SEC, EU, International Regulators Act on ESG Disclosures, Guidance

Law firm Debevoise and Plimpton highlighted several recent international developments in the environmental, social, and governance (ESG) space in the latest editions of its ESG Weekly Update newsletter.

In the United States, the Securities and Exchange Commission (SEC) has set an April 2024 “Final Action” date for its proposed rule on climate-related disclosures, as detailed in the Dec. 15 edition of the newsletter. This rule, initially put forward in March 2022, mandates SEC registrants to disclose greenhouse gas emissions and other climate-related information in their filings.

In the E.U., the European Supervisory Authorities (ESAs) have proposed amendments to the Sustainable Finance Disclosure Regulation (SDFR), part of the E.U.’s Action Plan for financing sustainable growth. These changes include expanding the list of Principal Adverse Impacts (PAIs) to cover issues like tobacco production and gender-based pay gaps. Additionally, new disclosure rules on greenhouse gas emissions reduction targets for financial products have been introduced.

The Commodity Futures Trading Commission (CFTC) in the United States has issued proposed guidance on trading voluntary carbon credit derivative contracts. The guidance focuses on factors such as transparency, additionality, permanence, and robust quantification to ensure compliance with the Commodity Exchange Act. 

Meanwhile, the 2023 United Nations Climate Change Conference, or COP28, concluded with a historic agreement to transition away from fossil fuels, as the law firm wrote in its Dec. 21 edition. The goal is to achieve net zero by 2050.

“Many participants lobbied for binding language to eliminate fossil fuels by a fixed date,” the firm wrote. “Ultimately, to achieve wider buy-in, the final agreement sets no specific deadline for the completion of the transition away from fossil fuels; it merely notes the need for accelerating action toward this goal this decade.”

Debevoise and Plimpton also highlighted the Corporate Sustainability Due Diligence Directive (“CSDDD”) coming out of the European Union. The CSDDD mandates that companies “identify, mitigate, and prevent actual and potential negative impacts on human rights and the environment caused by their own operations, operations of their subsidiaries, and operations carried out by business partners,” the law firm wrote.

Under the CSDDD, companies need to incorporate due diligence into their risk management policies and make sure that their business models and strategies comply with the Paris Agreement.