Other Notable Developments
New Sustainability Funding: On August 28, 2024, the European Investment Bank (“EIB”) priced a new €5 billion Climate Bond. The Climate Awareness Euro Area Reference Note (EARN) is a 10-year bond due September 4, 2034, the proceeds of which support the EIB’s “activities contributing substantially to climate change mitigation.” The EIB’s cumulative issuance of climate bonds, which inaugurated the Sustainable Bond Market with the first issuance in 2007, will surpass €100 billion across 23 different currencies with this new offering.
Dubai Introduces ESG Label: The Dubai Chamber of Commerce has announced a strategic initiative to promote sustainability in business practices. The new undertaking aims to address “the need for a holistic approach to sustainable business practices that benefit society and the environment.”
U.S.: Texas Officials Sued over 2021 ESG Law
On August 29, 2024, the American Sustainable Business Council (the “Council”), a nonprofit representing businesses that support environmentally friendly policies, filed a lawsuit against Attorney General Ken Paxton and Comptroller Glenn Hegar of Texas seeking to block a state law restricting state investment in businesses deemed to “boycott” the energy sector. The Council argued that, among other things, the law “impermissibly infringes rights of free speech and association under a scheme of politicized viewpoint discrimination, based on no legitimate state interest.” As a result of the 2021 law, Comptroller Hegar maintains a list of more than 350 investment funds and 16 financial companies that the Comptroller considers to engage in boycotts of the fossil-fuel industry, including several large banks, which list was most recently updated last month.
The lawsuit argues that the 2021 law, known as Senate Bill 13, (a) unconstitutionally infringes on firms’ rights to free speech and association, (b) includes “undefined and vague” provisions with respect to violations and compliance with the law and (c) does not afford entities adequate notice of their prospective exclusion from competition for state investments and contracts, further giving them no meaningful opportunity to contest their placement on the Comptroller’s list. Comptroller Hegar accused the Council of pursuing a “radical environmental agenda” and forcing “Texas taxpayers to invest their own money in a manner inconsistent with their values and detrimental to their own economic well-being.”
Links:
American Sustainable Business Council v. Hegar et al, U.S. District Court, Western District of Texas, No. 24-01010
Texas Comptroller’s Statement
EU: ESMA Issues ESG Fund-Naming Guidelines
On August 21, 2024, the European Securities and Markets Authority (“ESMA”) issued new guidelines to specify the circumstances in which funds using ESG or sustainability-related terms in their names would be considered unfair, unclear or misleading. The guidelines seek to protect investors from greenwashing, homing in on fund names as “a means of communicating information about the fund to investors and also an important marketing tool.”
The guidelines require funds using ESG-related terms in their names to meet a minimum threshold of 80% of investments in assets with environmental, social or sustainable investment objectives. Affected firms will be required to report whether existing funds comply by October 21, 2024, and new guidelines will become effective on November 21, 2024. This comes on the heels of similar Sustainable Fund Labeling guidance from the Financial Conduct Authority.
Links:
ESMA Guidelines on Funds' Names Using ESG or Sustainability-related Terms
Debevoise ESG Weekly Update (Aug. 8, 2024)
EU: Dutch Banks Allowed to Collaborate on Sustainability Reporting Project
On August 15, 2024, the Netherlands Authority for Consumers and Markets (the “ACM”) issued a decision following the request of the Dutch Banking Association (the “NVB”) to examine whether collaboration related to ESG reporting is allowed under Dutch competition rules. The NVB had introduced a pilot project whereby banks would work together in support of a data project that seeks to increase reliability of ESG data by explaining the ESG criteria on which banks are required to report. The decision by the ACM indicates that Dutch banks would be permitted to collaborate when discussing their sustainability reports and sharing nonsensitive information.
According to the decision, collaboration is more likely to avoid antitrust concerns if participating banks do not exchange competitive information such as client data. The ACM recommended that businesses use ACM’s Collaboration Check Tool to determine whether collaborating with another business could run afoul of Dutch competition rules. ACM also noted that businesses will have more latitude if the proposed collaboration relates to achieving sustainability goals.
Link:
ACM Decision
This publication is for general information purposes only. It is not intended to provide, nor is it to be used as, a substitute for legal advice. In some jurisdictions it may be considered attorney advertising.