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In Brief: EU discusses economic governance reforms; Australia proposes mandatory climate disclosure legislation

The latest ESG policy and regulatory news

Members of the European parliament have given their final approval to a new law that will ban climate neutrality claims that are not properly substantiated or are based on carbon offsets. Moreover, the law also regulates the use of sustainability labels, which will need to be based on official certification schemes. For a full overview of what the new law entails, see our previous reporting.

The parliament has also given the go-ahead to new rules that will impose emissions reductions on fluorinated gases and ozone-depleting substances, in alignment with the EU’s climate targets under the Green Deal.

Meanwhile, the parliament and the EU Council have reached a provisional agreement on a reduction standard for carbon emissions emitted by heavy-duty vehicles, such as buses, trucks and trailers.

The EU parliament is also opening consultations with the council regarding the bloc’s new economic governance rules, which would see the introduction of budgetary flexibility in countries’ fiscal plans to allow for much-needed climate investments.

Several non-profits have launched a legal challenge against the European Commission over the sustainable investment rules it levies on the aviation and shipping sectors under the EU’s green taxonomy. The legal challenge could result in a lawsuit before the European Court of Justice. A full overview of the case can be found here.

Amundi, Scottish Widows and Candriam are part of a group of 27 investors supporting this year’s Follow This climate resolution at oil giant Shell. Climate activist Follow This has been submitting resolutions at oil and gas majors’ annual meetings for years to try to force boards to set Paris-aligned decarbonisation targets. The organisation said its climate resolution was revised following consultation with large investors, but that “the essence, Paris-aligned emissions reduction targets, remains”. The main differences include a rewriting of the resolution’s supporting statement “to reflect investor requests for a more agnostic text that is solely focused on emissions”, and the replacement of the wording “2030 target” with “medium-term targets”.

In other Shell news, newly discovered internal files from the 1970s would further implicate the company in the alleged deception of climate change harms caused by its products. According to an investigation by news outlets DeSmog and Follow The Money, the newly released files could be used as further evidence by plaintiffs worldwide who have sued Shell under different legal frameworks in several jurisdictions.

Meanwhile, Norway has lost its case in court against Greenpeace Nordic and Natur og Ungdom (Young Friends of the Earth Norway), after a judge from the Oslo District Court ruled that the approvals of three oil and gasfields in the North Sea were invalid because they had been granted without an assessment of their environmental impact. The government is now not allowed to issue any new permits that would be necessary to develop these fields.

Legal non-profit ClientEarth has pledged to continue its battle in the Belgian courts against British chemicals group Ineos and its plan to build an ethane cracker in the port of Antwerp. At the beginning of January, Ineos received a temporary permit from the Flemish authorities to start developing the project after several years of delay. Ethane is a component of natural gas and a key element in the production of plastics. ClientEarth lawyer Tatiana Luján criticised the latest news saying: “This would be Europe’s largest plastics investment in decades and it is entirely out of touch with the Green Deal and the reality of climate change, the decline of the natural world, and the increasing evidence of what plastics do to our health.”

The UK government is “largely off track” in meeting its environmental objectives, shows a yearly assessment by the Office for Environmental Protection. The report, which covers the period April 1 2022 to March 31 2023, analysed the government’s progress towards legally binding environmental targets and goals under its “environmental improvement plan”. Out of 40 individual environmental targets, the report found that 10 were largely off track, while 15 were not possible to be examined due to a lack of sufficient evidence. The OEP suggests that one of the factors impeding government progress is the issue of policies being announced but then not properly implemented nor delivered.

The UK Financial Conduct Authority has appointed the first members of a new working group mandated to support and provide best practice to the financial industry on how to advise consumers buying products making sustainability claims. The group is expected to make its first recommendations in the second half of this year.

The UK government has published an impact assessment on potential transitional arrangements for developing large-scale biomass electricity generators. The generators are set to be used to power bioenergy carbon capture and storage under government plans to reach net zero and enhance energy security. The government has also launched a consultation on the design of these transitional arrangements, which is open until February 29.

Indian conglomerate Tata Steel has decided to shut the two blast furnaces it operates at Port Talbot in Wales, which will result in job losses of round 3,000 people, the BBC reports. The company is said to want to transition towards a method of low-carbon steelmaking, having secured a £500mn UK government subsidy, while investing an additional £700mn from its own funds to build new electric arc furnaces. However, both Tata and the UK government have been criticised for their lack of a strategic approach towards the transition. “A proper planned transition to the steel industry of the future, including hydrogen, could have kept these jobs in communities that need them,” says Jess Ralston, an analyst at non-profit the Energy and Climate Intelligence Unit. “The UK industry will have to transition or face decline.”

The Japanese Financial Services Agency has released a list of 21 rating agencies that have signed up to its voluntary code of conduct for environmental, social and governance evaluation and data providers.

Legislators in the US state of New Hampshire have proposed an anti-ESG law that would impose criminal accountability on those who take into account ESG factors when investing in funds on behalf of the state. The legislative proposal states that “it shall be a felony punishable by not less than one year, and not more than 20 years’ imprisonment”.

The US Federal Trade Commission is opening a consultation on proposed improvements to its “energy labelling rule”, which is aimed at helping consumers to compare the energy use and costs of competing home appliances. The purpose of the rule is to allow consumers to better understand the energy use of products so as to avoid cost surprises after purchase.

The US Department of Agriculture has announced the distribution of $19mn in grants under the “Higher Blends Infrastructure Incentive Program” of the US Inflation Reduction Act. The grants will assist selected US companies with building the infrastructure needed — such as pumps, dispensers and storage tanks — to expand the country’s biofuel capacity. The programme ends on September 30 2024, with the next application deadline being March 31 2025.

Australia’s Treasury department has opened a consultation on draft legislation that would introduce mandatory climate-related financial disclosure requirements for large businesses and financial institutions. Responses to the consultation are accepted until February 9.

The Institutional Investors Group on Climate Change has published its “net zero voting guidance”, aimed at assisting asset owners and managers in developing their own in-house net zero voting policies and practices. The guidance is based on three core principles of net zero voting: alignment with the investor’s own net zero objectives and targets; communication of net zero expectations; and support of net zero stewardship, engagement and investment approaches.

A service from the Financial Times