China: China Issues First ESG Disclosure Standard
The China Enterprise Reform and Development Society, a
government-backed think tank, published the first China-focused
disclosure standard, entitled "Guidance for Enterprise ESG
Disclosure". The guidance applies to all Chinese companies
from June 1, 2022 and will serve as a reference for self- and
third-party evaluation. It is currently voluntary and has not been
made into law.
The ESG disclosure standard was developed in collaboration with
Chinese insurer Ping An, China Mobile, Ant Group and several other
companies. The guidance is intended to reflect local market
characteristics, taking into account Chinese laws and regulations
such as China's Environmental Protection Law and Product
Quality Law. It is based in part on the sustainability disclosure
requirements of the Hong Kong Stock Exchange and the Shanghai Stock
Exchange. While jurisdictions such as the UK, New Zealand, Japan
and Switzerland base their disclosure measure on the TCFD's
recommendations, China's guidance focuses on national
requirements.
The guidance establishes an indicator system which provides a basic framework for disclosure when measuring the sustainability of a business. Disclosure requirements, indicators and other factors vary depending on the industry and size of companies. Factors considered include pollution, employee labor rights, product liability and business ethics. The disclosure principles require:
- Materiality, meaning that the information disclosed must have a significant impact on stakeholder decision-making. Stakeholders include any persons or groups whose interests may be affected by the decisions or actions of a corporation;
- Truthfulness, requiring objective and fact-based disclosures that reflect a true picture of the enterprise's activity;
- Accuracy, which refers to the use of concise, clear and easy to understand language when making disclosures, without misleading statements;
- Integrity, requiring all information with significant impact on stakeholder judgment to be disclosed, without omissions; and
- Consistency, to facilitate comparison.
Links:
Guidance for Enterprise
ESG Disclosure (Chinese only)
EU: EU Parliament's Economic and Monetary Affairs
Committee Proposes More Stringent Rules for EU Green Bond
Standard
The EU Parliament's Economic and Monetary Affairs Committee
has announced proposals to significantly widen the scope of the EU
Green Bond Standard (EUGBS), which was greenlit by the EU Council
last month. The European Commission initially launched the EUGBS in
July 2021, aiming to establish a European Green Bond (EuGB) label
and with the goal of reducing greenwashing. The Committee's
proposals—approved with 44 votes in favor (12 against, three
abstentions)—seek to implement transparency requirements and
allow comparisons between EuGBs and existing green bonds. They
would mandate that issuers identify and limit significant adverse
affects of their operations and prohibit the issuance of EuGBs in
countries on the EU's grey or blacklist of tax havens, such as
Panama.
The EU Taxonomy, part of the EU Action Plan on Sustainable Finance,
enables certain economic activities and investments to be
categorized and assessed based on their impact in achieving at
least one of six defined environmental objectives. These include
climate change mitigation and adaptation, which made up the basis
of the newly implemented First Delegated Act. The Second Delegated
Act specifies the particulars of disclosure requirements and
advises on how the criteria can be reflected in key financials,
with the Third Delegated Act—covering the inclusion of
nuclear energy and natural gas in the taxonomy—yet to be
formally adopted. On a related note, there have been important
developments as regards the EU's Sustainable Finance Disclosure
Regulation (SFDR) recently, as we have covered here. The Commission has proposed amendments
to the Regulatory Technical Standards, finalized by the European
Supervisory Authorities (ESA) last month, which included disclosure
templates for funds caught by Articles 8 and 9 of the SFDR. The
ESAs have also raised questions with the Commission as to the
interpretation of the SFDR and EU Taxonomy.
The proposals will obligate all issuers using the EuGB label to
have verified climate transition plans in place to avoid the use of
the label by so-called "brown" companies, or companies in
high-polluting industries. Additionally, there would be stronger
supervision powers ensuring that reviewers have fewer conflicts of
interests and more power to ban companies from issuing EuGBs if
they breach the new rules.
The Committee will begin negotiations with Member States in the
coming weeks in order to finalize the scope and precise content of
the amendments agreed upon in principle this week.
Links:
European Parliament
Press Release
France: TotalEnergies Rejects Shareholder Climate
Proposal
TotalEnergies rejected a shareholder proposal that called for
the energy giant to align its climate goals with the Paris Climate
Agreement. The proposal was introduced in April by a group of 11
investors, including Dutch pension provider MN, representing
approximately 0.8 percent of TotalEnergies' shareholder
capital. The groups acknowledged TotalEnergies' engagement and
improvement in its climate-related positions in recent years but
stated the view that the company's current efforts were
insufficient.
In response, the company stated that the resolution
"encroaches on the public policy competence of the board of
directors to define the company's strategy." In a
statement, TotalEnergies argued that "under cover of extending
the transparency of the information to be provided in the
management report, the proposed resolution would in fact amount to
an obligation to frame the strategy 'to align its activities
with the objectives of the Paris Agreement' and to (i) set
reduction targets in absolute terms...of direct or indirect
greenhouse gas emissions...and (ii) the means implemented by the
company to achieve these targets."
While TotalEnergies indicated it won't support the proposal,
the company announced additional efforts at increasing transparency
by committing to publish its Sustainability and Climate Report
annually, which report will highlight the company's strategy
regarding energy transition and implementation of related
measures.
The investors behind the proposal have urged the French financial
authority (the AMF) to ensure the climate resolution appears on the
agenda of the company's next shareholder meeting.
Links:
The Board of Directors
of TotalEnergies is promoting dialogue with its shareholders by
inviting those that proposed a draft resolution to express their
views at the Annual Shareholders' Meeting of 25 May
2022
TotalEnergies
shareholders urge regulator to ensure climate resolution included
at next AGM
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