FCA Finds Further Improvement Needed on Design, Delivery, and Disclosure of ESG Funds

By Latham & Watkins on November 28, 2023 Posted in Environmental, Social and Governance, Green Finance

The FCA has set out good and poor practices for asset managers to consider in relation to funds with ESG or sustainable characteristics.

By Nicola Higgs, Anne Mainwaring, and Charlotte Collins

On 16 November 2023, the FCA published the findings from its review of how asset managers have been embedding current regulatory expectations regarding the design, delivery, and disclosure of funds marketed as having ESG or sustainable characteristics.

With the FCA yet to finalise its Sustainability Disclosure Requirements (SDR) and investment labelling regime, it reviewed authorised fund managers’ (AFMs’) compliance with existing regulatory requirements, including the Guiding Principles set out in the Dear Chair letter issued in July 2021 (see this Latham blog post). The recently implemented Consumer Duty has added an extra dimension for AFMs to consider since the Guiding Principles were issued. The FCA highlights that the consumer understanding outcome is particularly relevant for AFMs providing ESG or sustainable funds; under this outcome, firms need to provide investors with the information they need at the right time and present it in a suitable way.

Webcast — Expansion of Transmission Grid Needed to Support Reliability and Renewable Integration: Why It Matters for a Decarbonized Future

By Latham & Watkins on October 26, 2023 Posted in Environmental Regulation, Power, Oil, Gas and Minerals

We discuss key regulatory trends and strategies to consider when pursing US transmission and interconnection opportunities.

By Tyler Brown, Marc T. Campopiano, and Jennifer K. Roy

Renewable energy production has grown at an exponential clip over the past decade, with continued strong expansion expected because of declining costs, numerous governmental incentives, and long-term decarbonization policies. This trend has driven a tremendous demand for new transmission infrastructure in the US and globally, yet new transmission lines often take years to develop due to regulatory hurdles and litigation challenges.

An unprecedented investment in transmission will be needed over upcoming decades to keep pace with demand and meet decarbonization goals. Companies and investors will need to factor into their strategies these key regulatory trends when pursuing US and global transmission and generator interconnection opportunities.

EPA Continues Its Phasedown of HFCs

By Latham & Watkins on October 16, 2023 Posted in Environmental Litigation, Environmental Regulation

The agency’s two recent actions introduce enhanced restrictions on hydrofluorocarbons and provide a series of compliance dates for industry stakeholders.

By Stacey VanBelleghem and Jennifer Garlock

On October 5, 2023, the US Environmental Protection Agency (EPA) issued two rules, one final and one proposed, to phase down hydrofluorocarbons (HFCs) under the bipartisan American Innovation and Manufacturing Act of 2020 (AIM Act). The agency’s recent actions represent major steps in the Biden administration’s goal to significantly reduce HFCs over the next decade.

HFCs are a group of chemical refrigerants and potent greenhouse gasses (GHGs), commonly used in foam products, cooling systems, aerosols, and fire suppressants. International focus on managing these compounds sharpened in the 1980s, when countries agreed in the Montreal Protocol to shift global markets away from the ozone-depleting chlorofluorocarbons (CFCs) — the then dominant strain of refrigerant and aerosol chemicals — toward HFCs. Although HFCs are less damaging to the ozone layer than CFCs, they have global warming potential (GWP) values (a figure that allows comparison of relative climate impact of a GHG) hundreds or thousands times higher than carbon dioxide (CO₂), which has a GWP equal to 1. In 2016, nearly 200 countries adopted the Kigali Amendment to the Montreal Protocol agreeing to a global phasedown of production and use of HFCs. The US ratified that amendment on October 31, 2022.

UK Transition Plan Taskforce Launches Full Disclosure Framework

By Latham & Watkins on October 12, 2023 Posted in Environmental Regulation

The framework claims to set the “gold standard” for companies to contribute to the net zero transition while emphasising ambition, action, and accountability.

By Paul A. Davies, Michael D. Green, and James Bee

The UK Transition Plan Taskforce (TPT) launched its transition plan disclosure framework (the Framework) at the London Stock Exchange on 9 October 2023. The Framework encourages businesses to create transition plans for a low greenhouse gas (GHG) emissions economy. It also seeks to help companies and financial institutions create consistent and comparable disclosures on their climate transition plans.

While initially voluntary, the Framework is expected to become mandatory for certain entities in the UK through incorporation into regulatory frameworks.

SCAQMD Announces Enforcement of Southern California Warehouse Regulation Despite Ongoing Litigation

By Latham & Watkins on October 4, 2023 Posted in Air Quality and Climate Change, California, Environmental Litigation, Environmental Regulation

Regulators are pursuing steep fines in response to widespread alleged noncompliance with an emissions rule still subject to potential reversal by the courts.

By Joshua T. Bledsoe, James Friedland, and Jennifer Garlock

Key Points:

The enforcement action alleges 1,400 warehouses are noncompliant.
Noncompliance can result in fines of up to $11,710 per day.
Litigation challenging this program remains pending, with no quick end in sight.

On September 20, 2023, the South Coast Air Quality Management District (SCAQMD or the District) announced an enforcement initiative for Rule 2305, also known as the Warehouse Indirect Source Rule (ISR), which is part of the Warehouse Actions and Investments to Reduce Emissions (WAIRE) Program. As described in this June 2021 blog post, the WAIRE Program applies to warehouses in the South Coast Air Basin over 100,000 square feet, with a phased implementation based on warehouse size. The ISR imposes a compliance obligation based on the number of truck visits to that warehouse per year, which warehouse operators can meet through emissions-reducing actions, either from the “WAIRE Menu” or through a custom plan approved by the District.

China Plans to Relaunch Its Carbon Credits Program

By Latham & Watkins on September 26, 2023 Posted in Carbon Offsets, China, Environmental Regulation

The draft New Measure aims to enhance the environmental integrity of China’s carbon market by introducing new requirements for project registration and credit issuance.

By Paul A. Davies, Jean-Philippe Brisson, Michael Dreibelbis, and Qingyi Pan

China is preparing to relaunch its carbon credits program, the Chinese Certified Emission Reduction (CCER) Scheme, after suspending the program for over six years. On July 7, 2023, the Ministry of Ecology and Environment (MEE) and the State Administration for Market Regulation (SAMR) of the People’s Republic of China jointly released the draft Measure for the Administration of Voluntary Emission Reduction Trading (the New Measure).

The public consultation for the draft New Measure ended on August 6, 2023, and on September 15, 2023, the MEE ministry conference reviewed and passed the New Measure in principle. The formal release is expected to happen in October 2023, upon which the New Measure would replace the previous set of rules and become the governing law of the CCER Scheme.

Together with the national emission trading scheme (the China ETS) launched two years ago, the CCER Scheme represents China’s continuous efforts towards adopting market-based mechanisms for achieving its climate pledges (peaking emissions before 2030 and reaching carbon neutrality before 2060).[i]