Welcome to the first NewGround Law ESG weekly NEWsletter.
At NewGround Law, we recognise the importance of Environmental, Social and Governance (ESG), both to our firm and our clients. We are not the only ones who think this. The values and principles relating to the three aspects of ESG are already significantly altering capital flows, stakeholder engagement as well as national and international regulation. We vow to stay ahead of these trends. We believe that doing so will place us in an optimum position to capitalise on these changes as they materialise.Hence, the experts at NewGround Law have created a weekly newsletter to help those around us stay on top of the key developments shaping the ESG landscape across Europe.
EU Commission chooses seven Dutch Cities to become Carbon Neutral by 2030
The European Commission has announced the 100 cities from EU member states which will participate in the 'EU Mission' to become carbon neutral and smart cities by 2030.1 Along with 12 cities from partner nations outside the Union, the 100 EU cities will receive ?360 million during the period 2022-23. A total of seven cities from the Netherlands have been selected to receive funding from the project; this includes Amsterdam, Eindhoven, Helmond, Groningen, Rotterdam, The Hague and Utrecht.2
The cities will receive funding from the Horizon Europe programme. Created under Regulation 2018/0224, the programme aims to tackle global issues through financing research and innovation.3 Between 2021-2027, Horizon has a budget of ?95.5 billion; 35% of this has been allocated to tackle issues surrounding sustainability and climate change.
Participating cities will benefit from tailor-made advice and assistance from a dedicated Mission Platform run by NetZeroCities, additional funding, networking opportunities and financing opportunities and the possibility to join large innovation actions and pilot projects. Given that 377 cities originally showed interest in the project, the commission also announced that it would put support in place for the cities which were not selected.
The next steps for the mission are for the participating cities to develop 'Climate City Contracts' which they will be able to communicate with authorities and potential stakeholders by the end of 2022. This will include an overall plan for climate neutrality across all sectors such as energy, buildings, waste management and transport, together with related investment plans. Stakeholders who are impacted by the project, or may even wish to contribute to it, should remain informed with updates from national and local governments.
Shell Triples Renewable Energy Capacity through Acquisition of Solenergi Power Private Limited
Shell Overseas Investment B.V., a subsidiary of Shell plc, has agreed with Actis Solenergi Limited to purchase a 100% stake in Solenergi Power Private Limited.4 Created in 2017, Solenergi supplies wind and solar power in India. With a current capacity to supply 2.9 GW of renewable electricity, along with an additional 7.5 GW in upcoming projects, the acquisition is set to triple Shells existing renewables capacity. The deal, which will cost the energy giant $1.55 billion, is subject to regulatory approval and is expected to be finalised later this year.
Over the past year, Shell has been under increasing pressure from a range of stakeholders to increase its environmental commitments. Most notably, in May last year, Shell was ordered by The Hague District Court to reduce its worldwide C02 emissions by 45% by 2030 (compared to 2019 levels). This unprecedented decision against the energy giant is the first time a company has been legally obligated to align its policies with the 2016 Paris agreement. More recently, environmental law charity, ClientEarth, have announced their intentions to pursue shareholder litigation - in the UK - against Shell's Board for mismanaging climate risk.5
External groups are not the only ones pushing Shell to increase its environmental commitments. Shell is also under significant pressure from its own shareholders. Next month, on Tuesday May 24, 2022, Shell's shareholders will vote on a series of resolutions regarding the company's environmental commitments at its annual general meeting.6 Various investors including Dutch activist group 'Follow This' are pushing for the company to set and publish more detailed targets in line with the Paris agreement.
While the purchase of Solenergi is a step in the right direction for Shell, further expansion of its renewable capacity - whether it be through internal investment and/or further M&A activity - and reduction of its fossil fuels business, will be required if the company is to reach its legally binding 2030 target.
Unilever to End Marketing of Food and Beverages to Children Under-16
The global consumer brands giant Unilever, well known for owning companies such as Ben & Jerry's, Hellmann's and Magnum, has decided to end the marketing of its food products to under-16s across traditional media and social media platforms.7 Previous to this announcement, Unilever did not market to children under 13 via social media and 12 on normal media. The announcement this week is part of the company's new global principles which aim to recognise the influence of advertising on children as well as supporting parents in the selection of their families diets.
Commitments like these are an essential element of the 'S' aspect of ESG. It demonstrates that companies are both aware of the fluctuating social and political environment that their key stakeholders exist within but also that they are prepared to adapt their strategy to accommodate this. In the present case, Unilever and its associated brands, identified the significant role that advertising has on children in an increasing digital world. As a distributor of many 'treat' foods, Unilever has been proactive in championing positive lifestyle choices for their younger consumers. In this sense, the announcement also ties in with the 'G' side of ESG as the decision to raise the minimum age is a form of self-regulation. As a result of the field of food and beverage marketing being largely unregulated by national authorities, with the exceptions of some regulation in the UK and Portugal, for example, the decision by Unilever demonstrates proactive and effective decision-making within its corporate governance structure.
Unilever has set a deadline of the 1 January 2023 for it's brands to comply.
Relief for Sustainable Investors over French Election Result
Arguably one of the biggest stories from the EU last week has caused widespread optimism for the ESG community. Emmanuel Macron defeated his far-right competitor, Marine Le Pen, in the second round of the French election on Sunday to remain in office for five more years.
Many in the ESG community have expressed their relief from the results. This is a consequence of the two candidates contrasting environmental policies and in in particular, their approach towards the energy transition. In the only televised TV debate before the election, Macron promised to go 'twice as fast' to tackle GHG emissions. On the other hand, Le Pen wants the rate of transition to be reduced as she fears it is having overly restrictive consequences for the French public.8
Perhaps the most concerning aspect of Le Pen's climate plan, from a European perspective, is her wish to withdraw France from the EU Green Deal. The Green Deal is the core strategy for the EU on mitigating and adapting to climate change. Thus, it forms the policy basis for many key pieces of sustainability-related legislation such as; the EU Taxonomy Regulation, the Corporate Sustainability Reporting Directive and the Sustainable Finance Disclosure Regulation. Macron has championed this legislation throughout his presidency.
Macron's current government has also made some progress in the field of national sustainable finance. For example, Article 29 of France's law on Energy and Climate obligates specified financial firms to report on both climate- and biodiversity-related risks and impacts.9 The inclusion of biodiversity-related disclosures is a notable early-move from the French government as the international initiative tasked with creating such disclosures - the Taskforce on Nature-Related Financial Disclosures (TNFD) - is not set to make its first recommendations until next year.
One must, however, be cautiously optimistic about Macron's success. Just last year, a court found his government guilty of failing to meet their own commitments to reduce GHG emissions under the Paris agreement.10 Furthermore, the Climate Action Network (Réseau Action Climat) - a union of 26 climate and social justice groups in France - has labelled Macron's environmental manifesto as "unclear, incomplete and imprecise".11 While the election does not appear to be a step forward for sustainable finance in Europe, it does seem that France has avoided - what the Réseau Action Climat labelled as - "a climatic step backwards".
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