With the ESG landscape evolving at a rapid pace, MLT Aikins is pleased to offer a curated list of timely and relevant ESG articles to help you stay current. Learn more about our ESG services.
Release of International Sustainability Standards sets the stage for Canadian mandatory reporting
On June 26, the International Sustainability Standards Board (ISSB), a body created by the International Financial Reporting Standards (IFRS) Foundation, issued its first two Standards: IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 – Climate-related Disclosures. The Standards are designed so companies provide sustainability-related information alongside financial statements in the same reporting package. The ISSB prioritized climate-related disclosures for its initial application and granted a year of transitional relief on specific topics such as Scope 3 greenhouse gas emissions for companies implementing the Standards. Read more from MLT Aikins ESG group.
Consistent and comparable climate disclosures: CSA collaboration with ISSB standards
The Canadian Securities Administrators (CSA) welcomed the ISSB’s Sustainability Disclosure Standards IRFS S1 and IFRS S2. The CSA stated they intend to conduct further consultations to adopt disclosure standards based on ISSB Standards, with modifications considered necessary and appropriate in the Canadian context, with an update coming in the coming months. Read the CSA’s statement.
IFRS to take over monitoring responsibilities for TCFD
The inaugural IFRS sustainability standards, S1 and S2, fully incorporate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In July, it was announced that the IFRS Foundation will take over monitoring responsibilities for climate-related disclosures from the TCFD, further streamlining and clarifying global sustainability standards and agencies for companies and investors. Read the full announcement.
SEC pushes back timeline for climate-related disclosure to October
The United State Securities and Exchange Commission (SEC) Climate Change Disclosure rule has been delayed from April to October 2023. Because of the delay, the financial statements and disclosures under the rule would not be due until 2024. The proposed rule was released in March 2022 and would require public companies to disclose their greenhouse gas emissions and any climate-related risks. Read more about the delay and the proposed rule.
Nestlé abandons "carbon neutral" claims
Nestlé will stop using carbon offsets and withdraw its pledges to make certain brands "carbon neutral." Instead, Nestlé said it will invest in reducing and removing greenhouse gas emissions from within its value chain to reach its ambitions of net zero by 2050. Nestlé also aims to reduce its Scope 1, 2 and 3 emissions by 20% by 2025 and 50% by 2030 against a 2018 baseline. Read more from Just Food.
IFRS update on how to consider climate-related matters when preparing financial statements
UN Climate Change High-level Champions approve exchange group’s net zero target framework
The UN Climate Change High-Level Champions overseeing the Race to Zero Campaign has approved the Net-Zero Financial Service Providers Alliance’s (NZFSPA) net zero target-setting framework. The framework provides a roadmap for capital market infrastructure operators to align their operations with the Paris Agreement and assist their markets in addressing the climate crisis. Read more from SSE.
Mining Association of Canada (MAC) commits to equity, diversity and Inclusion (EDI) standards
MAC published a Towards Sustainable Mining (TSM) protocol, the Equitable, Diverse and Inclusive Workplaces Protocol. The TSM initiative is a mandatory component of MAC membership, focused on improving environmental and social practices in the mining sector. The Equitable, Diverse and Inclusive Workplaces Protocol sets out requirements for mining companies to develop and implement a corporate strategy complemented by site-level policies, processes and performance to drive transparency, systemic change and improve EDI performance in the mining sector. Read more from MAC.
ESG #2 priority for procurement executives according to Deloitte survey
According to Deloitte’s 2023 Global Chief Procurement Officer Survey, ESG has risen to the #2 priority of procurement executives from #7 in the prior 2021 study. Deloitte surveyed approximately 350 procurement leaders from more than 40 countries. Companies prioritizing ESG comes as they face more pressure from regulators and stakeholders to manage and report on sustainability factors; these initiatives focus on their value chains. Read more from ESG Today.
Financial Stability Board (FSB) releases Roadmap for Addressing Financial Risk from Climate Change
The FSB Roadmap for Addressing Financial Risks from Climate Change Progress Report: 2023 progress report responds to the need for co-ordinated action between standard-setting bodies and international organizations respecting climate-related financial reporting. The FSB asks that the ISSB takes over the monitoring of the adoption of climate-related disclosures by firms from the Task Force on Climate-Related Financial Disclosures (TCFD). The FSB is also setting up a Transition Plans Working Group to examine the relevance of transition plans and planning by financial and non-financial firms for financial stability. Read more from the FSB.
Global climate litigation continues to heat up, highlighting ESG risks
According to the Global Trends in Climate Change Litigation report, ESG-related litigation is expanding to include allegations of inaction, contradictory messaging, misrepresentation and misleading investors. More than 1,500 climate litigation cases have been filed globally since the Paris Agreement in 2015. When it comes to the targets of climate litigation, attention is shifting to corporate actors.
The avenues, range and complexity of legal ESG arguments are expanding. Claimants are filing cases at the state, regional and international levels, combining requests and expectations and using a variety of approaches and legal statutes. Moreover, the past year saw more than 25 “climate-washing” cases challenging the accuracy of net-zero narratives. Additionally, the energy sector is most exposed, facing various allegations of operational resiliency, with increased litigation focused on investment decisions. Finally, there is mounting pressure respecting personal liability for ESG failures among corporate officers and directors. In the past year, eight cases have sought to advance climate action by focusing on personal responsibility, either civil or criminal, for failing to manage climate-related risks. Read more from the MLT Aikins ESG group.
Appealing environmental protection orders: Lessons learned from a decade-long court battle
A case involving an environmental protection order (EPO) in Saskatchewan just ended after more than a decade. A company that operated a hazardous waste facility in a Saskatchewan rural municipality (RM) had a tax dispute with the RM. The RM took title to the property. The company vacated the property but left behind hazardous waste. In March 2011, Saskatchewan’s Minister of Environment issued an EPO directing the company to clean up hazardous substances on the property. The company initiated a statutory appeal challenging the validity of the EPO. The judge held that the EPO was valid. The Saskatchewan Court of Appeal upheld this ruling. Read more from MLT Aikins environmental practice group.
Oregon county seeks over $50 billion in climate change lawsuit
Multnomah County sued Exxon Mobil, Chevron and other major oil and coal companies and industry groups for the harms caused by extreme weather fueled by climate change. The county claims that fossil fuel companies and trade groups intentionally deceived the public about the dangers of fossil fuels for decades. It wants them to help pay for past and future harm from the extreme weather. There have been dozens of lawsuits filed against the fossil fuel industry by states and municipalities across the U.S., alleging harm from climate impacts. The county is seeking $50 million for its past efforts to protect public health, safety and property from heat waves and wildfires, at least $1.5 billion for future damages and at least $50 billion for an abatement fund to help study and implement mitigation measures to reduce climate-related harms. Read more about the lawsuit.
Ground-breaking youth-led climate trial comes to an end in Montana
The first constitutional climate trial in U.S. history awaits a ruling in Montana. The 16 young people bringing the lawsuit argue that the state of Montana must be held accountable for exacerbating the climate crisis and violating the plaintiffs’ constitutional rights to a clean and healthful environment. The lawsuit targets a provision of the Montana Environmental Policy Act which prevents the state from considering how its energy economy may contribute to climate change. Similar lawsuits are pending in four other states, and a federal suit is also pending. Read more from the Guardian.
U.K. government faces more legal action over its climate strategy
Campaign groups filed three new lawsuits against the U.K. government’s revised plan to net zero. The groups claim the strategy is unlawful because it provides insufficient information on the government’s assessment of the risk of various policies not being delivered and not meeting legally binding climate targets under the Climate Act. Notably, the government admitted the revised plan would fall short of its commitments. They also raised concerns about reliance on technology like carbon capture and storage. A year ago, the High Court held that the previous greenhouse gas emission policy was unlawful because there was insufficient detail on how to reach its target. Read more about the lawsuits at the Financial Times.
Church of England divests from major oil and gas companies over climate strategy
The Church of England is selling its investments in 11 major oil and gas companies, including Shell, BP, Exxon and Total, after concluding that none are aligned with the goals of the Paris Climate Agreement. The Church’s parliament voted in 2018 to sell investments in fossil fuel companies failing to take sufficient action to tackle climate change by 2023. In 2021, the Church excluded 20 oil and gas companies from its investment portfolio. The Church said it would also exclude all remaining smaller companies involved in oil and gas by the end of the year. Despite being a small investor, the Church, through its endowment fund and pension fund, has been involved in shareholder discussions with oil companies over climate change. Read more at the Financial Times and Pension Policy International.
Finance falling behind net-zero progress in the EU
The newly formed European Climate Neutrality Observatory (ECNO), which monitors progress toward net zero of various sectors, released that progress in finance is heading in the wrong direction. Specifically, European Union (EU) global financial flows are not on track to limit global warming to 2°C or less above pre-industrial standards and contribute to the Paris Climate Agreement. While ECNO has not made an annual climate investment gap assessment yet, the closest estimate from the European Investment Bank estimates that public and private climate investments in the EU should be 50% higher than they are now. ECNO cites increased fossil-fuel subsidies by member states in 2021 and 2022 with no phase-out plans, lower than targeted environmental taxation revenues and no relevant EU-wide aggregated data and indicators to assess the progress of the private financial system toward climate neutrality financing. Read more about the report from ECNO.
Nike and Dynasty Gold under investigation by Canadian human rights watchdog
The Canadian Ombudsperson for Responsible Enterprise (CORE) has initiated investigations into Nike Canada and gold mining company Dynasty Gold over allegations that the companies are using forced labour from the Uyghur population in the Xinjiang region of China. CORE’s mandate is to “review complaints about possible human rights abuses by Canadian companies when those companies work outside Canada in the garment, mining, and oil and gas sectors.” Read more from the BBC.
Alberta the first province to charge a carbon offset firm under environmental legislation
Alberta filed 25 charges against a carbon offset business, Amberg Corp., and its senior environmental regulatory co-ordinator for providing false information related to carbon offsets. These charges are a first under the Emissions Management and Climate Resilience Act. Since 2007, Alberta has run a mandatory carbon offset system for large emitters. They must purchase credits to offset emissions if they produce more than their allotted carbon dioxide levels. The credits are generated by companies reducing emissions through initiatives like solar panels or wind farms and are verified by third parties; Amberg provided these verifying services. The charges include providing false information, providing functions of a third-party assurance provider without the required qualifications, and breaching other rules related to auditing and verifying carbon offsets. Read more from the CBC.
Saskatchewan has released regulations to curb industrial emissions after the federal government agreed to remove the province from the federal output-based pricing system (OBPS). Saskatchewan has released the Management and Reduction of Greenhouse Gases (Standards and Compliance) Regulations, detailing how the province’s emissions reduction plan will work, including compliance obligations for regulated emitters. Read more from MLT Aikins.
New amendments to the First Nations Fiscal Management Act
The Government of Canada amended the First Nations Fiscal Management Act by expanding the mandates of two First Nations-led institutions, the First Nations Tax Commission and the First Nations Financial Management Board. The Act also establishes the First Nations Infrastructure Institute (FNII) as a First Nations-led organization that will support economic development by providing the skills and processes necessary to ensure that First Nations communities and Indigenous organizations can efficiently plan, procure, own, manage and assume greater jurisdiction over infrastructure assets on their lands. The Act intends to support Indigenous self-determination and economic reconciliation. Read more about the amendments.
Algonquin chiefs say proposed Chalk River nuclear site violates UNDRIP
Seven Algonquin First Nations call on the federal government to abandon a proposed nuclear waste dump site on their unceded territories. They claim the Canadian Nuclear Safety Commission has failed to fulfill its duty to consult, and the project would violate Article 29(2) of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). The proposed near-surface disposal facility would be one kilometre from the Ottawa River and have an expected operating life of 50 years. It will hold up to a million cubic metres of low-level radioactive waste, with 90 percent coming from the Crown-owned Chalk River Laboratory. The chiefs unveiled their Assessment of the Canadian Nuclear Laboratories Near Surface Disposal Facility and Legacy Contamination of Algonquin Aki Sibi, which examines the site’s impacts on culture, land, water and wildlife. The Algonquin Nations will present the conclusions at a hearing of the Canadian Nuclear Safety Commission on August 10. Read more from APTN News.
United Nations adopts the Agreement on Conservation and Sustainable Use of Marine Biodiversity
The United Nations adopted an agreement to strengthen the legal framework and to ensure the conservation and sustainable use of marine biodiversity in areas beyond national jurisdiction, which cover over two-thirds of the ocean. The agreement will come into force when 60 states sign. Read more about the agreement.
Greenwashing guidance from the U.K. Advertising Standards Authority (ASA)
The U.K. ASA published guidance on misleading environmental and social responsibility claims in advertising. The ASA states that claims should be clear and should not omit significant information; this includes considering consumers’ likely interpretation and their knowledge. Additionally, it states marketers should avoid using unqualified “carbon neutral,” “net zero” or similar claims. Also, marketers should ensure that they can substantiate their claims and should not state that their claim is true when there is a significant division of scientific opinion. Marketers should also consider a product or service’s entire lifecycle when making claims. Moreover, marketers should not mislead about a product or service's adverse impacts or environmental benefits. Markets should also prepare advertisements and marketing with a sense of responsibility to consumers and society. Read more about the guidance.
European Commission proposal on ESG rating activities
On June 13, the European Commission (EC) published a Proposal for a Regulation of the European Parliament and of the Council on the transparency and integrity of ESG rating activities. The proposal seeks to harmonize the regulation of ESG rating providers. Currently, the EC states that ESG ratings lack transparency on the characteristics of ESG ratings, their methodologies and data sources and lack clarity on how ESG rating agencies operate, including respecting conflicts of interest and governance. Consequently, ESG ratings users cannot make informed decisions on ESG-related investments, risks, impacts and opportunities.
The regulation would cover public ESG ratings in the EU. The European Securities Markets Administrator (ESMA) is expected to set up an ESG rating provider register in January 2028. ESMA would also have oversight powers, be able to withdraw or suspend the ESG ratings and impose fines and penalties. Read more about the proposal.
ESG raters in Britain face voluntary code ahead of possible rules
The U.K.’s Financial Conduct Authority will implement a voluntary code of conduct for ESG rating companies ahead of potential regulations. The code reflects recommendations from the International Organization of Securities Commissions and covers the raters’ governance, systems and controls, managing conflicts of interest and transparency over methodologies. The U.K. government is consulting on whether ESG raters should be formally regulated. The final version of the code is due to be published at the end of 2023. Read more from Reuters.
EU proposes mandatory EPR for all member states
The European Commission has proposed mandatory Extended Producer Responsibility (EPR) schemes for textiles in the EU. The rules aim to “make producers responsible for the full lifecycle of textile products and to support the sustainable management of textile waste.” Under the proposed rule, producers will cover the costs of textile waste management. The price producers pay will be adjusted based on the environmental performance of textiles. Producers’ contributions will finance investments into separate collection, sorting, re-use and recycling capacities. The proposal would also regulate waste shipments of textiles to other countries. Read more about the proposed rule.
Australian government launches environmental offsets crackdown
The Australian government will audit the compliance of more than 1,000 offset sites approved under national environmental law over the last 20 years to ensure they meet their obligations. The audits will determine whether they meet offset requirements and their environmental benefit. The government says that when offset arrangements are not effectively enforced or maintained, it is unclear whether offset arrangements prevent environmental decline. The government will also create new environmental laws, including a new offset standard and an independent body to monitor compliance. Read more.
Maastricht Principles of Human Rights of Future Generations are launched
The Maastricht Principles of Human Rights of Future Generations seek to clarify the present state of international law relating to the human rights of future generations. The Principles consolidate the developing legal framework and affirm binding obligations on states and non-state actors under international and human rights law. They also provide a progressive interpretation and the development of current human rights standards respecting the human rights of future generations. They also recognize that states may incur additional obligations as human rights law evolves. The signatories include experts in all regions of the world and current and former members of international human rights treaty bodies and regional human rights bodies, and former and current Special Rapporteurs of the United Nations Human Rights Council. Read the Principles.
The costs of extreme heat: Report from the Canadian Climate Institute
Extreme heat events are forecast to become more frequent and intense due to climate change. Extreme heat could kill 1,370 people and send 6,000 to the hospital annually in British Columbia by 2030 if the province does not adapt its essential infrastructure to the changing climate. Future deaths and hospitalizations could cost more than $12 billion annually in life lost by 2030; however, they could be prevented with urgent adaptations to health and critical infrastructure planning.
Access to cooling as a human right under climate change?
An expert at the University of Waterloo’s Intact Centre on Climate Adaptation, Blair Feltmate, says we should think of access to cooling as a fundamental human right because hundreds or thousands of Canadians could die without it. Feltmate draws attention to the need for greater heat adaptation because Canada is projected to experience higher daily temperatures and longer heat waves under climate change.