ESG Weekly Update – May 8, 2024

8 May 2024

Other Notable Developments

G7 Coal Power Phase Out: On April 29–30, 2024, the G7 forum, comprising the United Kingdom, the United States, Canada, France, Italy, Germany and Japan, met in Turin, Italy, to discuss their climate, energy and environmental agenda. Among other commitments, the G7 agreed to phase out existing unabated coal power plants by 2035 “or in a timeline consistent with keeping a limit of 1.5˚C temperature rise within reach, in line with countries’ net-zero pathways.”

African Development Bank Sets SDG Target: The African Development Bank President Dr. Akinwumi A. Adesina emphasized the need to increase financing to achieve the United Nations’ Sustainable Development Goals (the “SDGs”) by 2030. He estimated that the annual financial shortfall has increased from $2.5 trillion in 2015 to $4 trillion due to the impact of the COVID-19 pandemic. He also identified five key areas for investment: climate change, food security, energy access, health security and resource mobilization to meet the SDGs.

EU: European Council Postpones Sustainability Reporting Standards for Specific Sectors and Non-EU Companies

On April 29, 2024, the European Council of the European Union approved a directive amending the Corporate Sustainability Reporting Directive (the “CSRD”) to provide more time to apply the European Sustainability Reporting Standards (the “ESRS”). The CSRD requires in-scope EU companies and certain non-EU companies to make sector-specific sustainability disclosures in accordance with the ESRS.

In particular, the directive postpones to June 30, 2026 (from June 30, 2024) the adoption of sector-specific reporting standards for EU companies and general reporting standards for non-EU companies in scope. According to the European Council, this delay will enable companies to focus on implementing the first set of ESRS, adopted by the European Commission in July 2023, which includes undifferentiated sustainability reporting requirements across sectors.

The agreement between the European Council and Parliament urged the European Commission to publish and adopt the sector reporting standards at an earlier date, before June 2026.

European Council Press Release

U.S.: Environmental Protection Agency Issues Power Plant Pollution Rules

On April 25, 2024, the U.S. Environmental Protection Agency (the “EPA”) announced final rules aimed at reducing pollution from fossil fuel-based power plants. The standards are designed to provide regulatory certainty to the power sector and further support their long-term investments in clean energy transition.

The new rules were introduced under the Clean Air Act, Clean Water Act and Resource Conservation and Recovery Act. They provide that:

  • existing coal-fired plants and new gas-fired plants must control 90% of their greenhouse gas emissions by using available control technologies;
  • coal-fired power plants must comply with the updated Mercury and Air Toxics Standards, which tighten emissions standards for toxic metals by 67% and reduce the emissions standard for mercury from existing lignite-fired sources by 70%;
  • coal-fired power plants must limit discharge of pollutants in wastewater; and
  • coal ash must be safely managed in areas that previously were unregulated at the federal level.

EPA Press Release
Rule on Greenhouse Gas (GHG) Emissions
Rule on National Emission Standards for Hazardous Air Pollutants
Rule on Wastewater Discharge
Rule on Coal Combustion Residuals

Global: IFRS Foundation and EFRAG Publish Guidance on Interoperability of ISSB Standards and ESRS

On May 2, 2024, the International Financial Reporting Standards Foundation (the “IFRS Foundation”) and the European Financial Reporting Advisory Group (the “EFRAG”) published guidance on the interoperability of IFRS Sustainability Disclosure Standards (the “ISSB Standards”) and the ESRS.

This guidance promotes the convergence of sustainability-related disclosures by setting out how companies can apply both the ISSB Standards and ESRS. It discusses alignment on topics including materiality, presentation and climate disclosures. It also explains how a company starting with either set of standards can ensure compliance with both sets of standards.

IOSCO, the international standards setter for securities regulators, urged regulators to incorporate the ISSB Standards into their national regulatory frameworks.

IFRS press release
ESRS-ISSB Standards Interoperability Guidance

Global: ISSB Publishes Digital Taxonomy for Sustainability Disclosures

On April 30, 2024, the IFRS Foundation’s International Sustainability Standards Board (the “ISSB”) announced the publication of the IFRS Sustainability Disclosure Taxonomy (the “Taxonomy”), a new digital tool that will enable investors to analyze sustainability-related financial disclosures based on the ISSB’s recently released sustainability and climate-related reporting standards.

The Taxonomy reflects the first two standards issued by the ISSB in June 2023, namely IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures), as well as their accompanying guidance. The two standards took effect in January 2024. Following the launch of IFRS S1 and S2, the ISSB published a proposed digital taxonomy reflecting the disclosure requirements included in the standards. The newly launched Taxonomy contains the disclosures collected to date under the two reporting standards.

Similar to the IFRS Accounting Taxonomy used for financial reporting, the Taxonomy is a classification system, composed of a set of XBRL files used to identify information. The Taxonomy aims to facilitate communication between preparers and users of the disclosures by improving accessibility and comparability of the reported information for investors.

The IFRS Foundation announced a webcast, scheduled for later in May, to explain the role of the ISSB Taxonomy and its benefits.

IFRS Press Release
IFRS Sustainability Disclosure Taxonomy (ISSB Taxonomy)

U.S.: Government Streamlines Environmental Reviews for Clean Energy and Infrastructure Projects

On April 30, 2024, the Biden Administration introduced significant changes to the federal permitting process in an effort to accelerate the development of infrastructure and green projects across the United States. The goal is to accelerate project commencement and completion in an effort to address significant delays in the sector.

The changes introduced include: (i) stricter timelines for completing environmental reviews (two years for comprehensive environmental impact statements and one year for less extensive environmental assessments); (ii) shorter and more easily understandable environmental documents for better accessibility; and (iii) broader use of categorical exclusions, enabling a more expedited form of environmental review for projects deemed to have minimal environmental impacts.

White House fact sheet

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