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In Brief: London Metal Exchange sued over ‘dirty metals’ trade; SFDR review seen as lacking co-ordination

The latest ESG policy and regulatory news

The London Metal Exchange is facing a lawsuit in the UK High Court for its alleged involvement in enabling the trade of “dirty metals”. The case, filed by non-profits the Global Legal Action Network and the London Mining Network, alleges that metals traded on the LME are the proceeds of environmental crimes taking place in the Grasberg mine in Indonesia’s West Papua province. The non-profits argue that the policies set by the LME “do nothing” to prevent these metals being traded on its exchange. The claimants add that the toxic waste derived from the mining activities is being dumped into local rivers, leading to health issues in the indigenous communities that rely on these water ways.

The European Commission has published its recommendation regarding a 90 per cent reduction in net greenhouse gas emissions by 2040 compared with 1990 levels, as well as an industrial carbon management communication. Research by Climate Action Tracker suggests that the commission’s 2040 target is “not quite 1.5C compatible”. You can read our coverage about the implications of these announcements here.

The European Council and parliament have reached a provisional deal on delaying by two years specific aspects of the previously agreed Corporate Sustainability Reporting Directive. The CSRD’s sector-specific standards for small and medium-sized enterprises and for non-European companies will now only be adopted by June 302026, instead of June 30 2024. “This will allow companies to focus on the implementation of the first set of ESRS”, the announcement states. Some academic and business communities have criticised the move, urging a timely adoption instead.

The council and parliament have also reached provisional agreements on a right-to-repair directive, ESG rating regulations, as well as the Net Zero Industry Act and the Strategic Technologies for Europe Platform.

Separately, the parliament has also adopted its negotiating position on a proposed regulation involving the alteration of genes belonging to a single organism (new genomic techniques), with the aim of making food systems more resilient in the face of climate change and of reducing the need for fertilisers and pesticides. The parliament also endorsed new exposure limits on certain chemicals found in the manufacturing of green energy products, to protect the health of workers. The EU Council still has to agree to the limits before they become law.

Several European financial associations have published a public letter stating their concerns about a lack of co-ordination between the European Supervisory Authorities’ work on new rules for the Sustainable Finance Disclosure Regulation, and the commission’s own review of the landmark regulation. “It is critical that these two reviews of the SFDR are fully co-ordinated to guarantee legal certainty and deliver a successful lawmaking process, preventing overlapping and doubling efforts,” the announcement says. The signatories of the letter, which include the European Fund and Asset Management Association and the European Banking Federation, also say any changes to the SFDR would need to be backed up by “grandfathering measures”.

New rules under the EU’s Listing Act, which will require information on the environmental performance of companies to be included in prospectus summaries, have been welcomed by the World Wide Fund for Nature. The environmental group says the changes will provide for better disclosure as well as more information to retail investors interested in investing in greener assets. The WWF also praised the introduction of a notification system that will alert investors when a company considers an environmental issue as a material risk factor.

The European Financial Reporting Advisory Group has published a first set of “technical explanations” on the implementation of the European Sustainability Reporting Standards. They are based on questions received by Efrag through its dedicated Q&A platform. The group has also opened two public consultations regarding its work on digital taxonomies, with feedback accepted until April 8. The first consultation deals with the digital transposition of the first set of ESRS, by allowing digital tagging of ESRS statements for every data point as required under legislation. The second focuses on the digitalisation of the disclosure requirements for Article 8 under the SFDR.

The UK government has said the UK has become the first economy to reduce its greenhouse gas emissions by 50 per cent between 1990 and 2022. The government says the 50 per cent reduction is largely due to emissions cuts from the energy sector, with the country shifting from coal to renewables, which now represent more than 40 per cent of the UK’s electricity generation. No other information on the decarbonisation pathways of other sectors in the economy was provided in the assessment. The government says the result “has allowed us to take a more realistic approach while reaching our green targets, to ease the burden on hardworking families”.

The UK Sustainable Investment and Finance Association has welcomed a new report by UK charity the Financial Markets Law Committee, which looks at the fiduciary duties of pension fund trustees in relation to sustainability issues. UKSIF chief executive James Alexander says the guidance in the report “delivers the clarification necessary to make fiduciary duty legislation much more effective in its purpose”. He adds the report is clear that ESG risks are financial risks that should be taken into account by fiduciaries both in long and shorter-term investment horizons.

Meanwhile, the International Corporate Governance Network has released a statement on behalf of its members, criticising the regulatory overhaul of the UK listing regime initiated by the UK Financial Conduct Authority. The ICGN is cautioning against the proposals that remove shareholder voting rights prior to significant transactions, introduce dual-class shares, and merge the current “standard” and “premium” segments into a single listing category. The statement follows concerns that the FCA’s proposals — which aim to encourage more listings on the London market — may weaken governance standards. The regulator has admitted that “these proposals would result in a rebalancing of risk”. While the ICGN statement praised the UK’s current “advanced” corporate governance standards, in a statement on the proposed changes published this week, the FCA argues that “there is no clear evidence of a valuation premium for UK-listed companies due to our additional standards”.

British bank Barclays has released a revised climate change statement, in which it pledges to no longer provide project finance, or other direct finance, for upstream oil and gas expansion projects or related infrastructure. The bank also formulated an “expectation” for energy clients to either publish transition plans or decarbonisation strategies by January 2025. The change in policy is seen as a step forward by non-profits, but would nonetheless allow for further funding to oil and gas companies that continue expanding in this space.

The Chinese government has released a new set of rules to regulate emissions trading in the country and to counter fraud related to emissions data. While China has had a domestic emissions trading system since 2021, it so far only applies to the energy sector. The rules, which are set to kick in from 1 May, aim to better supervise trades and impose harsher financial sanctions in case of abuse. The penalties would apply both to the companies violating the rules as well as third parties who misrepresent companies’ emissions data.

The Australian government is looking for candidates to join its nature repair committee, following the passing in the country’s parliament of the Nature Repair Act at the end of 2023. The committee will act as an independent advisory body to the government and assess the biodiversity market created under the act. Applications are open until February 26.

Standard setter the Global Reporting Initiative has issued a standard to address the sustainability impacts of the mining sector globally. The GRI says the new standard will enable any mining company to report consistently on their operations, with the aim of increasing transparency and accountability. The standard was developed around 25 material topics core to the sector, including artisanal and small-scale mining operations in conflict zones and anti-corruption.

Meanwhile, the International Public Sector Accounting Standards Board is accepting feedback on two exposure drafts related to natural resources. One focuses on a proposed accounting standard for incurred costs in the exploration and evaluation of mineral resources. The other provides guidance on when to capitalise or expense incurred costs regarding the removal of waste material in surface mining operations. Comments on the exposure drafts need to be received by May 31.

The International Accreditation Forum has agreed that the International Ethics Standards for Sustainability Assurance recently launched by the International Ethics Standards Board for Accountants will be the benchmark when providing accreditation to companies that carry out assurance work on corporate sustainability disclosures. Under a new strategic partnership, the IAF and the IESBA have pledged to work more closely to enhance the ethics underlying the assurance of sustainability information.

ExxonMobil’s top 10 shareholder Norges Bank Investment Management, which runs Norway’s sovereign wealth fund, has spoken out against the oil major’s decision to sue two fellow shareholders for their proposed climate resolution at the company’s annual meeting. “We think it’s very aggressive and we are concerned about the implications for shareholders rights,” NBIM chief executive Nicolai Tangen told the Financial Times. The wealth fund has previously voted in favour of similar resolutions at Exxon and other oil majors. Earlier, it was reported that Exxon intends to pursue its lawsuit, even after filers Follow This and Arjuna Capital withdrew their resolution.

Danish wind developing company Ørsted has announced it will slash up to 800 jobs and suspend its dividend “to become a leaner and more efficient organisation”. The company also says it will exit the offshore markets of Norway, Spain and Portugal while “deprioritising” its development operations in Japan. The company, which is majority-owned by the Danish government and praised as an example of a fossil fuel producer transitioning to a renewables giant, has struggled with higher interest rates and supply chain issues hampering its balance sheet. It adjusted its 2030 target for installed renewable capacity down from 50 gigawatts to 35-38GW.

A service from the Financial Times