U.S.: Department of Justice Files Motion for Summary Judgment in States’ Challenge to ESG Investing Rule
On June 2, 2023, the Department of Justice filed a motion for summary judgment in Utah v. Walsh. The case concerns a suit filed by Republican attorneys general representing 25 states that seeks to block regulations permitting fiduciaries to consider climate change and other ESG factors when selecting investments for retirement plans (the “Rule”).
The Department of Labor issued the Rule last year; it took effect on January 30, 2023. On March 1, 2023, the Senate passed a joint resolution to nullify the Rule, but this was vetoed by President Biden on March 20, 2023.
The decision by the plaintiff States to file suit in Amarillo, Texas, where Judge Kacsmaryk – a Trump appointee – is the only judge, has been criticized. On March 28, 2023, Judge Kacsmaryk denied a motion filed by the Department of Labor requesting that the case be transferred to another district to “avoid the appearance of judge-shopping.”
Our Debevoise Update on the Rule is available here. For more information, see our ESG Weekly Updates dated February 8, February 15, February 22, March 9, and March 22, 2023.
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Article
Australia: ASIC Warns Companies Against Greenhushing
On June 5, 2023, the Chair of the Australian Securities and Investment Commission (“ASIC”) – Joe Longo – warned that companies may be “greenhushing,” a practice of not disclosing climate targets and practices in order to avoid scrutiny.
ASIC cited a 2022 study by Swiss carbon finance consultancy South Pole, which found that nearly a quarter of the 1,200 companies surveyed had decided to stay silent about their net-zero commitments.
Longo stated that he considered greenhushing to be a form of greenwashing and reaffirmed ASIC’s commitment to tackling greenwashing.
Other forms of greenwashing cited by Longo include:
- Net zero statements and targets without a reasonable basis or that are factually incorrect;
- Terms like “carbon neutral,” “clean” or “green” that aren’t based on reasonable grounds;
- Overstatement or inconsistent application of sustainability-related investment screens; and
- The use of inaccurate labelling or vague terms in sustainability-related funds.,
For more information on ASIC’s enforcement practices, please see our Weekly Update of May 19, 2023, available here.
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Speech
Global: Net Zero Standard for Banks and Net Zero Banking Assessment Framework Launched
On June 5, 2023, the Institutional Group on Climate Change (the “IGCC”) and the Transition Pathway Initiative Global Climate Transition Centre (the “TPI Centre”) launched a net zero standard for banks (the “Standard”). The Standard is built around 10 areas: (1) bank commitments; (2) targets; (3) exposures and emissions disclosure; (4) emissions performance; (5) decarbonization strategy; (6) climate solutions; (7) policy engagement; (8) climate governance; (9) just transition; and (10) annual reporting and accounting disclosures. The IGCC and TPI Centre had input from more than 25 investors in creating the Standard, including Amundi, Legal & General Investment Management, Nest Corporation, Schroders and Fidelity International.
In parallel, the TPI Centre launched the Net Zero Bank Assessment Framework (the “Framework”), a set of indicators and scoring guidance to assess the alignment of 26 global banks with the goals of the Paris Agreement. Multiple rounds of investor consultations and a 2022 pilot study found that, while the banks were committed to net zero, their disclosures on the implementation of that commitment were less consistent. The Framework is designed to counter this. The first annual assessment under the Framework is expected to be published in summer 2023.
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Article
Switzerland: Regulator Finds FIFA Made False Claims About Carbon Neutrality at Qatar World Cup
On June 7, 2023, the Swiss Fairness Commission (Schweizerische Lauterkeitskommission, “SLK”) – which regulates the Swiss advertising and communications industry – determined that FIFA, soccer’s world governing body, had made false and misleading statements about the environmental impact of the 2022 World Cup held in Qatar.
FIFA promoted the World Cup as the first carbon-neutral tournament, claiming to reduce and offset any carbon emissions generated. However, the Climate Alliance launched a complaint last year, citing the air-conditioned stadiums and the large number of fans that flew to the event. The SLK upheld all five claims made by complainants from Switzerland, France, Belgium, the UK and the Netherlands alleging that FIFA’s statements about carbon neutrality were false. The SLK made it clear that sustainability statements can only be made if there are definitive methods for measuring them and ensuring that relevant measures have been implemented.
While the SLK’s recommendations are not legally binding, the regulator advised FIFA against making unsubstantiated claims in the future.
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SLK Press Release
FIFA Statements