Practice News
Americas
California Climate Disclosure Laws Set to Go Into Effect
California’s broad, industry-agnostic climate reporting bills are set to go into effect on January 1, 2025, in amended form. Senate Bill 219, signed by Gov. Newsom on September 27, maintains the original timeline for greenhouse gas (“GHG”) emissions reporting under SB 253 (reports on Scope 1 and 2 due beginning in 2026, with Scope 3 due beginning in 2027), but extends the deadline for the issuance of implementing regulations by six months. SB 261 will require reports on climate-based financial risk drafted in accordance with TCFD by January 1, 2026. Please see our recent alert for further details on the application and requirements of both laws.
Missouri Files Motion to Dismiss to Eighth Circuit Appeal Intended to Save Its Anti-ESG Regulations
Missouri has asked the Eighth Circuit to dismiss its appeal of a federal judge’s decision finding that the state's anti-ESG regulations for brokers and advisers violate the First Amendment and are preempted by the National Securities Markets Improvement Act of 1996 and ERISA—securing an early victory for the Securities Industry and Financial Markets Association (SIFMA). The issue at hand is a rule requiring investment advisers and broker-dealers to inform Missouri customers if they incorporate a “social objective or other nonfinancial objective” into their investment decisions by having the customers consent via a signed form using language specified by Missouri. SIFMA argues that ESG aims are not predictors of profitability but can serve as a “tiebreaker” when considering two otherwise equivalent securities, while Missouri had argued that the rules are necessary to shield investors from financial advice that does not prioritize high financial returns. The judge granted the motion to dismiss the appeal and the state will pay the plaintiff $500,000 for fees and costs incurred during the district court litigation.
California to Require Child Labor Disclosures From Businesses That Conduct Social Audits
On September 22, Gov. Newsom signed AB 3234 into law, which will take effect on January 1, 2025 and requires an “employer” that has voluntarily subjected itself to a social compliance audit (“SCA”) on child labor practices to post a report on its website containing any child labor-related findings from that audit. In-scope companies include those headquartered, incorporated, or having its principle place of business in California, or doing substantial business in California, employing at least one person, if that company is conducting an SCA relating to child labor.
EU/U.K.
EU Commission Proposes Enforcement Delay for EU Deforestation Regulation
On October 2, the EU Commission proposed delaying enforcement of the EU Deforestation Regulation (“EUDR”) by 12 months (to December 30, 2025), following lobbying from industry, foreign governments and EU Member States. The measure is currently expected to apply to large and medium-sized companies from December 30, 2024. It seeks to ban the marketing in and export from the EU/EEA of seven listed commodities (coffee, cocoa, soy, beef, palm oil, rubber and wood) and certain derived products, unless they are (i) deforestation-free, (ii) produced in accordance with the relevant legislation of the country of production, and (iii) covered by a due diligence statement. Noncompliance can result in fines, confiscation of products/revenues, temporary exclusion from public procurement processes/public funding, or more serious penalties. Assuming EU Parliament and Council approval of the delay, companies will have additional time to implement compliant risk assessment and due diligence measures while minimizing potential supply chain disruptions, as informed by non-binding Guidance released by the Commission in October.
SDR Naming and Marketing Rules Implementation Delayed to April 2, 2025
On September 9, the U.K. Financial Conduct Authority (FCA) announced a delay to the application of the “naming and marketing rule” contained in the U.K.’s Sustainability Disclosure Requirements (SDR), to April 2, 2025. The naming and marketing rule is due to come into force on December 2, and will prohibit in-scope funds from using certain sustainability-related terms in their names or financial promotions unless they have adopted a sustainability label or comply with the disclosure requirements under SDR. In order for an in-scope U.K. authorized investment fund to be able to make use of the delayed implementation, they need to: (i) have submitted a completed application for approval of amended disclosures by 5 p.m. on October 1, 2024; and (ii) must currently be using one or more of the terms “sustainable,” “sustainability” or “impact” in their name and be intending to either use a label or change the name of the fund.
EU Commission Orders 17 Non-Compliant Member States to Fully Transpose CSRD
As discussed in our July update, the deadline for EU member states to transpose the Corporate Sustainability Reporting Directive (CSRD) into national law passed on July 6 with transposition by a number of Member States still outstanding. On September 26, the European Commission adopted a package of infringement decisions to order compliance from the 17 Member States that have not yet communicated full transposition of CSRD into national law. The Member States have two months to respond to the European Commission’s letter of formal notice and to complete transposition. Failing that, the European Commission has the ability to refer the matter to the European Court of Justice and ask the court to impose penalties.
CSRD Assurance Guidelines Issued
On September 30, the Committee of European Auditing Oversight Bodies (CEAOB) adopted final non-binding guidelines on limited assurance over sustainability reporting. The Corporate Sustainability Reporting Directive (CSRD) requires the European Commission to adopt limited assurance standards by October 1, 2026. To assist companies required to report before those standards are available, these non-binding guidelines outline general principles when undertaking limited assurance engagements of sustainability reporting. The guidelines were adopted at the European Commission’s request and Member States may recommend (as seen in Luxembourg) or require use of the CEAOB guidelines.
AMEA
Australia’s Treasury Laws Amendment Finalizes Climate Reporting Requirements
The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (Cth) (the “Act”) was passed by the Australian Parliament on September 9, 2024 and received final royal assent on September 17, 2024. The Act establishes the legal basis for the change to the mandatory Australian Sustainability Reporting Standards S1 and S2 reporting, which the Australian Accounting Standards Board (“AASB”) approved on September 20, 2024, in alignment with the ISSB S1 and S2 standards. The AASB plans to issue related assurance standards to complement the mandatory climate disclosure regime in Australia. The disclosure obligation under the Act applies to both listed and unlisted entities, and the trigger for disclosures vary depending on the entities’ size and activities. The Australian mandatory climate disclosure regime differs from other climate reporting jurisdictions, such as Japan and the European Union, which only cover listed entities. In accordance with the Act, larger entities are set to start reporting from January 1, 2025.
China Unveils Rules for the Issuance and Trading of Renewable Energy Green Electricity Certificates
On September 5, officials from China’s National Energy Administration answered questions related to the Rules for the Issuance and Trading of Renewable Energy Green Electricity Certificates (GEC) (“the Rules”) issued on August 26, 2024. The Rules establish standards for the issuance and trade of GEC in China, aiming to ensure a unified, open, competitive, transparent, and traceable green electricity market. In the Rules, the National Energy Administration defines the roles of authorities, account management, issuance methods, trading requirements, and information management for GECs, reinforcing China’s commitment to green and low-carbon development. Effective immediately, the Rules have a validity period of 5 years.
Standards
IFRS Releases Guide on ISSB Sustainability Reporting Standards
In June 2023, IFRS released the inaugural general sustainability (IFRS S1) and climate (IFRS 2) reporting standards to provide investors with information about companies’ sustainability opportunities and potential risks. More than 20 jurisdictions, representing over 50% of global GDP and global greenhouse gas emissions, plan to use the ISSB standards or take steps to introduce the standards in their internal frameworks. The released guide seeks to support companies in their voluntary application and implementation of the ISSB standards and provide an outline to communicate the company’s progress to their investors. The guide gives particular emphasis on two elements of the ISSB standards: (1) transition relief, including ‘climate-first’ reporting, comparative disclosures and reliefs around the disclosure of greenhouse gas emissions and (2) proportionality mechanisms to offer sufficient measures to address the range of capabilities and circumstances of companies.