September 2024 Newsletter

Please see this month’s top ESG stories.

Important Updates from the PRI Signatory General Meeting

The Principle for Responsible Investment’s (PRI) 2024 Signatory General Meeting outlined the 2024-2027 strategy, focusing on enhancing responsible investment, regional ecosystems, collaborative initiatives, and influencing policy. Key developments include improved reporting processes for 2025, mandatory modules for investment managers, and the design of "Progression Pathways" guiding responsible investment practices. The PRI’s prototype proposes three pathways for signatories: (A) integrating ESG factors, (B) addressing drivers, and (C) having an impact. Each pathway consists of eight pillars, outlining the essential elements of responsible investment signatories must fulfil. Available use is expected from 2025, with full details continuing to be developed. Additionally, the PRI is advancing new initiatives on human rights, circular economy, and nature, and is addressing anti-ESG challenges, particularly in the US market. For more information on this topic, read our article here.

FCA’s Naming and Marketing Rules Delayed until April 2025

The Financial Conduct Authority (FCA) has issued additional time for companies to comply with 'naming and marketing' rules for sustainable investment products, extending the deadline to April 2, 2025. The rules are part of the FCA’s Sustainability Disclosure Requirements (SDR) and investment labels regime (PS23/16), which holds firms accountable to accurately using sustainability-related terms in product names or labels. Firms now have additional time to name or use one of the SDR labels to meet higher standards for compliance with the anti-greenwashing rule, which took effect on May 31, 2024. However, if possible, companies should still aim to meet the original December 2024 deadline. Funds using other sustainability-related labels are excluded from the extension. For more information on this topic, read our article here.

EU Commission Acts on Member States’ CSRD Implementation Gaps  

The European Commission has initiated infringement procedures with 17 EU member states for failing to implement the Corporate Sustainability Reporting Directive (CSRD) into national laws by the July 2024 deadline. The CSRD updates the Non-Financial Reporting Directive (NFRD), expanding sustainability reporting requirements to over 50,000 companies. Starting in 2024, firms with over 500 employees must report on social and environmental impacts and human rights infringements and produce a report by 2025. From the subsequent year, it will extend to companies with more than 250 employees or €40 million in revenue. Several member states, including Belgium, Germany, and Spain, now face infringement procedures. If unaddressed, the Commission could proceed to take legal action. Additionally, 26 states have received warnings for delays in advancing renewable energy permits under the Renewable Energy Directive, aiming for 42.5% renewable use by 2030.

Californian Emissions-Reporting Delay Rejected

After a proposal to delay new laws was rejected, California's greenhouse gas emissions reporting requirements will proceed as planned. Legislation SB 253 and SB 261, enacted last year, mandate that companies disclose greenhouse gas emissions and climate-related risks from 2026.  About 75% of Fortune 1000 companies will be impacted. The SB 253 mandates public and private companies with over $1 billion in revenue to disclose their Scope 1, 2, and by 2027 Scope 3 emissions. This surpasses the SEC’s regulations of Scope 1 and 2 emissions disclosures. Additionally, SB 261 requires companies with over $500 million in revenue to publish a climate-related financial risk report by January 1, 2026. While a proposed two-year delay was rejected, the regulators now have until 2025 to create emission disclosure rules. Yet, ongoing legal challenges could further impact the future trajectory of the requirements. For more information on this topic, read our article here.

Keurig Penalized $1.5 Million for Deceptive Claims of Coffee Pod Recyclability

The U.S. Securities and Exchange Commission (SEC) has fined Keurig Dr Pepper Inc. $1.5 million over claims related to the recyclability of its coffee pods. Keurig allegedly misled consumers by overstating the extent to which their K-Cup pods were 100% recyclable. The company failed to disclose that many recycling facilities do not accept their pods due to their size and composition. Although Keurig did not respond to the allegation, the settlement requires the company to stop misleading product claims and improve transparency in communicating the recyclability of their products to consumers. The fine underscores the increasing scrutiny of companies' environmental claims and compliance with sustainability standards.

World’s Largest Companies Are Rapidly Increasing Climate Targets

Climate Impact Partner’s recent study reveals that the world’s largest companies are increasingly committing to ambitious climate objectives. Growing numbers of the Fortune Global 500 companies are adopting "significant climate targets", including science-based targets (SBTs). 45% of these firms have now set net-zero goals and plan to use carbon credits to offset their emissions. While these commitments reflect a shift towards greater corporate environmental responsibility, concerns remain surrounding the lack of transparent strategies and clear timelines to achieve these goals. Many corporations are not publicly announcing their exact efforts to avoid regulatory scrutiny and accusations of greenwashing. Nevertheless, the increase in ambitious climate targets indicates that companies are integrating environmental considerations into their business models.

Global Updates on the Implementation of the ISSB Sustainability Reporting Standards

The IFRS Foundation’s International Sustainability Standards Board’s (ISSB) sustainability reporting standards are being implemented by key regulators. Introduced in June 2023, the ISSB’s reporting standards aim to simplify the currently complex global reporting landscape, offering investors more consistent and comparable sustainability information. Currently, 20 jurisdictions, including the EU, United States and China, have adopted the standard into their climate-disclosure regulation. Open consultations on implementation are taking place in Switzerland, Malaysia, and Hong Kong.

Hong Kong Plans ISBB-Conform Sustainability Disclosure Rules

The Hong Kong Institute of Certified Public Accountants (HKICPA) recently put forward new sustainability and climate reporting standards, HKFRS S1 and HKFRS S2, in alignment with the IFRS’s general sustainability (IFRS S1) and climate-related (IFRS S2) disclosure rules. The changes in reporting requirements are expected to come into effect in August 2025, with a detailed implementation roadmap to be released later this year, applying to all companies and financial institutions in Hong Kong. Public consultation is open until October 27, 2024.

IFRS Releases Guide for Voluntary ISSB Standards Adoption

The IFRS Foundation released a guide supporting companies to voluntarily adopt the IFRS Foundation’s International Sustainability Standards Board’s (ISSB) sustainability reporting standards. The guide provides a clear roadmap for businesses, particularly those in regions without mandatory requirements, to align with ISSB reporting standards. This includes various pathways such as full adoption, partial adoption, and permitted use. The IFRS Foundation Regulatory Implementation Program outlines additional supporting tools that are planned, enabling companies to cost-effectively enhance their sustainability disclosures.

If you’d like to know more or discuss any of the topics, please get in touch.