Other Notable Developments

Net Zero Banking: The Net-Zero Banking Alliance published its 2024 Progress Report, finding that 97% of the 122 member banks had set individual sectoral targets.

Corporate Electricity Initiative: Google, AstraZeneca, and other major global companies joined the Climate Group’s 24/7 Carbon-Free Coalition—a new initiative that aims to decarbonize corporate electricity usage—as Founding Partners.

U.S.: California Governor Signs Amended Climate Disclosure Bill into Law

On September 27, 2024, California Governor Gavin Newsom signed into law Senate Bill (“SB”) 219, which makes important changes to last year’s Climate Corporate Data Accountability Act (SB 253) and Climate‐Related Financial Risk Act (SB 261). SB 219 clarifies questions regarding SB 253 and SB 261, including by granting the California Air Resources Board (“CARB”) an additional six months to adopt implementing regulations, namely until July 1, 2025.

SB 253 requires companies with more than $1 billion in revenue that do business in California to report Scope 1 and Scope 2 emissions annually from 2026 and Scope 3 emissions from 2027. SB 261 requires companies with more than $500 million in revenue that do business in California to report on climate-related financial risks and measures to address those risks from January 1, 2026.

SB 219, while retaining most of the provisions in SB 253, altered the timing sequence for reporting on Scope 3, to begin on a schedule to be determined by the CARB rather than 180 days after the disclosure of Scope 1 and 2 emissions, as previously required. Furthermore, the CARB now has until July 1, 2025 to adopt implementing regulations setting out detailed reporting requirements.

SB 219 also removed the requirement in SB 253 that subsidiary companies provide separate climate-related financial risk reports, allowing for consolidation at the parent company level, and relieved companies of their requirements to pay fees upon disclosure filings.

While SB 253 and SB 261 are still facing a challenge in the U.S. District Court for the Central District of California, their implementation is not stayed pending the outcome of that case.

Link:
Bill Text

U.S.: Missouri Abandons Appeal to Save Anti-ESG Rules

On September 27, 2024, the Missouri Attorney General dropped an appeal against a federal district court’s ruling striking down state anti-ESG rules.

Missouri had introduced rules that required investment advisers and broker-dealers to obtain the written consent of customers based in Missouri if the advisers or broker-dealers incorporated “a social objective or other nonfinancial objective” into their investment decisions. The Securities Industry and Financial Markets Association (“SIFMA”) challenged the rules, alleging that they violated the First and Fourteenth Amendments of the U.S. Constitution. On August 14, 2024, a federal district court granted summary judgement to SIFMA, finding the anti-ESG rules to be unconstitutional.

While Missouri initially chose to appeal the August ruling to the U.S. Court of Appeals for the Eighth Circuit, this has now been abandoned. Missouri will pay SIFMA $500,000 for fees and costs incurred in the district court litigation.

Link:
Motion

EU: European Commission Proposes Delay to EU Deforestation Regulation

On October 2, 2024, the European Commission proposed postponing the implementation of the EU Deforestation Regulation by twelve months to allow stakeholders additional time to prepare for compliance.

Enacted in June 2023, the Deforestation Regulation requires extensive due diligence to ensure that certain commodities and related products admitted and traded on the EU market are not linked to deforestation, forest degradation, or violations of indigenous peoples’ rights. Such commodities include soy, cattle, cocoa, coffee, palm oil, rubber, and timber. Under the Commission’s revised timeline, which still requires approval from the European Parliament and European Council, the Deforestation Regulation would go into effect on December 30, 2025 for large companies and June 30, 2026 for micro- and small enterprises (instead of December 30, 2024 for large companies and December 30, 2025 for micro- and small enterprises as currently required by the Deforestation Regulation).

The Commission also published additional guidance documents and 40 new FAQs for impacted companies and enforcement authorities. The new guidance includes more information on penalties, traceability obligations, and product scope. For more on the EU Deforestation Regulation, please see our recent Debevoise in Depth.

Link:
European Commission Press Release

EU: European Commission Adopts Package of Infringement Decisions

On September 26, 2024, the European Commission announced that it adopted a package of infringement decisions due to failures by member states to transpose certain EU directives into national law.

Notably, 17 member states—including Germany, Spain, the Netherlands, and Austria—were issued a formal notice for failing to notify the Commission of national measures transposing the Corporate Sustainability Reporting Directive (“CSRD”), which requires mandatory sustainability reporting for large companies. The deadline for transposition of the CSRD into national law was July 6, 2024. For additional information on the reporting requirements under the CSRD, please see our Debevoise In Depth on the topic here.

Furthermore, 26 member states were issued a formal notice for failing to fully transpose the provisions of the revised Renewable Energy Directive, which sets EU renewable energy targets and simplifies permitting procedures for renewable energy projects. Denmark is the only Member State that fully complied with the July 1, 2024 deadline for transposition of this Directive.

Each member state now has two months to respond and complete their transposition of these Directives, failing which the Commission may decide to issue a reasoned opinion. Under EU infringement procedures, a reasoned opinion is the precursor step to referring the matter to the Court of Justice of the European Union, which can impose financial penalties.

Link:
Infringement Decisions - Press Release

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