ESG Matters Incorporated Into UK Stewardship Code

The revised Code is likely to encourage a more robust and substantive review of ESG issues by institutional investors.

By Paul A. Davies and Michael Green

Background

The UK Stewardship Code (the Code) was originally published in 2010 following a review of corporate governance. The Financial Reporting Council (FRC) has responsibility for the Code, and promotes the long-term success of companies, outlines principles underlying an effective board, and fosters active investor monitoring and engagement of companies. All UK-authorised asset managers are required to produce a statement of commitment to the Code or to explain why the Code is not appropriate for their business model (the “comply or explain” approach discussed below). As such, there are 305 signatories to the Code, which primarily include asset managers and asset owners (pension funds, endowment funds, and charities).

The Code was last revised in 2012, and the FRC notes that there have been significant changes in the interim. In particular, legal and international developments concerning ESG issues and legal developments concerning the application of ESG issues in the context of trustees’ fiduciary duties (including pension trustees). For more information on ESG issues, please see Latham’s previous blogs here and here. Continue Reading

How China’s New Chemical Regulation Framework Will Impact Businesses

By Latham & Watkins LLP on March 7, 2019 Posted in Chemical Regulation, China

The framework represents China’s first comprehensive regulation of environmental risks from chemical substances.

By Paul A. Davies and R. Andrew Westgate

The Chinese Ministry of Ecology and Environment’s (MEE’s) draft Regulation on Environmental Risk Assessment and Control of Chemical Substances (Regulation) is likely to have broad implications for companies that manufacture, process, import, or export more than 100kg of any chemical substance in China. The framework represents China’s first comprehensive regulation of environmental risks from chemical substances.

Companies should be aware of MEE’s action plan for enforcing the Regulation, as well as those provisions that will impact their business activities. Continue Reading

CARB Amending SF6 Regulation: Stricter Requirements for California Electrical Equipment

By Latham & Watkins LLP on March 4, 2019 Posted in Air Quality and Climate Change, California

California proposes phasing out the use of SF6 in GIE and further reducing allowable GHG emissions from such equipment.

By Aron Potash and Kimberly D. Farbota

California Air Resources Board (CARB) staff recently published a discussion draft (Draft Amendments) of potential changes to the current Regulation for Reducing Sulfur Hexafluoride Emissions from Gas Insulated Switchgear (SF6 Regulation).

Key proposed changes to the SF6 Regulation include:

Phasing out sulfur hexafluoride (SF6) gas-insulated equipment (GIE)
Further reducing allowable emissions from GIE
Expanding the regulation to encompass greenhouse gases (GHG) other than SF6

CARB held a workshop in Sacramento on February 25, 2019, during which staff presented an overview of changes proposed in the Draft Amendments and answered stakeholders’ questions. During the workshop, staff stated that CARB would like to hear any questions or concerns stakeholders may have about the Draft Amendments. Continue Reading

Unanimous US Supreme Court Decision Takes a Hard Look at ‘Critical Habitat’

By Latham & Watkins LLP on February 21, 2019 Posted in Environmental Regulation

The decision gives landowners and developers a powerful tool to protect their interests and raises the bar for future critical habitat designations in unoccupied habitat.

By Janice Schneider, Nikki Buffa, and Brian McCall

The Supreme Court’s unanimous ruling in Weyerhaeuser Co. v. U.S. Fish & Wildlife Serv., 586 U.S. (2018) has important implications for landowners facing “critical habitat” designations under the Endangered Species Act (ESA) for areas that are unoccupied by listed species. The timing of this decision likely means the US Fish and Wildlife Service (FWS) will incorporate it into forthcoming final regulations the FWS is currently promulgating.

Background

In Weyerhaeuser, the US Supreme Court considered two main questions:

Can critical habitat include areas where the species cannot currently survive?
Is the FWS determination not to exclude a particular piece of land as critical habitat reviewable by a court?

China Issues Draft of Comprehensive Chemical Substances Regulation

By Latham & Watkins LLP on February 14, 2019 Posted in Chemical Regulation, China

China’s MEE is seeking comment on new chemical regulation framework, which includes a comprehensive environmental risk assessment.

Paul A. Davies, Ethan Prall, and R. Andrew Westgate

In January 2019, China’s Ministry of Ecology and Environment (MEE) issued a draft Regulation on Environmental Risk Assessment, and Control of Chemical Substances (the Chemical Substances Regulation or CSR) in conjunction with 20 other ministries and agencies, including the Supreme People’s Court, the National Development and Reform Commission, and the Ministry of Commerce. MEE is seeking comment on the draft regulation through February 20, 2019, which is available in Chinese only.

This draft regulation is significant because it represents China’s first comprehensive regulation of environmental risks from chemical substances, similar to the Toxic Substances Control Act in the United States or the Registration, Evaluation, Authorization, and Restriction of Chemicals Regulation (REACH) in the European Union. In the past, China’s chemical regulations, such as Order 7 issued by the former Ministry of Environmental Protection (also known as China REACH), have been more narrowly focused on requiring the registration of “new chemical substances” and on the import and export of toxic chemicals. As discussed below, the draft CSR incorporates not only most of the existing chemical registration requirements under Order 7, but would also introduce additional requirements creating a broader new chemical regulation framework. Continue Reading

CARB Workshop Previews Upcoming Heavy-Duty Diesel Changes

By Latham & Watkins LLP on February 1, 2019 Posted in Air Quality and Climate Change

CARB continues to drive lower NOx emissions for heavy-duty engines and vehicles on the road.

By Arthur Foerster and Reed McCalib

On January 23, 2019, the California Air Resources Board (CARB) held a public workshop to discuss the agency’s ongoing regulatory emissions overhaul for on-highway, heavy-duty diesel engines and vehicles. Based on the agency’s position that reducing oxides of nitrogen (NOx) from heavy-duty vehicles is necessary to attain air quality standards, CARB staff made clear the agency’s intention to “dramatically lower emissions” and to ensure emissions remain low throughout the vehicles’ operational lives. CARB staff indicated that the agency will work collaboratively with the EPA and its “Cleaner Trucks Initiative” to develop harmonized national requirements. (For a more in-depth look at this initiative, please see Latham’s previous blog post.) Staff stressed, however, that CARB will adopt new, more stringent rules regardless of what EPA does and expects to do so on a more accelerated timeline than EPA. CARB is undertaking what it says is a necessary “multi-pronged holistic approach” and intends to release draft rules later this year on a number of regulatory fronts, including more stringent standards, greater durability, and more testing.

More Stringent Standards

CARB staff reiterated the agency’s intention to lower the NOx emissions standard for new, on-highway heavy-duty diesel engines by as much as 90% below the current standard of 0.2 grams per brake horsepower hour (g/bhp-hr). Although CARB staff have not settled on a specific number, they indicated a target range of 0.015 to 0.035 g/bhp-hr. According to staff, the CARB-funded research being performed by the Southwest Research Institute (SwRI) to assess the feasibility of lower NOx emissions is not complete. The SwRI research results, along with other data such as cost impacts, will determine the new NOx standard expected later this year. Continue Reading

German Government Commission Agrees to Phase Out Coal Power Plants by 2038

By Latham & Watkins LLP on January 30, 2019 Posted in Air Quality and Climate Change, Energy Regulatory, European Environmental and Public Law, Power, Oil, Gas and Minerals, Project Siting and Approval

The Coal Commission’s phase-out proposal includes a €40 billion federal spending package for affected states.

By Jörn Kassow and Patrick Braasch

A German government-appointed body, known colloquially as the “Coal Commission”, has agreed to end coal-fired power generation by 2038. In an effort to meet Germany’s climate goals under the Paris Agreement, the Coal Commission proposes to gradually reduce Germany’s current coal power capacity of 42.6 GW to 30 GW by 2022 and 17 GW in 2030. A review is scheduled in 2032 to decide whether to bring forward the final phase-out from 2038 to 2035.

Coal-burning provided for 40% of Germany’s power mix in 2017, which is well above the EU-28 average of 21% in 2016, and was exceeded only by Bulgaria (45%), Greece (46%), the Czech Republic (54%), and Poland (81%). Coal-fired power plants accounted for 28% of Germany’s total CO2 emissions in 2016, while generating 70% of the energy sector’s total emissions in the same year. Germany will also close its last nuclear plants in 2022, which, as of 2017, still provided for 12% of the power mix. All considered, the country will see a fundamental change in its energy production landscape in the coming years. Continue Reading

Circular Economy and End of Waste Status: French Government Issues Criteria and Procedures

By Latham & Watkins LLP on January 23, 2019 Posted in Chemical Regulation, Contaminated Properties & Waste, European Environmental and Public Law

Waste producers must comply with new criteria and procedures for objects and products to benefit from end of waste status.

By Paul Davies

The French government has developed many measures to foster circular economy approaches. Most recently, a Ministerial Order of 11 December 2018 (Order) sets out criteria and procedures to end the waste status of certain objects and chemical products, to encourage their preparation for re-use.

The French Code of the Environment[i] defines “preparing for re-use” as “checking, cleaning or repairing recovery operations, by which products or components of products that have become waste are prepared so that they can be re-used without any other pre-processing.”

The Order requires that the objects and products meet specific criteria in order to benefit from the end of waste status. The criteria relate to:

The nature of the object or product
Techniques and treatment processes
Qualities and properties of objects and products resulting from such treatments
Contractual conditions subject to which such objects and products will be sold
Operator’s obligations in relation thereto (traceability)