ESG Weekly Update – May 15, 2024

15 May 2024

Other Notable Developments

U.S. Methane Emissions: The U.S. Environmental Protection Agency issued revisions to its Greenhouse Gas Reporting Program to strengthen, expand, and update methane emissions reporting requirements for the oil and gas sector.

Biodiversity: Malaysia has announced its intention to introduce “orangutan diplomacy” in its relations with major palm oil-importing countries to show its commitment to protecting biodiversity conservation.

U.S.: Oklahoma Court Halts Enforcement of Anti-ESG Law Targeting BlackRock, JPMorgan 

On May 7, 2024, an Oklahoma District Court granted a request for a temporary injunction halting the application of the Oklahoma Energy Discrimination Elimination Act (the “EDEA”). 

Under the EDEA, which was passed in 2022, contractors with Oklahoma municipalities and state agencies must provide a written verification that they do not “boycott” energy companies. The EDEA also requires the Oklahoma Treasurer to keep a list of “restricted companies” that are considered to boycott energy companies on the basis that they, “without an ordinary business purpose, refus[e] to deal with, terminat[e] business activities with, or otherwise tak[e] any action that is intended to penalize, inflict economic harm on, or limit commercial relations with a company” due to that company’s engagement with fossil-fuel-based energy initiatives. A range of criteria may cause a company to qualify as a restricted company, including membership in world climate alliances with net-zero emission goals. (For more on the Oklahoma EDEA, see our previous Weekly Updates here and here.)

Since the EDEA’s enactment, pension funds have sought exemptions on the basis of the high cost of complying with the EDEA. On December 21, 2023, an Oklahoma taxpayer and beneficiary of the Oklahoma Public Employees Retirement System—an organization facing $9.7 million in compliance costs—filed suit against the Oklahoma Treasurer and requested a temporary restraining order and a temporary injunction, alleging that the EDEA violated the Oklahoma Constitution.

On May 7, 2024, the court granted the motion for temporary injunction. It found that the plaintiff had a substantial likelihood of success on two grounds: (i) that the EDEA violated the requirement that pension funds are held on trust for the exclusive purpose of providing benefits, refunds, investment management and administrative expenses (a requirement specific to state retirement systems); and (ii) that the EDEA was unconstitutionally vague.

On May 9, 2024, the Oklahoma Attorney General, Gentner Drummond, announced he was removing the Oklahoma Treasurer from any decision-making authority in this case. Later that same day, the Oklahoma Treasurer responded that his decision-making authority could not be removed and said he intended to appeal the court order. 

Attorney General press release
Treasurer press release

Asia: Japan Proposes New ISSB-Aligned Mandatory Disclosure Requirements

On March 29, 2024, the Sustainability Standards Board of Japan (the “SSBJ”) published a set of draft Sustainability Disclosure Standards: the “Universal Sustainability Disclosure Standard,” which sets out how the standards will be applied; the “General Disclosures” standard; and the “Climate-Related Disclosures” standard. 

The SSBJ was established in July 2022. While the legal framework for sustainability disclosure standards is set by Japan’s Financial Services Agency, the SSBJ is tasked with developing domestic standards in line with this framework.

In developing its Sustainability Disclosure Standards, the SSBJ concluded that it would be useful for market participants to align the Japanese standards with the International Sustainability Standards Board's (the “ISSB”) IFRS Sustainability Disclosure Standards. The Sustainability Disclosure Standards drafts therefore incorporate IFRS S1 (General Requirements for Disclosure of Sustainability-Related Financial Information) and IFRS S2 (Climate-Related Disclosures), with some changes to allow alternative jurisdiction-specific disclosures. 

The draft Sustainability Disclosure Standards also introduce a small number of requirements that are not specifically required by the ISSB Sustainability Disclosure Standards. Some of these new requirements are clarificatory, for instance by specifically requiring units of measurement to be clearly disclosed, while others are more substantial, for instance by requiring entities to disclose their total emissions across Scope 1, Scope 2, and Scope 3. 

The SSBJ is accepting comments on its draft Sustainability Disclosure Standards until July 31, 2024. 

SSBJ Press Release

UK: High Court Rules Government Climate Action Plan Is Unlawful 

On May 3, 2024, the English High Court ruled that the UK government’s Carbon Budget Delivery Plan (the “CBDP”) was unlawful. Under the Climate Change Act 2008, the UK Secretary of State is required to submit a report to Parliament about its proposals and policies to enable the UK to meet its carbon emissions-reduction targets of reaching net zero by 2050 and cutting emissions by over two thirds of 1990 levels. The previous report (the Net Zero Strategy) was deemed unlawful by the courts following a judicial review process initiated by ClientEarth, Friends of the Earth, and the Good Law Project in 2022 (see our previous Weekly Update, here). The Secretary of State was ordered to submit a compliant report to Parliament, which was done through the CBDP on March 31, 2023. In summer 2023, ClientEarth, Friends of the Earth, and the Good Law Project challenged the legality of the CBDP.

In deeming the CBDP to be unlawful, the Court held that the Secretary of State had unreasonably assumed that each policy and proposal to reduce emissions set out in the CBDP would be delivered in full, despite evidence that this would not be possible. The Court also held that, even if—when considered as a whole—the policy and proposals in the CBDP would together deliver the required emission reductions, the CBDP would still be unlawful because the Secretary of State was not provided with sufficient information regarding the risk to each individual policy and proposal.

As a result, the Court ordered the Secretary of State to submit a revised plan for reducing emissions to Parliament within 12 months.


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