ESG Weekly Update – December 1, 2023

1 December 2023

Canada: Government to Introduce Subsidies for Carbon Capture and Green Energy Projects

On November 21, 2023, the Government of Canada released its Fall Economic Statement, where it confirmed it would introduce its carbon capture utilization and storage subsidies later this fall. The subsidies will take the form of investment tax credits (“ITCs”). Though first announced in 2021, the draft legislation introducing carbon capture utilization and storage ITCs was only recently published for public comment on August 4, 2023.

Other subsidies announced in the Fall Economic Statement include ITCs for clean technology adoption (available from March 28, 2023), clean hydrogen (available from March 28, 2023), clean technology manufacturing (available from January 1, 2024), and clean electricity (expected from March 2024 for projects that began construction after March 28, 2023).

Certain labor requirements will need to be met to claim any ITCs, including paying prevailing union wages and providing apprenticeship training opportunities. The aim of these measures is to enable Canada to meet its goal of net-zero emissions by 2050.

Fall Economic Statement

Global: GRI Publishes Draft Climate Change and Energy Disclosure Standards

On November 21, 2023, the Global Reporting Initiative (“GRI”) published the first draft of a proposed new Climate Change Standard and an updated draft of the Energy Standard. These drafts focus on how organizations can cut their greenhouse gas emissions and reduce energy consumption, while supporting the principles of a just transition to a net-zero economy. GRI is a leading provider of sustainability reporting standards, covering topics such as biodiversity, tax, and health and safety.

The proposed Climate Change Standard will require organizations to report on their plans for climate change mitigation and adaptation, their emission reduction targets, the reduction of greenhouse gas emissions across their value chains, and their use of carbon credits. The standard also contains disclosure requirements related to the societal impact of climate change, such as reporting the number of jobs created, eliminated, and redeployed due to an organization’s climate change transition plan.

The amended draft Energy Standard aims to clarify how organizations reduce their energy consumption, achieve energy efficiency, and source renewable energy. The new draft requires organizations to disclose the breakdown of significant energy consumption in their value chain by reference to both upstream and downstream Scope 3 emissions.

Comments on the draft Climate Change Standard and the Energy Standard are accepted until 29 February 2024. The final standards are expected to be published in Q4 2024.

GRI Press Release
Climate Change Standard
Energy Standard

Global: NZAOA Publishes Guide for Asset Managers on Net Zero Engagement Strategies

On November 16, 2023, the United Nations-convened Net Zero Asset Owner Alliance (“NZAOA”) published a guide for asset managers on net zero engagement strategies. The guide urges asset managers to adopt a “consistent, transparent, and outcomes-oriented climate engagement strategy, which recognises that climate change poses systemic risks to asset owner portfolio returns.”

The guide sets out four key recommendations for asset managers building their climate engagement strategies. Asset managers should:

  • Establish governance and oversight structures that ensure that engagement activities are integrated across the organization in a manner that supports its broader climate engagement strategy;
  • Set and publish a climate engagement strategy, which sets out climate change-related investment beliefs, how climate engagement contributes to the overall climate strategy, and a plan of action for issuers or portfolio companies that do not meet expectations;
  • Ensure that climate engagement practices are prioritized across the organization and set up internal tracking systems to share climate engagement insights and actions across teams and portfolio management activities; and
  • Make appropriate disclosures relating to the implementation of the climate engagement strategy to ensure transparency and accountability.

Notably, the NZAOA guide includes an antitrust disclaimer. This is likely in response to antitrust probes by several U.S. state attorneys general into the Net Zero Financial Service Providers Alliance and Net Zero Insurance Alliance (see our weekly update covering this update here). The Debevoise State-Level ESG Investment Developments Tracker tracks these and related developments at the state level.

Press Release