In Brief: UK to introduce CBAM by 2027; Native American tribes sue Big Oil

The latest ESG policy and regulatory news

The European Council has agreed its negotiating position to regulate environmental, social and governance ratings. Discussions with the European parliament on a final deal are expected to start in the new year.

The council also announced it would extend emergency measures on energy prices and supply security for an additional year. The emergency measure was implemented following Russia’s invasion of Ukraine.

Meanwhile, the council and parliament reached a provisional agreement on rules to reduce road transport emissions, and during the Environment Council, ministers agreed their negotiating position on a regulation aimed at cutting packaging and packaging waste. Sustainable Views published a more detailed piece on EU environmental policy announcements earlier this week.

The European Banking Authority has published final guidelines on diversity policies and gender pay gaps for financial services companies. Separately, the EBA has also advised the European Commission to introduce a voluntary EU label for green loans based on a yet-to-define common EU definition, and to integrate the concept of green mortgages in the union’s mortgage credit directive.

The European Securities and Markets Authority has launched a consultation on draft guidelines aimed at streamlining the approach of national regulators in their supervision of listed companies’ sustainability reporting aligned with EU law. The consultation is open until March 15 and final guidelines are expected to be released in the third quarter of 2024.

Esma has also published a new methodology approach to model climate risks in the fund sector and an analysis on the financial impact of greenwashing.

The European Financial Reporting Advisory Group and the Taskforce on Nature-related Financial Disclosures have agreed to co-operate to further upscale the reporting of nature-related sustainability issues. The two bodies are working on finalising an interoperability map, to be released at the beginning of next year.

The EU’s green hydrogen fund has received additional, unspecified funding from Germany, which will allow it to broaden its reach to also deploy investment grants to developing countries, said an announcement by the European Investment Bank. Launched in 2021, the fund has mostly focused on providing strategic advice and technical assistance to green hydrogen projects in the developing world

Separately, the EIB has signed a partnership with Rwanda to advance critical raw materials investments. Similar agreements have been made between the commission and other African countries. The deals are part of the implementation of the EU’s Critical Raw Materials Act.

The UK government has confirmed it will introduce a Carbon Border Adjustment Mechanism by 2027 on imports of aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron and steel. The mechanism, which will kick in a year later than the EU’s CBAM, aims to charge companies for the emissions embodied in products imported from countries with weaker climate policies.

Simultaneously, the UK Emissions Trading Scheme Authority has launched a consultation on the development of future ETS market policies and on changing the way free allocations are distributed in stationary sectors. Both consultations are open until March 11.

The UK government has also announced plans for “CCUS Vision”, a domestic carbon capture, usage and storage market. Set to be operational by 2035, the goal is to store 20mn-30mn tonnes of carbon dioxide a year by 2030, the equivalent of taking 6mn cars off the road.

The UK’s Department for Energy Security and Net Zero and the Treasury have commissioned a review into transition finance, set to be finished in July 2024.

The Financial Conduct Authority is sticking to its guns over proposals to simplify the UK’s listing regime. Following a May consultation, the regulator announced it had retained plans for a single listing category and streamlined eligibility requirements, and a shift towards a “disclosure-based regime”. It acknowledged the “increased possibility of failures”, but argued that these changes were needed to boost growth. The proposed changes were not universally well-received. “There is little sign the widely held and clearly communicated investor concerns about weakening corporate governance standards have been taken into account,” said Railpen senior investment manager Caroline Escott. “Disappointingly, this latest consultation has taken a backwards step on a key shareholder right to an equal vote.”

Campaign groups Uplift and Greenpeace have launched separate legal proceedings against the UK government for its decision to go ahead with the development of the Rosebank oil and gasfield in the North Sea. A judicial review of the decision to grant consent to the project was submitted to the Court of Session in Edinburgh. The campaign groups argue, among other things, that the decision is unlawful as it is incompatible with the government’s net zero strategy.

The pay ratio between chief executives and employees across the FTSE 350 remained largely stable in 2022, despite high inflation triggering a cost of living crisis, showed an analysis by UK think-tank the High Pay Centre. The FTSE 350 index featured a median CEO versus a median employee pay ratio of 57 to 1 in 2022. This figure is a slight increase compared with the previous year, where CEOs earned, on average, 56 times more than employees. Pay gaps between CEOs and employees narrowed during the pandemic, but have now returned to pre-pandemic levels, the study stated. It recommends companies provide more transparency on how many jobs are provided at different pay levels.

The French securities regulator has said it will ask the Legal High Committee for Financial Markets in Paris for an opinion on whether the law regarding the procedure for a company to withdraw a resolution from an annual meeting should be further clarified. This would also include ESG-related resolutions filed by investors, in opposition to the board. In its announcement, the regulator also made several recommendations to enhance the country’s corporate governance code, including the request to engage an external consultant to evaluate the board of listed companies at least once every three years. The watchdog is also in favour of disclosing information on the reasons why board directors resign or decide to leave their position earlier than expected.

Dutch bank ING has announced it will phase out upstream oil and gas financing by 2040 and aim to triple new financing for renewable power to €7.5bn annually, by 2025. Commenting on the announcement, Lucie Pinson, director of non-profit Reclaim Finance, said: “ING is the first major bank to publicly recognise the need to phase out conventional gas because of its negative impact on climate … ING’s new commitment to triple the annual financing of renewable power generation by 2025 is a big step forward, though the energy sources covered need to be specified.”

The International Sustainability Standards Board has amended the non-climate-related content of its sustainability standards to enhance their international applicability, regardless of jurisdiction or accounting framework.

The US Treasury Department and Internal Revenue Service have issued guidance on the eligibility of tax credits for sustainable aviation fuels. To apply for the tax credit, which ranges from $1.25 to $1.75 a gallon, the chosen SAF must reduce by at least 50 per cent greenhouse gases based on a lifecycle assessment, as compared with fossil fuels.

Two Native American tribes have filed separate climate lawsuits against oil majors, including ExxonMobil and Shell, for allegedly deceiving the public about fossil fuels’ contribution to climate change. The Makah Indian Tribe and the Shoalwater Bay Indian Tribe filed their cases with the King County Superior Court in Washington state asking for damages. While local governments have engaged in similar lawsuits before, it is the first time tribes have launched this type of litigation against Big Oil.

Democrats serving on the energy and commerce committee of the US House of Representatives have sent a letter to the management of US oil and gas wells company Diversified Energy inquiring about the company’s methane pollution. The politicians want the company to make clarifications about the costs involved to clean up wells, how these operations are monitored, and the number of workers responsible for these tasks.

Australia is consulting on reforms to its “safeguard mechanism”, the country’s legal framework for reducing carbon emissions across its largest industrial facilities, including mining and fossil fuel production. Views on the policy’s emissions intensities and international benchmarking are accepted until January 16. Meanwhile, the country’s climate change authority has recommended various improvements to the National Greenhouse and Energy Reporting Act, as well as the Australian Carbon Credit Unit Scheme. The changes are necessary for the legislation “to remain fit for purpose in a rapidly changing emissions and abatement landscape”, the authority said.

The Dubai Financial Services Authority and the Hong Kong Monetary Authority have announced a partnership to enhance cross-border collaboration in developing sustainable finance policies and regulations across the Middle East and Asia.