Other Notable Developments
African Debt-for-Nature Swap: The International Union for the Conservation of Nature is reportedly working on a joint debt-for-nature swap involving at least five African countries aiming to raise $2 billion to promote the conservation of corals in the Indian Ocean.
U.S.: Attorneys General Question Nasdaq Board Diversity Rule
On October 3, 2024, a group of 22 state attorneys general, led by Iowa Attorney General Brenna Bird, sent a letter to Nasdaq Inc. expressing concern that Nasdaq’s board diversity rule may conflict with state and federal anti-discrimination laws.
The Nasdaq board diversity disclosure rule requires Nasdaq-listed companies to disclose their board-level diversity statistics and either confirm that they do have, or explain why they do not have, diverse directors, as required under the rule. Specifically, the rule requires listed companies to have at least one female director and one director who self-identifies as part of an underrepresented minority or the LGBTQ+ community. The attorneys general argue that the Nasdaq rule uses discriminatory quotas similar to those that have been previously struck down as unconstitutional, in the university affirmative action context, by the U.S. Supreme Court. The attorneys general have asked Nasdaq to provide assurances that it is complying with state and federal anti-discrimination law. The letter requests Nasdaq to provide a summary and specific documentation by October 23, 2024.
The inquiry comes as the full Fifth Circuit Court of Appeals is reviewing the Nasdaq rule after a three-judge panel upheld the rule, as well as the U.S. Securities and Exchange Commission’s approval of the rule, in 2021. Some of the attorneys general, including Attorney General Bird, have also urged the Fifth Circuit to reject the Nasdaq rule, while some attorneys general filed an amicus brief laying out their arguments against the rule.
Links:
Nasdaq Board Diversity Disclosure Rules
Letter from Attorneys General to Nasdaq
Fifth Circuit Amicus Brief
U.S.: Former Executives of the Leading Carbon Credit Project Developer Charged with Fraud
On October 2, 2024, the U.S. Attorney for the Southern District of New York brought criminal fraud proceedings against Kenneth Newcombe, the former chief executive of C-Quest Capital LLC (“C-Quest”), and Tridip Goswami, the former head of C-Quest’s carbon and sustainability accounting team.
C-Quest developed emission-reduction projects to generate carbon credits that could be sold to companies and individuals wanting to offset their greenhouse gas emissions. Prosecutors allege that Newcombe and Goswami manipulated data from projects in rural Africa and Asia fraudulently to obtain carbon credits worth tens of millions of dollars. The prosecutors allege that these manipulated carbon credit figures were then used to attract over $100 million in investment.
Newcombe and Goswami face up to 20 years in prison if convicted. No charges were brought against C-Quest, with prosecutors noting the firm’s prompt disclosure of its executives’ misconduct, cooperation with the investigation, and remediation efforts as well as its agreement to cancel or void the voluntary carbon credits that had been obtained through the scheme.
The SEC, which initially filed a parallel civil suit, determined not to impose a fine, citing C-Quest’s cooperation and remedial efforts. However, the Commodity Futures Trading Commission fined C-Quest $1 million in its first-ever enforcement action for fraud in the voluntary carbon-credit market.
Links:
Press Release
SEC Order
CFTC Press Release
Asia: Hong Kong Accounting Body Publishes Draft Sustainability Disclosure Standards
On September 24, 2024, the Hong Kong Institute of Certified Public Accountants (“HKICPA”) published two exposure drafts outlining proposed sustainability disclosure standards.
The drafts, HKFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and HKFRS S2 Climate-related Disclosures, would bring Hong Kong’s disclosure regime in line with the International Sustainability Standards Board’s global baseline disclosure standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.
The HKICPA is aiming to finalize HKFRS S1 and HKRFS S2 by the end of 2024. It is accepting comments on the proposed drafts and implementation until October 27, 2024. The draft rules, once implemented, are expected to go into effect starting August 1, 2025.
Links:
Draft Reporting Standards
Press release
Explanatory Memorandum
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.