There are so many ESG-related publications and developments that it is hard to keep abreast of them all. For this reason, HSF publishes a monthly tracker of ESG-related publications and developments, with a primary focus on developments that may be of most interest to or impact our clients in the Southern African Development Community, be they corporates, asset managers or asset owners. 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. This issue covers the period from 1 to 28 February 2023. 02 HERBERT SMITH FREEHILLS enhance the gathering of evidence or seizure/ confiscation of proceeds of crime; (3) providing adequate financial and human resources to supervisors, developing and implementing a risk-based supervision plan; (4) providing adequate resources to the authorities to commence the collection of adequate, accurate and up-to-date beneficial ownership information of legal persons; (5) increasing the human resources of the financial intelligence unit as well as increasing financial intelligence sent to authorities; (6) demonstrating law enforcement agencies' capability to effectively investigate money laundering and terrorist financing cases using financial intelligence; (7) conducting a comprehensive TF risk assessment and begin implementing a comprehensive national CFT strategy; (8) increasing awareness on TF and PF-related TFS; and (9) carrying out the TF risk assessment for NPOs in line with the FATF Standards and using it as a basis to develop an outreach plan. 27 February 2023 It is reported that Mozambique's parliament is set to consider the Draft Law on the Creation, Organisation and Operation of Non-profit Organisations (draft law). The Mozambican government has expressed that the draft law is intended to counter money laundering and terrorist financing as its security forces battle an Islamic State-linked armed group in the northern part of the country. In September 2022, the government approved the draft law in anticipation of being placed on grey list in October 2022. SEYCHELLES 03 February 2023 It is reported that for the 5th consecutive year Seychelles has maintained its top ranking for the sub-Saharan African region in the Transparency International Corruption Perceptions Index (CPI). With 70 points, it is ranked 23rd globally in 2022. 14 February 2023 The President of the Republic, speaking at the World Government Summit, called on world leaders to take collective action, show greater global solidarity and stronger political will in helping the Small Island Developing States (SIDS) such as Seychelles in addressing the global challenges which arise from the adverse effects of climate change. The President stated that "Environmentally, [SIDS] bear little responsibility for the global concentration of greenhouse gases, yet we are disproportionately vulnerable to climate-induced shocks and intensifying ecological transitions, making us the most vulnerable societies to climate change". It should be noted that SIDS have been at the forefront of global discussions on strong climate mitigation efforts, minimizing the risks from climate change, and on mechanisms to address loss and damage. SOUTH AFRICA 06 February 2023 The Minister of Forestry, Fisheries and the Environment published a notice extending the appointment of the Environmental Assessment Practitioners Association of South Africa (EAPSA) as the single registration authority in terms of section 24H(3) read with section 24H(6) of the National Environmental Management Act, 1998. The notice extends the EAPSA's appointment for 12 months. EAPSA was originally appointed as the single registration authority for five years between 8 February 2018 and 7 February 2023. The appointment is said to have been extended by 12 months to grant the Minister time to adequately consider the most sustainable way forward for the long-term regulation of environmental assessment practitioners. 21 February 2023 The Minister of Forestry, Fisheries and the Environment published the Regulations to domesticate the requirements of the Rotterdam Convention on the Prior Informed Consent (PIC) procedure for certain hazardous chemicals and pesticides in international trade (Rotterdam Regulations). The purpose of the Rotterdam Regulations is to implement and outline the Rotterdam Convention on the PIC procedure and to promote shared responsibility and cooperate efforts in international trade from chemicals. The Rotterdam Regulations also aim to contribute to the environmentally sound use of chemicals by facilitating information exchange. 22 February 2023 The Minister of Finance gave the South African 2023 Budget Speech. The Speech focused on the energy crisis facing the country. Measures aimed at addressing the crisis included: (1) a proposal for a total debt-relief arrangement for Eskom (the state-owned entity responsible for providing power) for ZAR254 billion; and (2) tax incentives for business and private individuals to encourage the installation of solar power. 24 February 2023 The FATF officially added South Africa to the grey list owing to South Africa's failure to put measures in place to the satisfaction of the FATF to combat money laundering and financing terrorism. The consequence of the grey listing will be felt by businesses that operate internationally and may result in increased costs and administrative burdens. It may also discourage international investment. 28 February 2023 The Minister of Cooperative Affairs and Government published Regulations under section 27(2) of the Disaster Management Act, 2002 in response to the state of disaster declared by President Ramaphosa during his State of the Nation Address on 9 February 2023 regarding the electricity crisis in the country. The regulations span an array of measures to protect and provide relief to the public and to deal with the destructive nature, and other effects of the disaster. These include: ••minimising the impact of load shedding on livelihoods, the economy, policing functions, national security, security services, education services, health services, water services, food security, communications and municipal services, amongst others; ••reducing and managing the impact of load shedding on service delivery to support lifesaving and specified critical infrastructure; ••providing measures to enable the connection of new generation supply; and ••providing measures to improve Eskom’s plant performance. Among others, the Regulations provide for the authority to issue directions for purposes of giving effect to the Regulations including in relation to streamlining environmental decision-making processes and excluding upgrades, refurbishments, adjustments and repairs from the provisions of certain environmental requirements for the duration of the state of disaster. UNITED REPUBLIC OF TANZANIA 21 February 2023 It has been reported that Tanzania’s government approved the construction of the East African Crude Oil pipeline (Eacop) that will transport crude from oil fields being developed in Lake Albert, in north western Uganda to a Tanzanian port on the Indian Ocean. The $10 billion oilfields and pipeline project, which is being jointly developed by private entities, along with the state oil companies of Uganda and Tanzania, required approval from both countries – with Uganda issuing a license to the project operator last month. 03 HERBERT SMITH FREEHILLS 24 February 2023 The United Republic of Tanzania remains on the FATF's grey list in 2023 since being added to the list last year. The FATF noted that the country will continue to work to implement its action plan by: (1) improving risk-based supervision of financial institutions and DNFBPs, including by conducting inspections on a risk-sensitive basis and applying effective, proportionate, and dissuasive sanctions for non-compliance; (2) demonstrating authorities’ capability to effectively conduct a range of investigations and prosecutions of ML in line with the country’s risk profile; (3) demonstrating that law enforcement agencies are taking measures to identify, trace, seize, and confiscate proceeds and instrumentalities of crime; (4) conducting a comprehensive TF risk assessment and begin implementing a comprehensive national CFT strategy as well as demonstrating capability to conduct TF investigations and pursue prosecutions in line with the country’s risk profile; (5) increasing awareness of the private sector and competent authorities on TF and PF-related TFS; and (6) carrying out the TF risk assessment for NPOs in line with the FATF Standards and using it as a basis to develop an outreach plan. ZAMBIA 21 February 2023 It is reported that Zambia is to build a solar plant to increase its electricity generation capacity amidst ongoing power cuts. Local media reported recently that the government had reduced the outages from 12 to 8 hours a day. The plant will be a project of the Copperbelt Energy Corporation, a publicly listed company that provides electricity to the country's mining industry. The annual yield of the plant is predicted to average 54.9GWh and to contribute to carbon saving of 51 kilotons. ZIMBABWE 27 February 2023 It has been reported that Zimbabwe is making strides towards the adoption of International Financial Reporting Standards (IFRS) sustainability disclosure standards to be issued by the International Sustainability Standards Board (ISSB) by mid-year 2023. The IFRS will require companies to report emissions from their direct operations, energy purchases and from their value chains, including suppliers. AFRICA 01 February 2023 It is reported that Africa's gas share in the global market will increase to cover 11% of all gas supplies by 2050, according to a report by Gas Exporting Countries Forum, from 6% in 2021. Production is projected to increase from 260 billion cubic meters in 2021, to 585 billion cubic meters in 2050, on the back of the maximal exploitation of local energy resources by governments. This is predicted to make Africa responsible for the second largest growth in gas supply, by volume, globally, after the Middle East during the period. 14 February 2023 The Economic Community of West African States Centre for Renewable Energy and Energy Efficiency (ECREEE) announced that ECREEE and the West African Science Service Centre on Climate Change and Adapted Land Use (WASCAL) are collaborating to research and promote green hydrogen in the region. The parties met recently and discussed, among other issues, the implementation of the ECOWAS Green Hydrogen Strategy, currently being developed by ECREEE. ECREEE and WASCAL also held bilateral meetings with Electra, the Cabo-Verdean Ministry of Energy and the Centre for Renewable Energy and Industrial Maintenance to discuss potential collaboration in the development of green hydrogen initiatives. Dr Bruno Korgo, WASCAL regional coordinator for renewable energy and green hydrogen, reaffirmed the centre’s interest in supporting green hydrogen initiatives in West Africa. 16 February 2023 It is reported that African countries are turning to new-generation banknotes to help curb corruption, runaway inflation and money laundering. From simple alterations like changing colour schemes to complex modifications incorporating embedded security features, central banks in Nigeria, Somalia, and Central African states have demonetised older series banknotes. They aim to replace their high-value currency note still in use, to deal with counterfeit bills, excess cash in circulation and inflation. 24 February 2023 The FATF officially added Nigeria to the grey list. Nigeria's grey listing came just a day before it held presidential and parliamentary elections, and after cash shortages linked to measures to prevent vote-buying have been impacting economic activity. 24 February 2023 Uganda remains on the FATF's grey list. The FATF noted that Uganda failed to complete its action plan, which expired in May 2022. The FATF gave Uganda until the end of June 2023 to make improvements failing which, Uganda may be placed on the FATF's blacklist which currently features Myanmar, Iran and North Korea. Global 01 February 2023 The EU Commission announced the launch of its Green Deal Industrial Plan which includes a series of strategies and initiatives aimed at enhancing the competitiveness of the Europe’s net zero industries, and support the EU’s transition to climate neutrality. The plan focuses on key areas including creating a simpler regulatory framework to facilitate net zero industries, upskilling the European workforce for the green transition, accelerating access to investment and financing, and enhancing global trade cooperation for cleantech and raw materials. 03 February 2023 The Financial Conduct Authority (FCA) has informed asset managers that it will be testing the ESG and sustainable investing claims made in their communications with investors, as part of its efforts to reduce greenwashing risk. The warning forms part of a letter from the FCA to the leaders of asset management firms outlining the most likely harms to consumers or markets arising from asset managers’ business models, and its expectations of asset managers, as well as the FCA’s plans to address these areas. Noting an increasing prominence of ESG and sustainable investing products over the past few years, the FCA letter highlights the risks that some claims about ESG and sustainable investing are misleading or inaccurate, and notes that this could negatively impact the confidence of consumers to invest, as well as undermining the allocation of capital aimed at delivering environmental and social outcomes. 04 HERBERT SMITH FREEHILLS To address the greenwashing risks, the FCA noted in the letter that it will test whether firms deliver on the claims made in their communications with investors with a particular focus on "outlier firms” identified in previous supervisory activities or involved on ongoing surveillance. 07 February 2023 The U.S. Securities and Exchange Commission (SEC) announced that ESG investing will be a priority area of focus for its Division of Examinations in 2023, guiding its monitoring and focused examinations of market participants including investment advisers and investment companies for the year. According to the division, the examinations will focus on ESG-related advisory services and fund offerings, assessing whether the funds are operating as described in their disclosures. The examinations will also assess whether ESG products are appropriately labelled – this has emerged as a focus area for the SEC, which released proposed rules last year for ESG fund names and disclosures for funds and advisers that claim to integrate ESG factors into their investment products. The examinations will also focus on whether recommendations of ESG products for retail investors are made in the investors’ best interests. 02 and 09 February It is reported that nearly 14,000 people from two Nigerian communities have approached the high court in London, claiming Shell is responsible for pollution of their water sources and destruction of their way of life. The individuals from the Niger delta area of Ogale, a farming community, lodged their claims in February, joining more than 2,000 people from the Bille area, a largely fishing community. In total 13,652 claims from individuals, and from churches and schools, are asking Shell to clean up the pollution which they say has devastated their communities. They are also asking for compensation for the resulting loss of their livelihoods. They also claim that their ability to farm and fish has been destroyed by the continuing oil spills from Shell operations. For the past five years, Shell has argued that it is not liable for the actions of its Nigerian subsidiary Shell Petroleum Development Company of Nigeria (SPDC) and the claims from the people of Ogale and Bille could not be heard in a London courtroom. But the supreme court ruled last year “there is a good arguable case” that Nigerian communities could bring their claims to the high court. Furthermore, ClientEarth, an environmental law organization, announced that it has launched legal action against the board of directors of Shell in the UK, arguing that the company’s “flawed” energy transition strategy puts shareholder value at risk, and asking the court to order the board to strengthen the company’s climate plans. According to ClientEarth, the suit is the first of its kind to seek to hold corporate directors personally accountable to prepare for the energy transition. 13 February 2023 The EU Commission proposed detailed rules to define what constitutes renewable hydrogen in the EU, with the adoption of two Delegated Acts required under the Renewable Energy Directive. The new rules form part of the broad EU regulatory framework for hydrogen which includes energy infrastructure investments, state aid rules, as well as legislative targets for renewable hydrogen for the industry and transport sectors. One of the most stringent of the proposed conditions for what constitutes renewable hydrogen is the principle of “additionality,” it requires electrolysers to be connected to new renewable electricity production, ensuring an increase in the volume of renewable energy available to the grid compared to what exists already. The rules also include criteria ensuring that production only occurs where sufficient renewable energy is available. The EU’s proposed renewable hydrogen rules will apply both to domestic and external producers, with a certification scheme for producers to demonstrate compliance and trade renewable hydrogen in the EU single market. 14 February 2023 EU Commission announced a series of new proposed carbon emissions reduction targets for new heavy duty vehicles, such as trucks, buses and trailers, including goals to reduce emissions by 90% by 2040, compared to 2019 levels, and for all new city buses to be zero-emission as of 2030. Additional interim proposed requirements for new heavy-duty vehicles include 45% emissions reductions from 2030, and 65% from 2035. 14 February 2023 The EU Parliament approved the new CO2 emissions reduction targets for new passenger cars and light commercial vehicles, as part of the “Fit for 55” package. With 340 votes in favour, 279 against and 21 abstentions, MEPs endorsed the deal reached with the Council on revised CO2 emission performance standards for new cars and vans in line with the EU’s increased climate ambition. The new legislation sets the path towards zero CO2 emissions for new passenger cars and light commercial vehicles in 2035 (an EU fleet-wide target to reduce CO2 emissions produced by new cars and vans by 100% compared to 2021). Intermediate emissions reduction targets for 2030 are set at 55% for cars and 50% for vans. 17 February 2023 The (ISSB) announced that the IFRS' new global sustainability and climate disclosure standards will be effective as of January 2024. The new reporting standards are expected to be released by the end of Q2 2023, with companies beginning to issue disclosures against the standards in 2025. 20 February 2023 The Securities and Exchange Board of India (SEBI) released a new set of proposals on ESG reporting and supply chain-level ESG disclosures, aimed at improving transparency and addressing greenwashing risks. Under the current rules, the top 1,000 listed companies in India by market capitalization are required to provide reporting on ESG factors based on Business Responsibility and Sustainability Report (BRSR) guidelines introduced in 2021, with BRSR reporting becoming mandatory this year. Noting that investors and other stakeholders will be increasingly relying on these reports, SEBI’s consultation paper notes the need for ESG disclosure assurance, which in turn will enhance credibility of disclosure and investor confidence and also pointed out that more transparency is required in the supply chains of reporting companies. To address this, SEBI introduced “BRSR Core,” consisting of select KPIs for various E, S and G factors that need to be assured, with proposed mandatory assurance for the top 250 companies beginning next year, followed by the top 500 companies the following year, and the top 1,000 after that. In the supply chain, the regulator proposes ESG disclosures according to the BRSR Core for the top 250 companies on a comply-or-explain basis beginning in 2024, with assurance beginning the following year. SEBI sought commentary on the proposals until 6 March 2023. 05 HERBERT SMITH FREEHILLS 23 February 2023 The SEBI proposed establishing a regulatory framework for ESG Rating Providers (ERPs). In a consultation paper, the SEBI stated that the role of ERPs has become important in making investment decisions, but their activities are not typically subject to regulatory or supervisory at present. Among others, SEBI has suggested that ERPs can form an industry association and play an active role in development of a regulatory framework for ERP in the securities market as well as engage with the regulator at its ESG advisory committee. It is further proposed that while Core ESG ratings must necessarily be based on assured or verified data, ERPs may be allowed to provide an additional commentary/outlook/observations on data that may not be verified/assured. SEBI sought commentary on the proposals until 8 March 2023.
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