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.
Should nature be your next priority for ESG disclosure?
As Canadian regulators move to mandate corporate ESG disclosures on climate and supply chain due diligence, nature has emerged as a next key disclosure priority. Launched during New York Climate Week on September 19, 2023, the Task Force on Nature-Related Financial Disclosures (TNFD) recommendations and guidance are intended to assist companies in disclosing nature-related risks and opportunities to investors and other stakeholders. Read more from our MLT Aikins ESG Team here.
TCFD identifies areas for improvement in its Final Report
On October 12, the Task Force on Climate-Related Financial Disclosures (TCFD) issued a final status report with a few key findings. First, 97 of the top 100 global companies either support the TCFD, report in line with its recommendations, or both. In fiscal year 2022, 58% of companies disclosed in line with at least five of the 11 recommended disclosures, marking a significant rise from 18% in 2020, with only 4% reporting in line with all 11. Notably, climate-related financial information in financial filings remains limited, with a fourfold disparity in disclosure likelihood between sustainability and annual reports. Among the largest asset managers and asset owners, more than 80% and 50%, respectively, reported in line with at least one of the recommended disclosures, with around 70% of the top 50 asset managers and 36% of the top 50 asset owners disclosing in line with at least five of the recommendations, according to publicly available reports. Continue reading more from the TCFD.
The Supreme Court finds that the federal government’s Environmental Impact Assessment legislation oversteps its jurisdiction
On October 13, the Supreme Court ruled that the federal Impact Assessment Act, designed to evaluate the environmental impacts of major projects, is largely unconstitutional. The court found that the Act encroached on provincial jurisdiction, granting excessive powers to Ottawa. While assessments impacting federal areas remain permissible, the decision signals a setback for federal efforts to streamline environmental approvals. Alberta's Premier hailed the ruling as a win, indicating potential implications for other federal policies on emissions and clean energy regulations. Industry associations and analysts also welcomed the decision, foreseeing a positive impact on the energy sector's development and investment. Read more via Reuters.
Cargill fined by Brazilian Court for buying cocoa from farms that exploit children
Cargill was recently fined US$120,185 by a Brazilian Court for purchasing cocoa from farms where child labour and forced labour were identified. The ruling requires Cargill to include clauses in its contracts with Brazilian cocoa suppliers to terminate commercial relationships in case of such illegal labour practices. Additionally, the court has instructed Cargill to conduct a due diligence process to monitor its supply chain for child labour and initiate an anti-child labour campaign. While Cargill plans to appeal the ruling, it emphasized its zero-tolerance policy toward human trafficking, forced labour or child labour within its operations, highlighting its practice of suspending suppliers upon detecting violations. Read more at Reuters.
A win for Indigenous rights in Brazil
The Supreme Court of Brazil’s recent decision rejected attempts to curtail Indigenous Peoples’ rights to ancestral lands, particularly favouring the restoration of land to the Xokleng community, which had been forcibly removed by settlers during the 1800s and 1900s. This ruling is expected to set a precedent for Indigenous land claims and has significant implications for Indigenous rights across Brazil. The case, rooted in the dispute over land rights, involved the Xokleng's eviction from a nature reserve in 2009, with the state authorities invoking the marco temporal argument, which the court ultimately ruled against. This decision has broader implications, challenging similar disputes where the marco temporal argument was used. Keep reading at the BBC.
Is biodiversity loss in the seafood and agriculture sectors the next focus of ESG litigation?
A report by Client Earth emphasizes the legal ramifications anticipated, which Client Earth likens to those seen in climate change litigation, associated with biodiversity loss if urgent action is not taken. The report outlines applicable laws related to biodiversity loss and suggests measures to mitigate associated risks. Companies in these sectors are particularly vulnerable due to their reliance on ecosystem services and their contribution to biodiversity loss, triggered by various factors such as pollution and overexploitation. To counter these risks, integrating biodiversity considerations in decision-making, conducting comprehensive due diligence and implementing robust disclosure practices are recommended. Financial institutions are encouraged to assess and manage environmental risks in their investments and develop policies to alleviate their own exposure to biodiversity-related risks. Continue reading at Client Earth.
Texas judge rejects rules in favour of the federal climate-friendly investing rule
In a recent U.S. case, Utah v Walsh, N.D. Tex., No. 2:23-cv-00016, 9/21/23, a Texas judge has ruled in favour of the U.S. Labor Department's 2022 climate-friendly 401(k) investing rule, dismissing attempts by 26 states to overturn the regulation under the Administrative Procedure Act. This decision upholds the effectiveness of the rule, which has faced significant opposition from Republican lawmakers and state attorneys general. Read more from Bloomberg Law.
President Biden mandates government agencies to consider climate change costs in budgets
The Biden administration has introduced a directive requiring federal agencies to factor in the economic impact of climate change when making purchasing decisions. This move is expected to have far-reaching implications, potentially reshaping the federal government's procurement strategies, infrastructure projects and vehicle fleet composition. Continue reading at The New York Times.
Greenwashing is a costly game: SEC fines Deutsche Bank subsidiary DWS $19 million after investigation
The SEC's two-year investigation found DWS guilty of misrepresenting its integration of ESG factors in investment processes. DWS failed to adhere to its publicized ESG policies, prompting the SEC's ongoing efforts to establish stringent disclosure rules to prevent such misrepresentation. While the SEC found no financial misstatements, the SEC stressed the need for investment advisers to align actions with public ESG claims. Read more at ESG Today and the Financial Times.
The Alberta Securities Commission is looking into a complaint filed by Greenpeace against Suncor Energy
Greenpeace has filed a complaint against Suncor Energy with the Alberta Securities Commission, alleging inadequate disclosure of climate-related risks to shareholders. The complaint contends that Suncor removed warnings about potential stranded assets from its 2023 climate report, raising concerns about the company's transparency. Read more from Reuters.
U.S. Treasury puts new principles in place for net-zero pledges
The U.S. Treasury recently outlined new principles for net-zero financing commitments, emphasizing the need for alignment with the 1.5 Celsius temperature limit and the use of credible metrics and targets. The principles encourage “transition finance” to facilitate the shift from high-emitting to low-emission assets, citing examples like replacing coal-fired power plants with renewable energy sources. Financial institutions are urged to align client and portfolio investments with temperature limits, with a focus on their fiduciary responsibilities. The Treasury also announced significant philanthropic funding to support research and resources for robust net-zero commitments. Read more at The National News.
The EU steps up to combat greenwashing in its new ban
The EU has introduced a new ban to prevent the use of generic environmental claims and deceptive marketing tactics, aiming to promote more transparent and accurate product information. This restriction will extend to communications about products featuring design elements meant to limit durability. Only sustainability labels backed by approved certification schemes or public authorities will be permitted, ensuring clearer and reliable sustainability information for consumers. Additionally, there will be an emphasis on enhancing the visibility of guarantee information, along with the introduction of a new guarantee extension label. Continue reading here from the European Parliament.
U.S. continues clamp down on modern slavery
The United States has imposed restrictions on imports from three more Chinese companies in an effort to eradicate products made from the forced labour of Uyghur minorities. With the addition of these three entities to the Uyghur Forced Labor Prevention Act Entity List, the total number of listed entities has reached 27. The Department of Homeland Security states that these designations are a consequence of involvement in practices that exploit the human rights of Uyghurs and other groups. The designated companies were identified for their collaboration with the Xinjiang government in facilitating the recruitment and use of forced labor from Uyghurs and other groups. Keep reading more from Reuters.
SEC Chair talks about new California climate law
During a house oversight hearing, the SEC Chair underscored the potential impact of a pending law in California that would mandate companies to provide climate-related disclosures. He emphasized how this legislation could bolster initiatives to regulate corporate climate disclosures, which have encountered strong resistance from industrial lobbies. The testimony suggests that the California law might influence how federal regulators consider the costs associated with their forthcoming climate regulations. See more here from Reuters.
Exxon Mobil Pension Plan found in breach of U.K. regulations
The U.K. Pensions Regulator has issued a fine to the ExxonMobil Pension Plan for failing to publish a report on its management and governance of climate-related risks and opportunities, in breach of regulations. Keep reading at IPE.
Green Agreements increase co-operation in the U.K.
The new Green Agreements Guidance, published by the U.K. Competition and Markets Authority (CMA) following extensive consultation, explains how competition law applies to environmental sustainability agreements between firms operating at the same level of the supply chain, to help them act on climate change and environmental sustainability. Read more at Gov.UK.
Marathon or sprint? The race to decarbonize includes many early hurdles and mazes
The speed of change in ESG risk management, reporting and marketing continues at varying paces. The road ahead involves complex regulations, more stringent rules and an ever-expanding encyclopedia of risks and challenges posed by climate litigation. Reflecting on the outcomes of #climateweek2023 and the momentum ahead of #COP28, our ESG team at MLT Aikins has summarized recent key climate-related updates in this blog.
Are Canadian companies being transparent about climate targets in executive pay?
Canadian companies are increasingly incorporating climate targets into executive compensation, aiming to incentivize improved environmental performance. While over half of the TSX60 companies have integrated climate-related metrics into executive pay, concerns persist about the effectiveness of these measures. Without ambitious and meaningful targets, such initiatives risk becoming superficial exercises. In 2022, the number of TSX60 companies linking executive pay to climate progress rose to 39, up from 29 the previous year, alongside a significant increase in firms setting net-zero emissions targets. Read more at 440.
Green can be glamourous: Toronto Hotel getting net-zero retrofit
Toronto’s Fairmont Royal York Hotel is undergoing a $46.5-million retrofit to achieve net-zero carbon emissions. With an 80% reduction target by the end of the year, the hotel aims for the Canada Green Building Council's Zero Carbon Building Standards Certification. KingSett Capital, the hotel's owner, is committed to a 67% overall carbon reduction by 2035, emphasizing its broader ESG objectives. The initiative aligns with Canada's goal of net-zero by 2050 and highlights the growing importance of sustainability in the hospitality industry. Keep reading at The Globe and Mail.
Are ESG ratings fair to companies of all sizes?
ESG ratings, once niche, now wield substantial influence in directing more than $2.8 trillion of sustainable investments. However, this power is attracting formal scrutiny, with regulators in Europe, Asia and the U.S. seeking greater transparency and questioning the agencies’ interests. The industry faces criticism for potential conflicts of interest, reliance on unaudited data and a gap between perceived and actual assessment of ESG ratings. The dominant market players, including MSCI, S&P Global and Moody's, face challenges over market concentration and the potential influence wielded by a few agencies over ESG definitions and investment decisions. As the industry grapples with heightened regulatory scrutiny, concerns persist regarding the overall robustness and transparency of ESG ratings. Keep reading at Financial Times.
Nature Action 100 wants to address Biodiversity and Nature Loss and it has the money to do it
Nature Action 100, backed by $24 trillion in assets, has identified 100 companies, including Amazon, McDonald’s and Walmart, that are targeted for initiatives addressing nature loss and biodiversity decline. The selection is based on market capitalization and the significant impact of these companies on nature. Targeted sectors include biotechnology, chemicals, retail, food and mining. Keep reading at ESG Today.
Banks among the worst offenders for greenwashing
A recent report revealed a 70% surge in cases of greenwashing by global banks and financial firms over the past year, with European institutions being primarily implicated, particularly regarding claims related to fossil fuels. An ESG data firm recorded 148 instances of greenwashing in the banking sector, emphasizing misleading communications about the environment as a key indicator. While the European Banking Federation highlighted increased scrutiny as a potential factor, regulators aim to eradicate greenwashing to foster investor confidence and promote sustainable investments. The rise in such incidents has led to concerns over trust among consumers and investors, potentially impeding collective environmental progress. Read more at Reuters.
This New York Times Reporter has beef with the world’s biggest meat producer: Find out why
JBS CEO Gilberto Tomazoni faced scrutiny from The New York Times during Climate Week in New York City, particularly regarding the calculation of Scope 3 emissions in the company's meat supply chains. The CEO suggested that he did not know how to calculate this cost. This lack of transparency raised concerns about the company’s decarbonization strategy, leading environmental groups like Mighty Earth to oppose JBS’s plan to list on the NYSE due to climate and governance issues. Read more at The New York Times.
Going Green Faster means Increased Profits and Reduced Costs
The European Central Bank has emphasized the critical importance of accelerating the green transition to achieve a net-zero economy. The results of its climate stress test emphasize the advantages of frontloading green investment, demonstrating that delaying the transition will escalate costs and risks for firms, households and banks. Accelerated green policies and investment, compared to the current pace, lead to reduced financial risks in the medium term, which benefit both firms and households. Banks face heightened credit risks in the case of delayed transition, underscoring the urgent need for decisive action to meet climate goals and mitigate costly physical risks. Continue reading from the European Central Bank.
Shell CEO taken to task by employees in an open letter
An open letter from two employees in Shell's low-carbon division has expressed concerns about recent strategic changes within the company that shift the company back toward non-renewables. The letter, addressed to Shell's executive committee, emphasized that Shell would maintain its leadership in the energy transition. Shell's CEO’s leadership has focused on enhancing operational performance and profitability, resulting in divestments and a shift toward traditional oil and gas operations, biofuels and electric vehicle charging. Despite changes, Shell's spokesperson emphasized the company's vital role in the energy transition and highlighted the areas where Shell is positioned to succeed in the current and future energy system. Keep reading at Euro News.
How climate disasters may change the way home insurance works in Canada
Insurance leaders and Natural Resources Canada are addressing the overdue implementation of a national home “climate risk” rating system, initially promised two years ago by Prime Minister Justin Trudeau. Recent climate-related disasters in Canada have underscored the pressing need for better evaluation of climate risks on properties. Insufficient government focus on climate resilience has left consumers without vital information, potentially undervaluing property protection costs. The rise in climate-induced insurance claims, from $1 billion in 2005 to nearly $2.5 billion in 2021, highlights the urgency for an effective risk assessment framework. Read more from Global News.
Have we been thinking about carbon credits in the right way?
A recent Financial Times article emphasizes the risks associated with relying on carbon credits as the primary strategy for achieving net-zero commitments. Highlighting examples like the Wildlife Alliance project in Cambodia, the article points out the potential shortcomings in such initiatives, often detached from a company's core operations. Purchasing carbon credits, while seemingly a quick fix, can impede the fundamental need for companies to address their own emissions and business models. The article suggests third-party verification by “carbon accountants” as a potential solution to ensure transparency. However, the more effective approach would be for companies to prioritize direct decarbonization efforts within their operations rather than relying chiefly on carbon offsetting. Keeping reading at The Financial Times.
Canada’s climate progress not on track for 2030 targets
Canada’s greenhouse gas emissions for 2022 increased by 2.1%, led largely by the oil and gas sector. Carbon policy and clean technology deployment have mitigated the rise in other areas, with electricity emissions halved since 2005. Canada remains 6.4% below its 2005 emission levels, well short of its 2030 target. Keep reading at 440.
Assembly of First Nations set to release National Climate Strategy
The Assembly of First Nations is set to unveil its National Climate Strategy that will introduce a First Nations approach to #ClimateAction. The AFN will be holding a technical briefing to provide an overview of the specific strategies and actions contained within the AFN National Climate Strategy on Thursday, October 25 from 1-3 p.m. EDT. Visit the AFN website for more information.
Brick-by-brick: LEGO’s experiment with oil-free bricks falls down
LEGO has ended its initiative to replace oil-based plastics in its toy bricks with a new material made from recycled plastic bottles, citing higher carbon emissions associated with the new process. The company, known for its sustainability efforts, had initially aimed to shift away from ABS, a petroleum-based plastic, to recycled polyethylene terephthalate. However, the need for new equipment resulted in increased carbon emissions, prompting the company to refocus on enhancing the sustainability of ABS instead. Read more from The Financial Times.
Canada Climate Law Initiative wants Pension Plan Guidelines to address climate risks
The Canada Climate Law Initiative made five recommendations that would strengthen the climate-related aspects of the Guideline, including setting baseline standards to ensure pension fiduciaries are able to fulfil their duties to members; adopting specific governance requirements for plan administrators; identifying processes and tools for assessing and monitoring climate-related risks; developing transition plans to net zero; and disclosing the pension funds' oversight and management of climate-related governance, strategy and other metrics in their financial reporting. Read more at Canada Climate Law Initiative.