EU: European Council Advances Green Bond Framework
Last week, the European Council announced that it would move forward with negotiations on a proposed regulation for a European Green Bond Standard, which would include requirements and a supervisory framework for the use of the “European Green Bond” or “EuGB” designation for a green bond issuance. The proposal sets out the sustainability requirements which companies and public authorities would be required to meet in order to use this designation, defining standards with the goals of enabling investors to more easily compare issuers on sustainability factors and better protecting investors from greenwashing. Key components of the supervisory framework included requiring EuGB-designated bonds to fully allocate funds to projects aligned with the EU Taxonomy, provide full transparency on how bond proceeds are allocated and be subject to an evaluation by an EU-supervised external reviewer to ensure compliance with the regulation.
EU Council Press Release
EU Council Mandate for Parliament Negotiations
EU: European Commission Rule Proposals Target Environmental Impact of Consumer Products
On March 30, the European Commission announced the launch of its Sustainable Products Initiative, a series of proposals aimed at making “sustainable products the norm” by greening the manufacturing process of products, improving their design and enhancing energy efficiency throughout a product’s lifecycle.
The new proposals build on the existing Ecodesign Directive, expanding the scope of the directive to set ecodesign requirements on a broader range of products to improve product sustainability information. Product-specific legislation will be implemented to ensure products are made to be more durable, reliable, reusable and reparable; easier to maintain and refurbish; and more energy and resource efficient.
The Commission acknowledged existing sectoral rules that seek to make products greener and more energy efficient but took the view that a broader framework for setting harmonized rules on environmental sustainability is needed to accelerate the transition to a climate-neutral and resource-efficient economy for the EU Single Market.
Current Ecodesign and Energy Labelling Working Plan 2022-2024
Commission Press Release
UK: UK Government Issues Clean Energy Strategy
On April 7, the UK government released its new Energy Security Strategy, outlining plans to advance long-term energy independence and increase affordability while supporting greater investment in renewable energy sources. The strategy includes initiatives to accelerate the development of hydrogen and nuclear energy, while allowing for a short-term increase in oil and gas production.
With respect to nuclear power, the government’s strategy reflects an increase in the production of nuclear reactors from one per decade to one per year, with the goal of nuclear energy meeting approximately 24% of the country’s electricity demand by 2050. With respect to renewables, the strategy envisions offshore wind power increasing from 40GW to 50GW by 2030, including up to 5GW from floating offshore wind in deeper seas. As part of this initiative, the government aims to reduce renewables project approval times from four years to one. The strategy also reflects a goal of increasing solar capacity by up to five times by 2035.
Government Press Release
Canada: Canadian Government Targets Climate Change in Federal Budget
Canada’s federal government recently released its 2022 budget, which contains a number of climate-related goals, including:
- pollution reduction, including measures designed to reduce greenhouse gas emissions from vehicles, facilitate the transition to zero-emission vehicles, develop a national electric-car charging network and facilitate sustainable agriculture, and the development of green technologies more generally;
- the creation of a clean, resilient energy sector, whereby the government plans to invest in national clean energy projects and programs as well as collaborate with regional and local governments in parallel efforts;
- protection of land, lakes and oceans through investment in projects that preserve Canada’s waters and land areas; and
- the development of a net-zero economy, including an initiative through which Canada’s Office of the Superintendent of Financial Institutions will consult with federally regulated financial institutions on climate disclosure guidelines with the goal of requiring financial institutions to publish TCFD-aligned climate disclosures beginning in 2024.
Canada’s Budget 2022 also includes measures related to the construction of green homes and buildings and the creation of an Indigenous Climate Leadership Agenda. The budget identifies $9.1 billion in total private and government investment in climate-related initiatives.
Canada’s Budget 2022
Netherlands: Dutch Regulator to Investigate Funds’ SFDR Compliance
The Dutch regulator, AFM, has published a report exploring the Dutch retail market for sustainable funds and has noted its concerns about the use of Sustainable Finance Disclosure Regulation (SFDR) disclosure categories by fund providers when marketing their funds.
The AFM’s concern is twofold: firstly, retail investors could confuse a fund’s self-determined disclosure category (e.g., as an Article 8 fund) with the fund’s broader ESG strategy or, indeed, its sustainability rating. Secondly, the AFM previously has noted that a number of funds that may choose an Article 9 classification would not meet the necessary Article 9 requirements when their strategy is scrutinized.
In its report, the AFM emphasizes the importance of ensuring that the interpretation of sustainability by fund managers and the expectations of investors do not diverge. To that end, it will begin conducting supervisory investigations into compliance with the SFDR this year.