ESG Weekly Update – May 11, 2023

11 May 2023

U.S.: Florida Passes Anti-ESG Bill

On May 2, 2023, Florida Governor Ron DeSantis signed into law HB-3, a bill aimed at – among other things – eliminating the consideration of ESG factors in investment decisions, prohibiting the issuance of green bonds, and imposing limits on factors that can be considered when selecting government contractors. The far-reaching law has various facets, including:

  • A requirement that investment decisions, construed broadly, be “based solely on pecuniary factors,” which are defined in the law as factors an investor “prudently determines is expected to have a material effect on the risk or returns of an investment based on appropriate investment horizons consistent with applicable investment objectives and funding policy. The term does not include the consideration of the furtherance of any social, political, or ideological interests.” Investments subject to this requirement include: (i) investments by the state’s Chief Financial Officer; (ii) investments of the assets of any retirement system or plan by any investment managers; (iii) the exercising of shareholder rights, including the voting of proxies, on behalf of a retirement system or plan; (iv) investments by local governments; and (v) investments related to state trust funds.
  • A requirement that state retirement systems or plans file a comprehensive report detailing and reviewing the governance policies concerning decision-making in voting decisions and adherence to the fiduciary standards required of such retirement system or plan under the relevant section of the law, including in the exercise of shareholder rights.
  • A prohibition on “ESG Bonds,” defined as “any bonds that have been designated or labeled as bonds that will be used to finance a project with an ESG purpose, including, but not limited to, green bonds, Certified Climate Bonds, GreenStar designated bonds, and other environmental bonds marketed as promoting a generalized or global environmental objective; social bonds marketed as promoting a social objective; and sustainability bonds and sustainable development goal bonds marketed as promoting both environmental and social objectives. The term includes those bonds self-designated by the issuers as ESG-labeled bonds and those designated as ESG-labeled bonds by a third-party verifier.”
  • A requirement that any communication discussing social, political, or ideological interests to a company by an investment manager that invests public funds contain a statement that the views and opinions expressed in this communication are those of the sender and do not reflect the views and opinions of the State of Florida.
  • A prohibition on state agencies and local governments from considering social, political, or ideological interests in government contracting.
  • A requirement that state funds be deposited into “qualified public depositories,” which are defined as financial institutions that do not engage in the “unsafe and unsound” practice of denying or canceling its services to a person on the basis of the person’s: (i) political opinion; (ii) religious beliefs; (iii) non-quantitative or impartial factor related to the person’s business sector; (iv) social credit score; (v) ownership of firearms; (vi) engagement in the manufacturing of firearms; (vii) production of fossil-fuel energy; (viii) support of the state or federal government in combatting illegal immigration, drug trafficking, or human trafficking; and (ix) failure to meet environmental standards, social governance standards, corporate board, or company employment composition standards, among others.

Florida Bill – HB 3

EU: TotalEnergies Sues Greenpeace Over Emissions Report

On April 28, 2023, the French oil supermajor TotalEnergies sued Greenpeace France and consulting firm Factor-X over a joint report that claimed the company underrepresented its total greenhouse gas emissions in 2019.

Despite the company disclosing emissions of 455 million tons of carbon dioxide equivalent for that year, the report – which relied on Factor-X’s carbon emissions accounting methods – claimed that TotalEnergies’ emissions instead totaled 1.64 billion tons. In its civil complaint, TotalEnergies seeks a ruling that the report contains “false and misleading information, relying on debatable methodology and including multiple errors and approximations.” Further, it is seeking a judicial order to withdraw the report and cease all references to it, in addition to a nominal EUR 1 in damages. The company has decided not to sue for defamation.

The first hearing will take place on September 7, 2023 to determine the proper calculation of TotalEnergies’s actual emissions. The Paris court also has jurisdiction over a complaint filed by Greenpeace against TotalEnergies, with respect to alleged greenwashing through misleading advertising.


EU: Parliament Members Call for Sustainable Textile Production

On April 27, 2023, the European Parliament reported that members of its Environment Committee had adopted recommendations targeting fast fashion and promoting sustainability and human rights in textile production. The recommendations call on the European Commission and EU member states to implement measures that make EU-made textiles more sustainable and conscious of human and animal rights throughout the supply chain, including:

  • eliminating the “high volumes of lower quality garments at low price levels” that lead to the overproduction and overconsumption of clothes and footwear;
  • reducing greenhouse gas emissions at all points in the textile production process;
  • banning the destruction of unsold textiles;
  • ending greenwashing practices;
  • promoting fair and ethical trade; and
  • reducing the use of microplastics and microfibers.

The recommendations were unanimously adopted by the Committee, with 68 votes in favor and one abstention. The next step is for the report to be adopted by Parliament, which is expected before the summer.

Press Release

Global: Investors Urge Heavy Plastics Users to Take Action

On May 3, 2023, a group of 185 investors representing over $10 trillion in assets under management wrote a letter to companies in the consumer goods and grocery industries – including Coca-Cola, Procter & Gamble, Danone, and Unilever – urging them to take action to address the global plastics crisis. The letter estimates the social cost of plastics to be US$ 350 billion per year, due to the adverse effects on human and environmental health, including from greenhouse gas emissions, ocean pollution, and collection costs. The letter highlights investors’ concerns that companies that do not take action will face increased regulatory, reputational, and litigation risks, as well as higher raw material costs. Such risks and costs put the companies’ “long-term value creation and investment returns at risk.”

The letter notes that, to date, companies have not taken sufficient action to make a meaningful impact. The investors set out three specific actions that they urge companies to take. First, companies should support a global plastics treaty and publicly support the European Commission’s Packaging and Packaging Waste Regulation. Second, single-use plastic packaging should be reduced and reuse systems should be upscaled. Finally, companies should identify and eliminate the over 3,000 potentially harmful chemicals found in food packaging and publicly report their progress on this front.

The investors invite other institutional investors to support the letter.