ESG Weekly Update – February 29, 2024

29 February 2024

EU: European Council Votes Against Corporate Sustainability Due Diligence Directive

On February 28, 2024, the European Council voted against the Corporate Sustainability Due Diligence Directive (“CSDDD”), which would have imposed obligations on certain companies to perform due diligence on human rights and environmental issues on their value chains and certain downstream activities.

The CSDDD did not receive the required majority of votes in the European Council after Germany and Italy voiced their opposition to the directive, expressing concerns about excessive bureaucracy and the burden that would be placed on business. France also attempted to significantly reduce the number of companies to which the directive would apply. This was the second attempt to approve the CSDDD in the Council, after the first vote was postponed earlier this month.

The European Council plans to work with the European Parliament to address the concerns of the member states, and to agree to a new text for the directive. For more information, please see Debevoise’s previous publications on the CSDDD, including: Debevoise In Depth, Update on the Corporate Sustainability Due Diligence Directive; ESG Weekly Update – February 14, 2024; and ESG Weekly Update – June 8, 2023.

ESG Today

U.S.: United States Supreme Court Declines to Hear High School Admissions Case

On February 20, 2024 the U.S. Supreme Court declined to hear a challenge to the 4th Circuit Court of Appeals’ ruling in Coalition for TJ v. Fairfax County School Board. The case centers around the admissions policy adopted in 2020 at Thomas Jefferson High School for Science and Technology (“Thomas Jefferson”), which uses socio-economic factors to inform admissions decisions. The plaintiffs were a coalition of parents and students who argued that Thomas Jefferson’s admissions policy racially discriminated against Asian Americans in violation of the U.S. Constitution’s 14th Amendment equal protection guarantee.

While the lower court granted summary judgment in favor of the plaintiff coalition, the 4th Circuit Court of Appeals reversed in favor of the school board in May 2023, holding that the school’s revised admissions policy did not violate the Equal Protection Clause. The Supreme Court’s denial of certiorari allows the Court of Appeals decision to stand. Justices Samuel Alito and Clarence Thomas dissented from the decision not to hear the case, calling the Court of Appeals’ ruling on what is required to prove intentional race discrimination “patently incorrect.”

Petition for Writ of Certiorari
Denial of Petition for Writ of Certiorari
Docket for Coalition for TJ v. Fairfax County School Board

U.S.: ExxonMobil Maintains Lawsuit Against Activist Shareholder Proposals

On January 21, 2024, ExxonMobil Corporation (“Exxon”) sued two investors, Arjun Capital and Follow This, in an effort to block a proposal from being presented at the company’s annual shareholder meeting. The proposal sought to accelerate the company’s efforts to reduce greenhouse gas emissions. Although the shareholders withdrew the proposal that gave rise to the lawsuit, on February 21, Exxon asked the U.S. District Court for the Northern District of Texas, Fort Worth Division, to proceed to trial.

In its request, Exxon claimed that the defendants “hijack the shareholder proposal process to advance their social causes with serial filings each year at the expense of investors who focus on generating returns.” The lawsuit seeks to bypass SEC Rule 14a-8, which includes a list of grounds for excluding shareholder proposals, including if a shareholder has presented a substantially similar proposal in the past. In this instance, Exxon claims that its shareholders put forth substantially similar proposals in 2022 and 2023, which received only 27.1% and 10.5% of the vote, respectively.

The lawsuit comes at a time when the total number of shareholder proposals submitted to public companies has been increasing. As cited in the complaint for this case, the number of shareholder proposals that were voted on at public companies’ annual shareholder meetings in 2023 has increased by 40% compared to 2021. According to SEC Commissioner Mark Uyeda, the number of ESG-related shareholder proposals submitted increased by 52% over that timespan, while the number of such proposals voted on at meetings increased by 125%.


EU: European Lawmakers Agree to Regulate Carbon Removal Through Certification Process

On February 20, 2024, European Parliament and Council lawmakers announced that they had reached a provisional political agreement on a regulation “to establish the first EU-level certification framework for permanent carbon removals, carbon farming and carbon storage in products.” This regulation would help monitor and accelerate carbon removal and soil emission reduction in the European Union.

The regulation will utilize a definition of carbon removals that is in line with the United Nations’ Intergovernmental Panel on Climate Change (IPCC), and will cover four types of activity:

  • permanent carbon removal;
  • temporary storage of carbon in products that are durable for at least 35 years, with consistent monitoring;
  • temporary storage of carbon resulting from carbon farming; and
  • reduction of soil emissions (including those resulting from carbon farming) and carbon removal from biological matter.

The European Commission is expected to produce a report by 2026 discussing the feasibility of certifying other activities that result in the reduction of emissions. The European Commission will be assisted by an expert group in developing tailored certification methodologies, while ensuring certification is voluntary and that key criteria are met for certification, namely quantification, additionality, long-term storage and sustainability. Lawmakers view this development as an important step for the European Union to achieve climate neutrality by 2050, in addition to maintaining the rapid reduction of greenhouse gas emissions as their top priority.

Press Release


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