ESG Weekly Update – May 24, 2023

24 May 2023

Global: ISSB Consults on the International Applicability of SASB Standards

On May 11, 2023, the International Sustainability Standards Board (“ISSB”) launched a consultation on how to make Sustainability Accounting Standards Board (“SASB”) Standards easily applicable for entities operating in any jurisdiction and applying any generally accepted accounting principles.

The SASB Standards are used as guidance for applying (more on this here):

  • IFRS S1 – General Requirements for Disclosure of Sustainability-Related Financial Information, setting out requirements for an entity to disclose sustainability-related financial information about its sustainability-related risks and opportunities; and
  • IFRS S2 – Climate-Related Disclosures, setting out requirements for an entity to disclose climate-related financial information about its climate-related risks and opportunities.

Around 20% of the metrics included in the SASB Standards refer to specific national laws and regulations. The ISSB’s consultation seeks to revise these references to ensure that the standards can be applied without any issues or regional bias. The objective is to implement the revisions ahead of IFRS S1 coming into force in January 2024.

The exposure draft is open for comments until August 9, 2023.

Press Release
Exposure draft

EU: Parliament Approves Proposal Empowering Consumers to Make Sustainable Choices

On May 11, 2023, a plenary session of the European Parliament approved a draft directive, titled “Empowering Consumers for the Green Transition”, aiming to improve the transparency and sustainability of commercial practices to allow consumers to make more informed decisions about the products they purchase.

The proposed directive focuses on tackling misleading environmental claims and improving the sustainability of consumer goods. In particular, the rule would ban general environmental advertising and labeling claims such as “eco-friendly” or “natural” without supporting scientific evidence or demonstrated proof of excellent environmental performance, as well as prohibit claims relying entirely on offsetting schemes (such as purchasing carbon credits).

Beyond the greenwashing provisions, the directive also proposes banning early product obsolescence, namely product designs intended to shorten a product’s lifespan or limit the durability of a product. Instead, producers would be required to provide consumers with specific information about a product’s durability and reparability.

The Parliament and EU Member States are expected to begin negotiations on the final content of the directive shortly. A “green claims directive” focusing on greenwashing is also underway.

Press Release
Proposed Text

Norway: Sovereign Wealth Fund Files ESG Proposals at Four U.S. Public Compaines

Norges Bank Investment Management (“NBIM”), Norway’s sovereign wealth fund, filed shareholder proposals on climate at four U.S. companies. NBIM withdrew its proposals after receiving commitments on climate from Packing Corporation of America and Marathon Petroleum, while shareholders at NewMarket voted against the proposal; Westlake has not yet disclosed the results of the annual meeting.

The proposals were NBIM’s first on climate. Going forward, NBIM has committed to vote consistently at annual meetings and keep an open dialogue with companies and their boards, with shareholder proposals serving as a last resort. Carine Smith Ihenacho, the fund’s Chief Corporate Governance Officer, remarked that filing shareholder proposals is more appropriate in the United States, partly because of the easier process of filing proposals but also because U.S. companies lagged behind their European counterparts on various ESG topics.

Between 2009 and 2015, NBIM filed 21 shareholder proposals at 13 U.S. companies on proxy access and split the role of chief executive and chair but has not filed on any climate topics until now.

NBIM global voting guidelines 2023

U.S.: Republican Attorneys General Warn Insurers of Antitrust Issues

On May 16, 2023, 21 U.S. attorneys general, led by Utah AG Sean Reyes and Louisiana AG Jeff Landry, sent a letter to insurance companies asserting that joining UN net-zero alliances – Net-Zero Insurance Alliance and Net-Zero Asset Owner Alliance specifically – could violate American antitrust laws.

In the letter, the AGs allege that actions taken by 28 insurance companies have increased insurance costs, led to higher gas prices and increased the costs of goods and services by “pressur[ing] clients who work in an environmentally ‘dirty’ [oil, gas, power, and transportation] industry to progressively decarbonize their business practices.” They argue that membership in the alliances constitutes an arrangement across business competitors which violates both federal and state antitrust laws.

In particular, the AGs contend that the influence these companies collectively wield over the insurance market means that any sort of coordinated action would upset free market activity and threaten to increase costs, leading to increased prices. They further allege that emissions targets limit potential customers and business scope and could qualify as an illegal boycott.

This letter is one of a number of state-level Republican actions intended to curtail private ESG commitments from companies, business groups and international alliances (visit our tracker for more information).


India: Government Considers WTO Complaint Regarding EU Carbon Goods Tariffs

As the EU’s Carbon Border Adjustment Mechanism (“CBAM”) entered into force on May 16, 2023 (more on this here and here), it is reported that India is considering filing a complaint before the World Trade Organization (“WTO”). Indian officials fear the EU mechanism’s economic impact on key exports from India such as steel, iron ore and cement.

CBAM introduces 20% to 35% tariffs on imports of high-carbon goods. The mechanism was designed to be compatible with WTO rules by applying the same carbon price on imported goods as on producers. According to government sources, however, CBAM may constitute an illegal trade barrier with discriminatory effect, especially considering India’s compliance with its Paris Agreement pledges.