ESG Knowledge Update | October 2024

Legal and regulatory news

European Union

The European Commission put forward a proposal on 2 October to delay the implementation of the EU Deforestation Regulation to (EUDR) by 12 months. The EUDR bans the placing or making available on the EU market or the export of relevant products from the EU market, unless they are deforestation-free, have been produced in accordance with the relevant legislation of the country of production and are covered by a due diligence statement.

The European Commission has published detailed frequently asked questions on the Corporate Sustainability Reporting Directive (CSRD) which was required to be transposed into national law by 6 July 2024. The first sustainability reports under CSRD are due to be published in 2025 and, ahead of that, the European Securities and Markets Authority has published guidance on how businesses should apply European Sustainability Reporting Standards to produce their sustainability reports and on how sustainability reporting will be supervised by national regulators.

The Corporate Sustainability Due Diligence Directive (CSDDD), which requires companies to identify and address human rights and environmental impacts of their operations and supply chains, was published in the Official Journal of the EU on 5 July 2024 and entered into force on 25 July 2024. Member States have until 26 July 2026 to transpose the directive into national law. The European Commission has now published a high-level overview of the CSDDD.

The Right to Repair Directive, which gives consumers a new right to request a repair of defective products and creates a new general obligation on "producers" to repair defective goods after sale, was published on the Official Journal of the EU on 10 July 2024 and entered into force on 30 July 2024. Member states will need to transpose the directive into national law by 31 July 2026.

The Nature Restoration Law was published in the Official Journal of the EU on 29 July 2024 and came into force on 18 August 2024. The new law requires Member States to implement measures to jointly restore, as an EU target, at least 20% of the EU’s land and sea areas by 2030.

The European Supervisory Authorities have updated their consolidated questions and answers  on the Sustainable Finance Disclosure Regulation (SFDR) and the SFDR Delegated Regulation. Guidance has been provided on a variety of topics including how to calculate the share of sustainable investments that qualify as environmentally sustainable.

United Kingdom

A consultation has been launched to make changes to the UK Emissions Trading Scheme to align it with the introduction of the UK Carbon Border Adjustment Mechanism in 2027. Operators will receive the consultation from their scheme regulator and have until 11 October 2024 to respond.

The Financial Conduct Authority (FCA) opened its first ESG-related enforcement investigation into a company over climate-related issues (which the regulator suggested did not relate to greenwashing).

The FCA has updated its webpage on its sustainability disclosure requirements and investment-labelling regime to include a section on downloadable labels. Firms must notify the FCA when using an investment label.

In R (On the Application Of World Uyghur Congress) v National Crime Agency, the Court of Appeal held that the National Crime Agency's refusal to investigate potential money laundering offences in relation to the import of cotton allegedly produced using forced labour into the UK from the Xinjiang Uyghur Autonomous Region of China was unlawful.

The Circular Economy (Scotland) Act 2024 received Royal Assent on 8 August 2024 and requires the Scottish Ministers to prepare and publish a "circular economy" strategy. It gives ministers powers to set local recycling targets and statutory targets for delivery of a circular economy, restrict the disposal of unsold consumer goods, place charges on single-use items like disposable cups, and gives local authorities additional enforcement powers.

The UK chancellor, Rachel Reeves, has said the government will introduce legislation to allow for a regulatory regime for ESG rating providers by 2025.  Currently in the UK, ESG providers can follow the FCA's voluntary code of conduct.

With the recent FCA and Prudential Regulation Authority consultation on diversity and inclusion (D&I) as well as a parliamentary enquiry on sexism in the City, the UK financial regulators may take further steps to tackle issues around D&I. 

International

The International Accounting Standards Board (IASB) published on 29 August a proposed update to the  International Financial Reporting Standards (IFRS) Accounting Taxonomy 2024 to reflect these new and amended IFRS Accounting Standards. The proposed update includes changes to the IFRS Accounting Taxonomy to reflect the new and amended disclosure requirements introduced in these Standards.

The US has agreed to support the UN Plastics Treaty, which aims to end plastic pollution. Earlier this year, the US was aligned with China and Saudi Arabia in not wanting to be included in the treaty but has now shifted its position. Negotiations for the new treaty are scheduled to conclude in November, after the US presidential election on 5 November 2024.

Market news

The International Finance Corporation has launched an initiative called ClimaLab, which is aimed at enhancing climate resilience in the banking sector…Deloitte launches the LEAP Dashboard to help organisations identify, evaluate, and manage nature-related risks and opportunities…Cushman and Wakefield's Sustainability Megatrends review finds that 60% of global investors report that ESG investing leads to higher performance yields.

Recent ESG Insights from Osborne Clarke

• Commission proposes one-year delay to the implementation of the EU Deforestation Regulation
• Environmental, social and governance | UK Regulatory Outlook September 2024  
• Non-financial misconduct in UK financial services: the disputes perspective
• ESMA sets stricter guidelines for ESG and sustainability-related fund names
• What's holding back UK green consumer finance? A financial services perspective
• How can sustainability and IP rightsholders' interests be reconciled in second-hand goods sales in Europe?