 2022

U.S.: Biden Signs Law Ending Mandatory Arbitration for Sexual Assault Cases

On March 3, 2022, President Joseph R. Biden, Jr. signed into law a bill ending mandatory arbitration in workplace sexual harassment and assault cases. Our detailed Debrief on the new law can be found here. Under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, first introduced in 2017, survivors will be permitted to file lawsuits against their perpetrators in court, nullifying any agreement with their employer in which this right was waived in favor of settling disputes by arbitration.

At the signing event, Vice President Kamala Harris stated that mandatory arbitration “gives corporations a powerful tool to hide abuse and misconduct.” Advocates of ending the practice have long maintained that it has the effect of silencing survivors while promoting secrecy and shielding perpetrators in the workplace. Some reports indicate that between 50% and 75% of all women report that they have faced some form of sexual harassment in their jobs. Arbitration clauses in employment agreements are common, but in recent years, a number of corporations have committed to ending the practice of arbitration requirements for sexual assault or harassment situations, including Airbnb, Facebook and Google.

Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 
Biden Signs Bill Ending Forced Arbitration in Sexual Misconduct Cases 

EU: EBA Publishes Report on Sustainable Securitization Framework

The European Banking Authority (EBA) published a report suggesting that the development of a dedicated framework for green securitization would be premature due to the early-stage of development of the market, with sustainable securitizations accounting for only 2% of EU ESG bond issuances and approximately 6% of EU securitizations. Instead, they have recommended that the European Union’s Green Bond Standard (EUGBS) be augmented for use in the securitization market.

The result of the suggested adjustment would be that the EUGBS would apply to the bond’s originator rather than the securitization vehicle itself. The bond originator (the vehicle that pools the debt into a portfolio prior to selling it off in tranches to the securitization vehicles that deal directly with investors) would therefore be responsible for using the bond’s proceeds to meet the green EUGBS criteria. Assessment at this level would allow a securitization that is not backed by a portfolio of green assets to meet the EUGBS requirements so long as the originator commits to using all of the proceeds from the green bond to generate new green assets.

To ensure that investors are aware of the characterization of the underlying securitized assets, the EBA has recommended that the EU Securitisation Regulation be amended to increase disclosure obligations. Currently, only those securitizations that qualify as “Simple, Transparent and Standardized” can, on a voluntary basis, provide disclosures regarding the principle adverse impact of securitization investments. The amendment would extend this voluntary disclosure to all securitizations.

EBA Report 
Responsible Investor Article

U.S.: Department of Energy Launches New Climate Challenge

On February 28, 2022, the United States Department of Energy (DOE) announced the launch of the Better Climate Challenge, an initiative through which more than 90 companies and organizations have made pledges to reduce their carbon emissions by half by 2030. The press release announcing the public-private partnership calls on participating organizations to set “bold, portfolio-wide greenhouse gas reduction targets and share their innovative solutions and best practices with partners and across industries.” To support participating organizations, as part of the initiative, the DOE will provide technical assistance and convene “peer-to-peer exchanges” to facilitate sharing of best practices. Participating organizations will provide annual updates on their progress to the DOE and commit to working together to advance their collective goal. Among the 90 participating organizations are:

  • IKEA Retail U.S.
  • Hilton Harley-Davidson Motor Company
  • The Cleveland Clinic
  • The State of Maryland Johnson Controls
  • Toyota Motor North America, Inc.
  • MetLife Investment Management

U.S. Department of Energy

UK: FTSE 100 Companies Lag Behind Others in Climate Risk Reporting

A report published last month by Marsh—“Evaluating ESG and pandemic risk reporting trends: FTSE 100 and global exchanges risk analysis 2021”—found that while ESG trends are beginning to appear more frequently in annual reports as a principal risk, most FTSE 100 companies haven’t begun to fully report on ESG risk factors and corresponding mitigation efforts, in line with the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations.

The report looked at the annual reports of companies on the FTSE 100 during the July 2020 to July 2021 period. It also compared findings from FTSE 100 companies with 60 companies listed on the Hong Kong Stock Exchange (HKSE), New York Stock Exchange (NYSE) and Euronext.

While 90% of companies listed on Euronext listed ESG as a principal risk, only 21% of companies listed on the FTSE 100 did. By comparison, 30% of reviewed HKSE companies and 35% of reviewed NYSE companies listed ESG as a principal risk.

Furthermore, only 30% of FTSE 100 companies showed evidence of reporting climate change risk on a standalone basis, as recommended by the TCFD. Marsh also found that this standalone reporting varied by industry, with, for example, 75% of mining, utilities and healthcare sector companies evidencing standalone TCFD reporting, while only 10% in the aerospace and industrial sector did.

Beginning April 6, TCFD-aligned disclosures will be mandatory for the 1,300 largest UK-registered companies, including traded companies, as well as private companies with over 500 employees and £500 million in annual turnover.

Report and press release