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In Brief: Zalando to remove sustainability references; Chicago sues Big Oil over climate risk deception

The latest ESG policy and regulatory news

Online retailer Zalando has committed to remove sustainability and environmental references from its web pages, following an investigation by the Consumer Protection Cooperation Network, an EU network of supervisory authorities that started in 2022. The European Commission announced that from April, Zalando will be obliged to publish “clear information” about its products’ environmental characteristics, such as the percentage of recycled materials, while avoiding misleading sustainability displays next to its products. The company will also have to submit a report on the implementation of its commitments, which the Consumer Protection Cooperation Network will assess and if necessary impose further content removals or fines.

The European parliament and the European Council have reached a provisional deal on strengthening EU air quality standards to have greater alignment with the recommendations of the World Health Organization. Air-polluting substances, such as nitrogen dioxide, arsenic, lead and nickel, will have stricter annual limits, which will be reviewed by 2030 and every five years thereafter.

The two EU institutions also agreed on a provisional agreement to legislate a carbon removals certification framework, which aims to expand the deployment of carbon removal and soil emission reduction activities, on a temporary and permanent basis.

The council has also given the final approval to amendments to the unfair commercial practices directive and the consumer rights directive, which centre on consumer rights in the green transition and the circular economy, such as protections against misleading sustainability claims.

The European Environment Agency has published a report emphasising that repair, reuse and recycling measures should be further expanded in the race to cut emissions to reach the EU’s 2050 net zero pledge.

Meanwhile, the Belgian presidency of the council is struggling to reach agreement on several dossiers that need finalising before the EU elections in June, notably the EU Corporate Sustainability Due Diligence Directive and the EU Energy Taxation Directive. Meanwhile, the EU Nature Restoration Law is seeing a renewed rebellion by certain MEPs in its final hurdle. You can find more details in our editor’s note here.

The EU and Rwanda have signed a memorandum of understanding on critical raw materials’ value chains. The agreement will be followed by a road map in six months’ time, setting out the concrete steps of the strategic partnership, which will also include increased due diligence and traceability of raw materials and alignment with environmental, social and governance standards.

French financial market regulator the Autorité des Marchés Financiers has published a position paper detailing the main principles it wants the European Commission to follow in the ongoing review of the EU’s Sustainable Finance Disclosure Regulation. The regulator favours a “thorough recast” of the SFDR, whereby product categories would be based on objective minimum criteria, while also prioritising simplification “wherever possible” to provide investors with the most material disclosures. It proposes four different categories to replace the current division of Articles 8 and 9 funds, which have caused controversy when being used as a label rather than as a disclosure mechanism.

The EU is set to miss its climate targets for 2050, according to research by energy consultancy Wood Mackenzie. The union is on course to progressively increase its renewables footprint, but the planned capacity increase would not be enough to meet net zero. The research suggests the EU is shifting its focus towards energy security and economic stability, with less policy and investment certainty for clean technology.

Hundreds of international and regional non-profits have published an open letter demanding that EU and G7 leaders take stronger measures to guarantee the enforcement of sanctions against Russian oil and gas exports, emphasising that loopholes remain two years after the war in Ukraine started.

The UK government has announced it will exit the contentious Energy Charter Treaty, following unsuccessful attempts at reforming the mechanism. The treaty, which dates back to the 1990s, was initially designed to protect fossil fuel investors by allowing them to sue membership countries in investor state dispute settlement tribunals if large-scale energy investments were jeopardised by changes in government policies, including climate-centred legislation. Several EU countries, such as France, Spain and the Netherlands, have already exited the treaty. However, a clause stating that governments can be sued 20 years after withdrawing from the treaty is causing uncertainty about the consequences of countries’ exits.

The Pensions Regulator in the UK has urged pension trustees to further expand their reporting on ESG risks and opportunities. In a blog post, TPR’s climate and sustainability lead, Mark Hill, argues that disclosures should represent the output of strategic decisions by trustees, despite acknowledging that “we have heard some say reporting may get in the way of decision-making and action”. He adds: “Our job is to use that disclosure to spot the market-wide risks and opportunities, and constructively check and challenge decision-making so that savers’ interests are really being met.” Hill also comments on the government’s intention to make climate plans mandatory: “…  transition plans afford an opportunity for more effective disclosure compared with [the Task Force on Climate-related Financial Disclosures], as some suggest, is something to explore and discuss”.

BP, Chevron, ConocoPhillips, ExxonMobil, Phillips 66, Shell and trade association the American Petroleum Institute are the defendants in the latest climate lawsuit filed by the city of Chicago. The US city is seeking damages from the oil and gas majors for their alleged deception of the climate risks associated with the sale of their products. A similar case was filed last year by the US state of California.

The Dutch Association of Investors for Sustainable Development and the Rainforest Foundation Norway have published a statement signed by 29 other investors, representing $1.2tn in combined assets, to encourage carmakers and electric vehicle battery manufacturers to better integrate environmental and social considerations across their nickel supply chains. Nickel is a key mineral in the development of batteries for EVs and the statement urges companies to implement responsible mining practices to protect areas in which nickel is exploited, such as Indonesia and the Philippines. Deforestation, strain on water resources, air pollution and biodiversity loss are listed as some of the negative impacts of nickel mining.

Non-profit research centre the Institute for Climate Economics has published a report in which it assesses the impact of banks’ transition plans. It finds that strategies to manage climate risk do not necessarily spur banks to issue more transition finance. Separately, a paper by the European Central Bank makes the case for incorporating climate-related capital requirements in the existing prudential framework of banks to overcome potential excessive risk-taking by banks during the green transition.

The International Financial Reporting Standards Foundation is recruiting candidates for its sustainability reference group. The cohort, which will consist of approximately 150 members, will provide technical expertise on standard-setting to International Sustainability Standards Board staff. Candidates should ideally have “practical, direct experience” in sustainability disclosures. The deadline for submissions is April 20.

A service from the Financial Times