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.
Carrot, stick or safe harbour? Regulators in Canada and the U.S. are gearing up for mandatory ESG reporting & greenwashing enforcement
At its annual conference, the Alberta Securities Commission (ASC) confirmed that it is developing safe harbour provisions to mitigate legal risk for companies regarding the unreliability of scope three emissions. A recent complaint filed with the ASC against Suncor highlights increasing legal risks, interest in standardization and pressure on regulators to ensure credible and accurate climate-related disclosures. The complaint alleges that Suncor fails to disclose climate-related risks to shareholders fully. As requirements for mandatory climate-related disclosure continue to progress at varying paces across jurisdictions, there is concern over alignment and coordination; particularly within the U.S. where litigation and greenwashing enforcement are more prevalent. Read more from the MLT Aikins ESG team.
U.S. Democrats renew calls for release of SEC climate rules while SEC Chair indicates support for Scope 3 reporting
Senior House Democrats pleaded with the SEC to quickly require public companies to report greenhouse gas (GHG) emissions and other climate disclosures. The SEC aimed to release climate disclosure regulations as early as October 2023, but the SEC has delayed the release of the rules. Democrats also urged the SEC to include disclosure of Scope 3 emissions from supply chains and other indirect sources in the rules after California mandated Scope 3 reporting starting in 2027 as part of its emissions disclosure law signed on October 7, 2023. Read more from Bloomberg Law.
SEC Chair Gary Gensler says that investors are demanding Scope 3 GHG emissions reporting from companies, which provides them with key information to assess company risk. These comments suggest that Scope 3 emissions reporting will likely be a part of the final SEC disclosure rule; however, the timeline remains unclear. Many companies, especially smaller enterprises are still pushing back on issues, including the cost and disruption from complying with the new rules. Notably, Gensler did express concerns about staying within the SEC’s mandate. The SEC originally released its proposed climate disclosure rules in March 2022. Read more from ESG Today.
New Brunswick and Nova Scotia align with the federal government to transition off coal by 2030
Natural Resources Minister Jonathan Wilkinson announced that the federal government finalized its joint policy statement with Nova Scotia and New Brunswick. In the policy statement, the federal government says it will support the two provinces in phasing out coal-fired electricity by 2030, reaching net-zero GHG emissions from electricity by 2035, and hitting net-zero emissions by 2050. The two provinces also announced the week before that they were abandoning the Atlantic Loop to reach their 2030 emissions targets. The loop is a planned energy corridor that aims to connect the Atlantic provinces with hydropower from Quebec and Labrador. Instead, the two provinces say they will complete the western portion of the loop containing an intertie between the two provinces. Read more from the National Observer.
Forced labour and human rights risks associated with Swedish electric buses
Ethical Trading Initiative (ETI) Sweden and the public transport authorities of several Swedish cities commissioned a report from the non-profit consultancy Globalworks to identify risks of human rights violations and forced labour in the Chinese supply chains of Swedish public transport authorities. Some findings include forced labour, systematic exploitation of interns, discrimination, extreme overtime, low wages, unauthorized wage deductions and debts, hazardous working conditions, substandard housing, unethical recruitment and restricted trade union rights. Read more from ETI Sweden.
Apple’s carbon neutral claims face renewed scrutiny from consumer groups
Apple faces scrutiny from European environmental and consumer groups over carbon neutral claims about the newest Apple Watch. The Bureau Européen des Unions de Consommateurs (BEUC) says carbon neutral claims are inaccurate and misleading. Apple relied on credits to cancel out the 7-12 kg of GHG emissions behind each new Apple Watch. Following the Apple Watch launch, the EU said that by 2026 it would ban carbon neutral claims that rely on carbon credits. Read more in the Financial Times.
Big drink companies face an EU-wide complaint over plastic bottle recycling claims
The BEUC, a consumer group, issued a formal complaint to the European Commission claiming that Coca-Cola, Danone and Nestlé are misleading customers with claims that their plastic bottles are fully recycled or recyclable. The BEUC states that recycling rates are far lower and bottles contain items that cannot be made from recycled material. The BEUC also said green imagery on bottles gave the false idea of environmental neutrality. Read more from The Guardian.
Office of the Superintendent of Financial Institutions Canada releases draft climate scenario methodology for consultation
On October 16, 2023, the Office of the Superintendent of Financial Institutions Canada (OFSI) released draft Standardized Climate Scenario Exercise (SCSE) methodology for consultation. Comments are due December 22, 2023. The SCSE aims to increase federally regulated financial institutions' (FRFIs) understanding of their potential exposures to climate-related risks, build their capacity to conduct climate scenario analysis and risk assessments, and give OSFI a comparable quantitative assessment of climate-related risks across FRFIs. OFSI’s B-15 Guidelines on Climate Risk Management requires scenario analysis and is effective starting in the 2024 fiscal year. Scenario analysis disclosures are also required in new International Sustainability Standards Board (ISSB) standards if material. Read more from OSFI on its call for feedback, and read the draft SCSE methodology.
More than 50,000 companies required to report climate impact in the EU
More than 50,000 companies will need to assess and report their environmental impact in the EU by 2026. More than 11,000 listed companies will have to comply from the start of 2024. The scope will expand to large non-listed companies and small and medium listed enterprises in 2025 and 2026. The requirements will also catch multinational companies. More than half of the European Parliament rejected a cross-party group of 44 members that tried to block the adoption of new sustainability reporting standards. Read more from the Financial Times.
U.K. preparing regulatory regime for the ESG ratings industry
Ministers from the government of the U.K. intend to unveil formal proposals to regulate agencies that evaluate the ESG performance of companies as early as January next year. A three-month consultation period closed in June. The push follows global concerns about a largely unregulated sector that wields broad influence over sustainable investments. The Treasury is examining whether regulating ESG agencies will require fresh legislation or could be achieved through measures under existing laws. The U.K.’s move to regulate the sector comes after the European Commission also proposed new rules for ESG rating providers in June. Read more from the Financial Times.
U.S. officials want Shein to provide forced labour information before initial public offering
16 U.S. attorneys general sent the SEC Chair, Gary Gensler, a letter asking the agency to ensure Shein, the Chinese fast-fashion company, and other foreign companies follow U.S. law before they trade on American exchanges. Shein is likely attempting to launch an IPO (Initial Public Offering) before the end of this calendar year. Shein has faced accusations that it used forced labour from the Xinjiang region in China. Shein is currently under investigation by the House Select Committee on the Chinese Communist Party, which has also accused Shein of evading U.S. tariff law. Read more from CNBC.
Carbon Disclosure Project’s 2024 Questionnaire to align with ISSB Climate-Related Disclosure Standard
The Carbon Disclosure Project (CDP) will harmonize its Questionnaire with other reporting frameworks. At COP27, the CDP and the Foundation announced that the CDP’s disclosures will be aligned with the IFRS S2. The CDP Questionnaire is already aligned with the Task Force on Climate-related Financial Disclosures recommendations. From the next year onward, the CDP Questionnaire will start to reflect the Taskforce on Nature-related Financial Disclosures (TNFD) framework, aiming to encourage more companies to report across both climate and nature matters. The CDP also stated it's committed to reflecting the U.S. SEC's upcoming climate disclosure rule and the European Sustainability Reporting Standards in its disclosure system. Read more from the CDP.
Western University releases report on greenwashing
A report released by Western University's Ivey Business School in collaboration with the University of Michigan highlights how large corporations greenwash their products or brands. The report examines private businesses' role in sustainability and the dangers of misleading consumers. Wren Montgomery, a professor of sustainability at the Ivey Business School, said the most common claim corporations use to greenwash is through "selective disclosure," where companies will exaggerate their efforts to be eco-friendly. Other forms of greenwashing include a vagueness on what corporations are doing to mitigate climate change, misleading symbols that exaggerate a product's eco-friendliness, and boasting green commitments while lobbying against environmental laws. Read more from the CBC.
European Court of Human Rights rules that the Italian waste management crisis violates human rights convention
In Locascia and Others v Italy, the European Court of Human Rights (ECHR) held there were several Violations of the European Convention on Human Rights. The case concerned the crisis over refuse collection, treatment and disposal in the Campania region and pollution from a landfill site. The Court found that pollution from refuse had adversely impacted the applicants’ well-being during the waste crisis from 1994 to 2009. The ECHR also held that the situation had continued in the landfill site. The Italian authorities to date have still not secured or cleaned up the landfill site. Read more from the ECHR.
U.K.’s North Sea oil and gas licences move forward after Greenpeace legal challenge dismissed
The London High Court dismissed Greenpeace’s action to oppose Britain’s authorization of new oil and gas exploration licences in the North Sea. Greenpeace alleged that Britain’s offshore energy plan was unlawful because Britain failed to assess the GHGs produced by consuming oil and gas. Last year, Britain held its first oil and gas exploration licensing round since 2019. As Europe weans itself off Russian fuel, Britain aims to boost domestic hydrocarbon output and states that domestic oil and gas production is key to its plan to improve energy security while remaining consistent with its target of net zero by 2050. Read more from Energy Now.
Greenpeace facing $2.1-million lawsuit from Shell after protest aboard vessel
Shell filed the claim against Greenpeace in London’s High Court. Greenpeace activists boarded the vessel in January near the Canary Islands off the Atlantic coast of northern Africa to protest oil drilling and travelled on it as far as Norway. The vessel was destined for an oil and gas field in the North Sea. The group said Shell offered to reduce its damage claim to $1.4 million if Greenpeace's activists agreed not to protest again at any of Shell's oil and gas infrastructure at sea or port. Greenpeace said it would only do so if Shell complied with a 2021 Dutch court order to cut its emissions by 45% by 2030, which Shell has appealed. Read more from Reuters.
Hawaiian climate misinformation suit against oil companies moves forward
The Hawaii Supreme Court denied Chevron, Sunoco and other oil companies’ appeal to dismiss Honolulu’s climate misinformation suit. The City and County of Honolulu argue that oil companies have knowingly deceived consumers about the climate change effects of fossil fuel use. The claim will now proceed to trial. Read more from Bloomberg Law.
Australian lawyer says companies could be held liable for nature-related risks
In response to a framework released by the TNFD, an opinion commissioned by Pollination Law and the Commonwealth Climate and Law Initiative said directors who rely on nature for success could face consequences if they do not consider, disclose and manage environmental risks. The opinion states that directors have a duty under Australia’s Corporations Act 2001 to consider, disclose and manage environmental risks. Considering Australian law, the authors found risks could arise from the impacts on nature, which courts would consider foreseeable. Thus, directors should identify nature-related dependencies and consider the risk of harm. A major finding in the opinion was that company directors who are directly or indirectly dependent on nature should consider both physical and transition risks, such as changes to regulation, consumer preferences, technology or laws associated with transitioning into a more nature-positive economy. Read more at Lawyers Weekly.
Lawsuit filed against U.K. government over inadequate response to climate adaptation needs
On October 1, claimants filed a lawsuit against the U.K. government, supported by Friends of the Earth. The claimants allege the U.K. government’s failure to set out lawful adaptation objectives in its latest plan is a breach of their human rights. Under the Climate Change Act 2008, the government must produce a national adaptation program every five years, setting out plans to protect communities in the U.K. from the extreme heat, flooding and coastal erosion expected as the climate breaks down. The latest national adaptation program, NAP3, was published in July. One claimant has a seaside home now five metres from a crumbling cliff, isolated and unreachable by car, after part of the road collapsed into the North Sea. His co-claimant lives in a care home with several long-term conditions that make him particularly susceptible to overheating. Read more from The Guardian.
Biden Administration invests US$3.46 billion to revitalize electric grid
The Biden Administration unveiled its $3.46-billion investment in 58 projects spanning 44 states, aimed at revitalizing the U.S.’s electric grid under the Grid Resilience and Innovation Partnerships Program Project. The Project aims to bring more than 35 gigawatts of new renewable energy online, invest in 400 microgrids and maintain and create union jobs. The Project will be funded under the Infrastructure Investment and Jobs Act and aims to leverage more than $8 billion in federal and private investments to deliver affordable, clean electricity to Americans and ensure that communities have a reliable grid that is prepared for extreme weather worsened by climate change. The Project focuses on unlocking more solar, wind and other clean energy, reducing faults that may lead to wildfires, and improving reliability by deploying innovative approaches to electricity transmission, storage and distribution. Read the Department of Energy’s release.
Ottawa suspends $1-billion green fund after receiving whistleblower complaint
Ottawa has frozen the activities of Sustainable Development Technologies Canada (SDTC), a federal foundation that finances the development of green technologies, after receiving a report criticizing its public funds management. SDTC is in the middle of a five-year agreement with the federal government to distribute $1 billion to small and medium businesses in the cleantech sector. The government hired an external firm to investigate the allegations. Read more from the CBC.
Top issuer in European bond market facing penalty over GHG emissions performance
Enel SpA, which has close to $11 billion in sustainability-linked bonds (SLBs) that may be affected, is highly unlikely to meet an end of 2023 carbon emissions goal after changes to European energy policy resulted in the delayed phase out of coal plants. This would release an estimated US$27 million of additional interest costs for Enel SpA. This would be the most significant penalty yet. The development also underlines how the energy crisis sparked by Russia’s invasion of Ukraine hampers companies’ climate commitments. Read more from Bloomberg.
Fitch Ratings Inc warns oil and gas companies facing an era of credit downgrades
The fossil fuel industry may face an era of credit downgrades if producers are too slow to adapt to a low-carbon future. Oil and gas companies stand out as the most vulnerable issuers in Fitch’s analysis, which sought to gauge how businesses will cope with climate risks such as increasingly stringent emissions regulations. More than half the global issuers potentially facing downgrades due to climate risk are currently investment grade. Read more from the Financial Post.
Oil refiners look for financing as banks move away from fossil fuels
While oil refining is still profitable, oil refiners find it more challenging to get financing for projects from banks. Plant owners say they now have to show their cleaner energy and net-zero goals. Despite worldwide demand for crude at an all-time high in 2023, lenders are more weary of financing these projects and place more restrictions on oil and gas funding. The global refining system is thus stretched, which raises the risk of bottlenecks and volatile prices. This leads, however, to an increased risk for greenwashing, where businesses are pressured to commit to something they cannot. Read more from Bloomberg.
Guidance on key definitions for responsible investment terms released
The CFA Institute, Global Sustainable Investment Alliance, and Principles for Responsible Investment collaborated to establish harmonized definitions for five responsible investment terms: screening, ESG integration, thematic investing, stewardship and impact investing. Read more from the CFA Institute.
Vast majority of companies budgeting to advance sustainability goals over the next year
Honeywell’s Environmental Sustainable Index found that sustainability goals are the top corporate priority, and more than 80% plan to increase spending toward achieving their environmental sustainability goals over the next 12 months. Likewise, executives have become more confident in meeting those goals. Honeywell launched the index in Q4 2022 to provide insight into how business leaders feel about the progress made toward their organizations’ sustainability commitments. Honeywell surveyed more than 750 business, technology and sustainability professionals involved in the planning, strategic development, implementation or oversight of environmental sustainability goals and initiatives at companies across multiple regions and economic sectors, each with at least 1,000 employees. Read more from ESG Today.
Major Canadian banks commit to racial equity audits following investor engagement
Royal Bank of Canada (RBC) and the Bank of Montreal (BMO) join TD, CIBC and the National Bank in committing to a third-party racial equity audit that covers the broad scope of its business and related risks of racial bias. The Vancouver-based Shareholder Association for Research and Education (SHARE) and the B.C. General Employees’ Union (BCGEU) refiled shareholder proposals with RBC and BMO seeking racial equity audits from the banks in 2024. SHARE and the BCGEU first called on RBC and BMO to commit to independent audits to assess the racial impacts of their operations and policies through shareholder proposals made in 2023. Read more from the Investment Executive.
Whistleblowers say McKinsey & Company advocating for fossil fuel interests in United Nation climate talks
According to multiple sources and leaked documents, as a key adviser to the UN’s COP28 climate talk in Dubai, McKinsey & Company (McKinsey) has proposed future energy scenarios to the agenda setters of the summit that are at odds with the climate goals it publicly states. An "energy transition narrative" drafted by the firm only reduces oil use by 50% by 2050 and calls for trillions in new oil and gas investment annually until then. Some analysts say this is at odds with the 2015 Paris Agreement. Read more from France 24.
Fossil fuel companies banned from French Socially Responsible Investment labelled funds
France’s Minister of the Economy, Finance and Recovery announced a series of updates to the French Socially Responsible Investment (SRI) label to make the label more demanding and climate-oriented. Under the new rules, SRI-labelled funds must exclude companies exploiting coal or unconventional hydrocarbons and launching new oil and gas exploration, production or refining projects. The new rules will also require companies included in SRI-labelled funds to have a Paris Agreement-aligned transition plan. Read more from ESG Today.
Bankers seek legal cover after backing US$1.5 trillion of sustainability-linked loans
As regulatory scrutiny intensifies, U.S. bankers serving one of the world’s biggest ESG debt markets seek legal protections to guard against potential greenwashing allegations. Sustainability-linked loans (SLLs) let borrowers and lenders say a loan is tied to some environmental or social metric. But the documentation to back those claims is generally unavailable to the public, nor is the market regulated. Some bankers are seeking declassification provisions in SLL documentation. Declassification provisions mean bankers can book what had been an SLL as a normal loan, should they subsequently realize the product does not merit an ESG label. Read more from Bloomberg.
U.S. investors vote against activist investor shareholder resolutions on climate
U.S. investors at the top five western oil firms’ shareholder meetings rebuffed activist group Follow This’s resolutions to align their emissions targets with the Paris Agreement. Follow This is a Netherlands-based activist group first formed to target Shell and subsequently expanded to file climate resolutions at other major western oil firms, including BP, Exxon Mobil, Chevron and TotalEnergies. This year, giant U.S. investors BlackRock, Vanguard, State Street and JPMorgan voted against the Follow This resolutions. Read more from The Globe and Mail.
New report predicts multi-trillion dollar impact to Canada’s economy by end of century without climate adaptation
Independent Canadian Senator Rosa Galvez’s office published a white paper titled “Aligning Canadian Finance with Climate Commitments,” finding that, without significant action on climate adaptation, the Canadian economy could lose $5.5 trillion by the end of the century. The report was prepared by Queen’s University’s Institute for Sustainable Finance. Senator Galvez’s office released the paper as sustainable finance experts and policymakers met in Ottawa for a conference on November 1, 2023. Read more from the National Observer.
UN experts say we are not spending enough on climate adaptation
The UN Adaptation Gap Report 2023, which looks at progress in planning, financing and implementing adaptation actions, states that the world must spend hundreds of billions more a year – 10 to 18 times more than it currently spends – helping vulnerable people adapt to mounting devastation. The report examined the gap between how much money vulnerable countries need to adapt to climate disasters and how much money the world offers. The report concluded that this adaptation finance gap is between US$194 billion and US$366 billion annually – more than 50% higher than previous UN estimates. Read more from the Washington Post.
EU backtracks on increased emission reduction target
After several countries held back during negotiations, EU environment ministers scrapped a plan to increase its 2030 GHG emissions reduction target. Poland, Hungary and Italy objected to increasing the EU’s emission target from 55% by 2030 to 57% compared with 1990 levels; however, ministers agreed to a fully or mostly decarbonized global power system in the 2030s. Read more from the Financial Times.
Apple and Nike launch an initiative to accelerate the adoption of clean energy in supply chains
Apple and Nike initiated the Clean Energy Procurement Academy through the non-profit Clean Energy Buyers Institute (CEBI). This initiative addresses supply chain emissions by equipping companies with the skills and knowledge required to explore and adopt clean energy. Other companies that joined include Amazon, Meta, PepsiCo and REI Co-op as founding organizations. Read more from ESG Today.
Climate Action 100+ assessments show most focus companies are not aligning fast enough with the Paris Agreement
Climate Action 100+, an investor engagement initiative on climate change, released its latest round of company assessments against its newly updated Net Zero Company Benchmark. The new Benchmark assessed companies on their net-zero transition plans. While the 2023 assessments showed incremental progress on company ambition, long-term targets were not supported by sufficient progress on short-term targets, decarbonization strategy and capital allocation. Read more from Climate Action 100+.
TotalEnergies agrees with union over employee energy transition allowance in France
TotalEnergies entered into a collective agreement with trade union representatives to offer its 35,000 employees in France an individual “energy efficiency and transition” allowance of €2,000. Read more from Energy Live News.