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In Brief: Another US youth climate case likely to go to trial; UK opposition’s green investment pledge under scrutiny

The latest ESG policy and regulatory news

The youth climate case of Juliana vs United States can proceed to trial after a federal judge in Oregon rejected the US government’s latest attempt to dismiss the case. The lawsuit, which was initially filed in 2015 by 21 youth plaintiffs against the US Department of Justice, claims that actions taken by the government have contributed to climate change and violated the plaintiffs’ constitutional rights to “life, liberty and property, as well as failed to protect essential public trust resources”. Youth climate cases have been gaining momentum, mostly in the US and Europe. In August 2023, a ruling on Held vs Montana declared the exclusion of climate factors in the state’s permitting decisions as unconstitutional.

The US Department of the Treasury and the Internal Revenue Service issued proposals for regulating tax credits for clean hydrogen production. Part of the Inflation Reduction Act, the regulation seeks to define which types of hydrogen and which production facilities qualify for the tax incentive, based on the source’s greenhouse gas emissions’ life cycle. The regulation also allows for the inclusion of hydrogen produced from landfill gas, in cases where renewable natural gas or fugitive methane are being used. The tax incentive for producers will range from 60 cents to $3 a kilogramme of hydrogen. Previously, the Treasury had announced a similar tax incentive for producers of sustainable aviation fuels.

The European Financial Reporting Advisory Group has released and opened for consultation three draft implementation guidance documents related to the European Sustainability Reporting Standards. The first guidance document focuses on materiality assessment requirements, the second draft looks at value chains, and the third lists guidance on data points. The consultations on the various documents are open until February 2.

Revisions to France’s socially responsible investment label, Investissement Socialement Responsable, may lead to forced divestments of billions of euros in 2024, as reported by the Financial Times. The SRI label, which was launched in 2016 and predates EU-wide sustainable finance policymaking, will be tightened, prohibiting investment companies from 2025 to include in their SRI labelled-portfolios any companies that launch new hydrocarbon projects. The rules are likely to impact investment firms outside France, as many asset managers implement the same sustainability funds across Europe to avoid duplication costs and expand liquidity, says the FT. The UK is establishing its own sustainability fund labels, while the EU is revising its disclosure regime for Article 8 and 9 funds to tackle greenwashing concerns.

The Italian central bank has published an analysis on the integration of climate risks in the corporate strategies of non-bank financial intermediaries. The central bank also published a preliminary analysis on the impacts of climate risks on accounting and the disclosure of environmental, social and governance risks by Italian banks.

UK Sustainable Investment and Finance Association chief executive James Alexander has urged the UK opposition Labour party “to hold firm on its commitment on £28bn of green investment annually by the second half of the next parliament”, in an emailed statement. The comment was made following the new year speech by Labour leader Sir Keir Starmer, who emphasised that any government borrowing for the plan must be aligned with the party’s fiscal rules.

Norway’s largest pension fund, KLP, with assets under management of $70bn, has divested from 12 companies listed on the stock exchanges of Saudi Arabia, Qatar and the United Arab Emirates following environmental and human rights concerns. Following a due diligence assessment, 11 companies active in construction, telecommunications and real estate were cut from the portfolio due to “an unacceptable, sector-specific risk of contributing to human rights abuses”. The remaining company, Saudi Aramco, was also excluded based on climate risks.

An inheritance tax to fund climate action in Switzerland has been proposed by the youth section of the country’s social democrat political party, known as Jungsozialisten Schweiz. In a statement, the youth organisation claims to have collected enough votes to trigger a national referendum on the matter. The tax, if applied to inheritance transfers above SFr50mn ($59mn) and taxed at 50 per cent, could generate approximately SFr6bn a year, according to the group’s estimates.

Taiwan has started trading voluntary carbon credits on its newly launched Taiwan Carbon Solution Exchange. According to local media, the first trading day saw transactions totalling approximately $800,000.

A service from the Financial Times