There are so many ESG-related publications and developments that it is hard to keep abreast of them all. For this reason, every two weeks, our firm has been publishing a tracker of ESG-related publications and developments, with a primary focus on developments that may be of most interest to or impact our clients, be they corporates, asset managers or asset owners.

Key updates covered in this edition include:

  • the Platform on Sustainable Finance’s publication of its Final Report on Social Taxonomy;
  • the European Commission’s publication of its management plan for setting out its objectives across four key areas (Environment; Employment, Social Affairs & Inclusion; Energy; Climate Action) in 2022;
  • The Spanish government has approved the Strategic Project for Economic Recovery and Transformation ("PERTE", by its Spanish acronym) of Circular Economy, which hopes to mobilise more than 1.2 billion euros; and
  • the European Banking Authority’s publication of its report in relation to the development of a framework for sustainable securitisation.

If you have any ESG-related questions, please get in touch with your usual contact at HSF who will be able to direct you as appropriate.

Key items

This issue covers the period from 23 February to 15 March 20221.

27 February 2022

The Intergovernmental Panel on Climate Change (IPCC) has finalised the second part of the Sixth Assessment Report, “Climate Change 2022: Impacts, Adaptation and Vulnerability”, the Working Group II contribution to the Sixth Assessment Report. It was finalised on 27 February 2022 during the 12th Session of Working Group II and 55th Session of the IPCC, accessible here.

The Working Group II contribution to the Sixth Assessment Report assesses the impacts of climate change, looking at ecosystems, biodiversity and human communities at global and regional levels. It also reviews vulnerabilities and the capacities and limits of the natural world and human societies to adapt to climate change.

28 February 2022

The Platform on Sustainable Finance, an advisory body established to advise the European Commission (EC) on the development of the EU Taxonomy, has published its Final Report on Social Taxonomy. The report proposes a structure for a social taxonomy within the current EU legislative environment on sustainable finance and sustainable governance. The report suggests that the social taxonomy should be centred on businesses’: (i) own workforce; (ii) end-users/consumers; and (iii) affected communities. The suggested structure of the social taxonomy consists of three objective which address different stakeholders: (i) decent work; (ii) adequate living standards and wellbeing for end-users; and (iii) inclusive and sustainable communities and societies.

01 March 2022

The EC has published a report on post-Covid economic and social challenges. The report addresses how the EU can pursue sustainable growth and focuses on a triple transition of climate, digital and social change. The report explores the financial, political and environmental challenges in the future and proposes recommendations to secure the best outcome for the EU. The recommendations focus on five areas: (i) financing the triple transition; (ii) fair and effective taxation; (iii) moving towards a health union; (iv) strengthening Europe’s global role; and (v) improving the EU’s governance.

02 March 2022

The UN Environment Programme hosted the United Nations Environment Assembly (UNEA-5) which brought together representatives of the 193 Member States of the UN, businesses, civil society, and other stakeholders to agree on policies to address the world’s most pressing environmental challenges. The resumed Fifth session took place online and in Nairobi.

During UNEA-5, representatives endorsed a historic resolution to End Plastic Pollution and forge an international legally binding agreement by 2024. The aim of the resolution is to complete a global draft legally binding agreement by the end of 2024 which reflects alternatives to address the full lifecycle of plastics, the design of reusable and recyclable products and materials, and the need for enhanced international collaboration to facilitate such initiatives.

02 March 2022

The European Banking Authority has published a report in relation to the development of a framework for sustainable securitisation. The report recommends adjustments to the proposed EU Green Bond Standard as regards securitisation transactions and explores:

  • whether and how the EU regulations on sustainable finance, including the EU Green Bond Standard, the EU Taxonomy and the Sustainable Finance Disclosure Regulations could be applied to securitisation;
  • the relevance of a dedicated regulatory framework for sustainable securitisation; and
  • the nature and content of sustainability-related disclosures for securitisation products.

02 March 2022

The United Nations Principles for Responsible Investment (UNPRI) published its response to the EC’s proposal for a Corporate Sustainability Due Diligence Directive (CSDD). The UNPRI welcomed the due diligence obligations, noting that the focus on reducing harm will support investors’ sustainability assessments, enhance risk analysis and processes for impact mitigation and provide greater understand of company operations. The UNPRI also set out suggested improvements, including increasing coherence between the CSDD and other EU sustainable finance legislation and expanding the scope of the CSDD to include, amongst other things, all businesses operating in the EU regardless of sector or size.

03 March 2022

The European Securities and Markets Authority (ESMA) has published its February edition of the Spotlight on Markets Newsletter.

The newsletter focuses on ESMA’s Sustainable Finance Roadmap and its priorities, ensuring the coordinated implementation of the ESG mandate for 2022-2024. In addition, readers are invited to provide input on the market structure for ESG rating providers in the EU through the Call for Evidence on ESG Ratings.

Furthermore, in its first Trends, Risks and Vulnerabilities (TRV) report of 2022, ESMA highlighted the risk of significant market corrections. For the first time, environmental risk has been added to the risk dashboard as a separate category. Articles linked to the TRV include the High Level of Divergence in Disclosure of ESG Factors in Credit Ratings, accessible here, and Monitoring environmental risks in EU financial markets, accessible here.

03 March 2022

The Loan Market Association (LMA), Asia Pacific Loan Market Association (APLMA), and Loan Syndications and Trading Association (LSTA) have jointly published two new ESG guidance documents as part of their continued work in relation to ESG and sustainable finance.

The first document, “Guidance for Green, Social, and Sustainability-Linked Loans External Reviews”, is intended to provide best practice guidance on the external review process for borrowers, lenders, external reviewers and other stakeholders in the loan market.

The second document, “Guidance on Social Loan Principles”, is designed to sit alongside the Social Loan Principles (SLPs) which were jointly published by the APLMA, LMA and LSTA in April 2021. This guidance is intended to provide greater clarity for market participants with regards to the requirements of the SLP and covers a number of frequently asked questions in relation to social loans.

Together, the guidance documents are intended to assist market participants globally in identifying and applying best practice market standards when structuring and entering into sustainable lending transactions.

04 March 2022

The Financial Action Task Force has announced that it has adopted amendments to recommendation 24 (and its Interpretive Note) on transparency and beneficial ownership of legal persons. The amendments strengthen the international standards on beneficial ownership of legal persons to ensure greater transparency about the ultimate ownership and control of legal persons and to mitigate the risks of their misuse, while retaining a degree of flexibility for individual countries to go further in refining individual regimes. The updated recommendation is accessible here.

04 March 2022

In his Office Hours video series, Gary Gensler, Chair of the US Securities and Exchange Commission (SEC), stated that the SEC is looking into product label and disclosure rules for ESG investment products to enable investors to understand the products they invest in and whether those products “are really what they say they are”. Gensler highlighted the significant growth in ESG investment products, noting that while investment managers are increasingly making claims about the ESG aspects of their products, definitions of “ESG investing” remain inconsistent.

04 March 2022

The EC has updated its webpage, “EU labels for benchmarks (climate, ESG) and benchmarks’ ESG disclosures”. The page now includes a new section on the EC’s study on feasibility, minimum standards and transparency requirements of an EU ESG benchmark label. The EC is inviting stakeholders such as benchmark administrators, benchmark constituents and benchmark institutional investors and/asset managers to have their say by participating in a survey that will provide input to the study.

07 March 2022

The EC has published its management plan for setting out its objectives across four key areas in 2022:

  • environment – The EC has committed to working towards a circular economy and further recovering and protecting the natural ecosystems in the EU. It seeks to reduce and, eventually, eliminate pollution, while establishing governance frameworks and ensuring environmental concerns and standards are mainstreamed across EU policies and investments. Lastly, the EC intends to stimulate global uptake of the environmental objectives of the European Green Deal through multilateral agreements, trade and engagement with third countries;
  • employment, social affairs and inclusion – As above, the EC aims to support the preparation of the initiatives related to the European Green Deal. It also aims to facilitate safer working conditions and better functioning labour markets. The EC’s goal is to move towards a new European democracy with equality for all citizens, focussing on the economic and social inclusion of people with disabilities and ensuring freedom from discrimination;
  • energy – The EC aims to establish the EU as a global leader in energy. It intends to do this by focusing on decarbonised energy production and energy efficiency in investments and infrastructure. The EC seeks to further invest in research and development in the clean energy technology space and wishes to involve all stakeholders in ensuring a clean energy transition, building on the European Climate Pact; and
  • climate action – The EC will continue to work towards climate neutrality by 2050 through a well-functioning EU carbon market and fair regulatory framework to reduce emissions. It will monitor EU climate legislation through the Energy Union Governance and work to mainstream climate-related spending in the EU budget and in private funds. The EC will further work towards ensuring EU society is increasingly adapted and insured against the adverse impacts of climate change. It will continue to play its role in leading climate diplomacy in line with the Paris Agreement and SDG 13.

08 March 2022

The EC has proposed an outline of a plan to make Europe independent from Russian fossil fuels before 2030, starting with gas.

To do so, the EC proposes to develop a REPowerEU plan that will increase the resilience of the EU-wide energy system based on two pillars:

  • diversifying gas supplies, via higher liquefied natural gas and pipeline imports from non-Russian suppliers and larger volumes of biomethane and renewable hydrogen production and imports; and
  • reducing the use of fossil fuels in our homes, buildings, industry and power systems, by boosting energy efficiency, increasing renewables and electrification and addressing infrastructure bottlenecks.

The EC proposes to work with Member States to identify the most suitable projects to meet these objectives, building on the work done already on national Recovery and Resilience Plans.

08 March 2022

The EC has published the 2022 edition of the European Commission’s annual report on gender equality in the EU. 2021 saw important steps taken in terms of legislative proposals, namely on pay transparency and adequate minimum wages in the EU, as well as on a new Digital Services Act which will help to protect users online. In December 2021, the EC also proposed to include hate speech and hate crime in the list of EU crimes.

The EC has further published a paper titled “The Macro-Economic Benefits of Gender Equality” which puts forward the business case for promoting equal opportunities for women in the labour market. The report notes that women in the EU still report significantly fewer hours of paid work than men and that there are stark differences between countries with respect to gender gaps in labour market outcomes. The paper highlights that addressing gender gaps can contribute to growth by expanding labour supply and through likely positive impacts on productivity.

08 March 2022

The Spanish government has approved the Strategic Project for Economic Recovery and Transformation (PERTE, by its Spanish acronym) of Circular Economy, which hopes to mobilise more than 1.2 billion euros.

This PERTE will focus on the textile, plastic and renewables sectors and will seek to reduce Spain's use of raw materials as well as the country's dependence on other countries.

In order to meet these goals, the project establishes aids of 492 million euros and will mobilise resources of more than 1.2 billion euros between public and private investment that will be developed from this year until 2026.

The aid will seek to boost the implementation of circular schemes in our country to address "serious" sustainability challenges, particularly in the following three specific industries: textiles-fashion, plastics and renewable energies, each of which will receive 100 million euros.

09 March 2022

The Regional Department of Sustainable Economy of the Autonomous Community of Valencia will allocate 1.1 billion euros in 2022 to the promotion of sustainable economy in this region.

These grants are aimed at associations, Small and Medium Enterprises (SMEs), universities and for territorial employment related agreements. The application process is open from 14 March to 22 April.

Associations, foundations and other non-profit entities and organisations that carry out activities for the promotion and encouragement of the principles linked to sustainability, social enterprise and/or the low carbon economy will be eligible for grants totalling 400,000 euros.

Also for training on the implementation, promotion and development of sustainable development objectives, such as gender equality, decent work and economic growth, industry, innovation and infrastructure, and responsible production and consumption.

10 March 2022

The Spanish Network of the United Nations Global Compact will consult Spanish companies on the implementation of SDGs (Sustainable Development Goals).

The "United Nations Global Compact Spain" will carry out a major business consultation on the degree of implementation of the SDGs through a qualitative study whose conclusions will be presented next June. According to the organisation, the aim of the project is to involve companies, regardless of their size and sector of activity, in making "effective and realistic" decisions on the measures that will allow the goals set out in the 2020 Agenda and the Sustainable Development Strategy 2030 to be achieved.

The consultation will be carried out in two phases. In March, the Spanish Network will firstly carry out a qualitative online survey aimed at the Spanish business community. Following so and based on the data collected during the first phase, the Spanish Network will carry out a series of qualitative surveys to examine these issues in greater detail. Once this consultation phase is completed, the United Nations Global Compact will prepare a report of conclusions reflecting the knowledge and state of implementation of the 2030 agenda in the Spanish business sector and its evolution compared to previous studies. This report will be issued in June.

11 March 2022

The Association for Financial Markets in Europe and ISDA (together, the Associations) have published their joint response to the ESMA Call for Evidence on Market Characteristics for ESG Rating Providers in the EU (the Call for Evidence). The Call for Evidence’s aim is to develop a picture of the size, structure, resourcing, revenues and product offerings of the different ESG rating providers operating in the EU.

In their response, the Associations encouraged the ESMA and EC to continue to coordinate with the International Organisation of Securities Commissions. The Associations noted such coordination would help to avoid a fragmented approach in working towards further transparency, comparability and reliability of ESG reporting and data, especially given the global nature of the market.

11 March 2022

The Autonomous Community of Navarra presented in Brussels a paper on the public policies and regional role in encouraging a sustainable and circular economy. This project focuses on improving regional policy instruments to achieve a circular economy.

To this end, several pilot projects will be developed within the framework of the strategic priorities of the new Smart and Sustainable Specialisation Strategy S4 with the aim of deciding on what action to take to encourage the circular economy and to facilitate the creation of economic activity based on circularity concepts. These projects fall within different priority categories (electric and connected mobility, healthy and sustainable food, green energy industry and sustainable construction).

Recent and upcoming HSF ESG-related publications, webinars and events

  • Check out the participation of the Head of Public Law, Environment and ESG, Iria Calviño, in the executive program titled "Environmental, Social and Relational Capital Management in Companies", on the management of ESG factors as a key to competitiveness and resilience, whose program can be accessed here;
  • Check out our Legal Briefing titled "Spain launches consultation on human rights and sustainability due diligence law", on the consultation opened by the Spanish Government to gather stakeholder views on the draft bill on the protection of human rights, sustainability and due diligence in transnational business activities and help to produce a draft text, written by the Head of Public Law, Environment and ESG, Iria Calviño, Public International Law Consultant Antonio Pastor and Junior Associate Catalina Hierro, all from the Madrid office;
  • Check out our Legal Briefing titled “Decarbonisation Round-Up – Russia Moves To Position Energy Sector For The Net-Zero Age” which provides an overview of the Carbon quotas and storage schemes, increasing hydrogen output and tougher environmental standards introduced by the Russian Government;
  • Check out our Alert titled "Public consultation for the Draft bill on the protection of human rights, sustainability and due diligence in transnational business activities", which provides details on the public consultation for the upcoming Spanish law, written by the Head of Public Law, Environment and ESG, Iria Calviño and Junior Associate, Catalina Hierro, both from the Madrid office; and
  • See our latest thinking on the EU Green Bond Standard, a European Union (EU) standard aimed at increasing transparency and accountability, represent one of the biggest developments in the sustainable debt capital markets in the last decade.