Other Notable Developments

EU Net-Zero Technologies: The European Commission announced that it will invest €3.4 billion in “net-zero technologies”, including electric vehicle batteries. The Commission also launched the second auction for the European Hydrogen Bank, a facility designed to create a full hydrogen value chain in Europe, with a budget of over €1.2 billion. The auction is a funding round for supporting the development of renewable hydrogen producers based in the European Economic Area.

U.S.: California Air Resources Board Publishes Enforcement Notice on Climate Data

On December 5, 2024, the California Air Resources Board (“CARB”) published an enforcement notice regarding disclosures under the Climate Corporate Data Accountability Act, also known as SB 253 (the “Act”). The Act requires companies with more than $1 billion in revenue that do business in California to report Scopes 1 and 2 greenhouse gas (“GHG”) emissions annually beginning in 2026 for the 2025 fiscal year and Scope 3 GHG emissions beginning in 2027 for the 2026 fiscal year.

In the notice, CARB recognized that “companies may need some lead time to implement new data collection processes” for Scopes 1 and 2 GHG emissions and announced that it “will exercise its enforcement discretion” to allow the first report due in 2026 to be based on information that the company already possesses “on the condition that entities demonstrate good faith efforts to comply with the requirements of the law”. However, CARB emphasized that the notice does not constitute an interpretation of statutory reporting requirements and encouraged reporting entities to fully comply with the regulations as quickly as possible.

For more details, see our Debevoise updates here and here.

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Enforcement Notice

EU: European Commission Updates Guidance on EU Taxonomy for Environmentally Sustainable Economic Activities

On November 29, 2024, the European Commission published draft FAQs clarifying issues related to the implementation of the EU Taxonomy, a standardized classification system for environmentally sustainable economic activities intended to direct investments toward the EU’s environmental objectives and to prevent greenwashing.

The FAQs provide technical clarification on several aspects of the Taxonomy, including on the screening criteria contained in the Taxonomy Delegated Acts. These govern the criteria for activities contributing to each of the six environmental objectives set out in the Taxonomy, including climate change mitigation and adaptation, transition to a circular economy, and protection and restoration of biodiversity and ecosystems. Among other things, the FAQs also provide guidance on reporting Taxonomy-related information under the EU’s Corporate Sustainability Reporting Directive.

The Commission’s stated aims in publishing these FAQs include making the Taxonomy easier to use and ensuring comparability between Taxonomy information reported. The draft FAQs will be formally adopted once they are translated into the EU’s official languages.

For more details, see our Debevoise In Depth updates on Reporting Taxonomy Alignment under CSRD for Asset Managers and, more generally, EU Taxonomy Regulation.

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Press Release
FAQs

Europe: Luxembourg Financial Regulator Fines Aviva for ESG-related Breaches

On November 29, 2024, Luxembourg’s financial regulator, the Commission de Surveillance du Secteur Financier (the “CSSF”), announced that it had fined Aviva Investors Luxembourg S.A. (“Aviva”) for misconduct in relation to five sub-funds of a fund under management (the “Fund”). The funds had been marketed as “light green” under Article 8 of the Sustainable Finance Disclosure Regulation (“SFDR”), meaning that they promoted “environmental and social characteristics” under the regulation. The fine, set at €56,500, is the CSSF’s first sanction under the SFDR.

Following an inspection focused on ESG matters at Aviva, the CSSF identified persistent breaches in the Fund’s internal governance. In particular, the CSSF found that:

• the first sub-fund had purportedly implemented an investment process aimed at filtering out assets with less favorable ESG characteristics. However, the CSSF determined that the sub-fund had not, in fact, adhered to this strategy and had invested in bonds, representing, on average, 5.5% of the net assets of the sub-fund, issued by five countries whose ESG scores did not meet the relevant criteria; and

• the remaining sub-funds had been described in the Fund’s prospectus as “primarily targeting” sustainable development goals, as defined by the United Nations, when in fact measures put in place by Aviva did not effectively ensure that the sub-funds met this target.

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CSSF Sanction

UK: “Naming and Marketing” Rules for Investment Products Enter into Force

On December 2, 2024, the United Kingdom’s “naming and marketing” rules for sustainability products under the Sustainability Disclosure Requirements (the “SDR”) entered into force.

The SDR and corresponding investment labels regime were originally published in November 2023, with the goal of protecting investors by supporting more informed decisions related to sustainability matters. Throughout 2024, several policies relating to sustainable investment took effect, including anti-greenwashing rules and rules permitting UK-based investment funds to use investment labels on their products.

While the “naming and marketing” rules went into effect on December 2, the FCA, in September, announced a “limited temporary flexibility” allowing UK investment funds, under certain circumstances, until April 2, 2025 to comply.

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