Other Notable Developments

Emissions Gap Report: The United Nations Environment Programme issued its 2024 Emissions Gap Report, which highlights that the world is currently on a path to reach global warming of 3.1˚C this century, well beyond the Paris Climate Agreement commitment to limit warming to 1.5˚C. The report urges countries to adopt more ambitious nationally determined contributions, due February 2025.

EU Emissions Trading Revenues: The European Commission invested €4.8 billion generated from the EU’s Emissions Trading System into the Innovation Fund to support 85 net-zero projects in 18 Member States. The projects are scheduled to become operational before 2030 and are expected to reduce emissions by roughly 476 million tonnes of CO₂ equivalent.

U.S.: WisdomTree to Pay $4 Million to Resolve Greenwashing Charges

On October 21, 2024, the Securities and Exchange Commission (the “SEC”) charged investment adviser WisdomTree Asset Management (“WisdomTree”) with misstatements and compliance failures when marketing three funds as following an ESG-aligned investment strategy.

The SEC determined that, between March 2020 and November 2022, WisdomTree wrongly marketed three of their funds as not investing in fossil fuel and tobacco companies. The SEC found that, in fact, the funds invested in such companies. The SEC order also noted that WisdomTree used third-party data that inadequately screened for fossil fuel and tobacco-related activities. Further, the SEC noted that WisdomTree did not have any policies regarding the screening process for excluding such companies.

The SEC’s order held that WisdomTree violated the antifraud provisions of the Investment Advisers Act of 1940 and the Investment Company Act of 1940 and the compliance rule in the Investment Advisers Act. WisdomTree consented to the order and further agreed to a $4 million civil penalty, a cease-and-desist order and censure without admitting or denying the SEC’s findings.

Link:
Press Release

Hong Kong: Monetary Authority Releases Sustainable Finance Action Agenda

On October 21, 2024, the Hong Kong Monetary Authority (the “HKMA”) released its Sustainable Finance Action Agenda (the “Action Agenda”) setting targets to develop Hong Kong into a “sustainable finance hub” in the region.

The Action Agenda lays out eight goals split across four themes, identifying actions to be taken by the HKMA:

• Net-zero banking. The HKMA pledged to support banks to achieve net zero in their operations by 2030 and in financed activities by 2050. Further, the HKMA will support banks to report under the International Sustainability Standards Board and the Basel Committee on Banking Supervision’s Pillar 3 disclosure standards.

• Sustainable investment. The HKMA will continue to prioritize ESG investments made through the Exchange Fund and support climate transition through investments.

• Financing net zero. The HKMA will provide subsidies and other incentives to prospective green bond issuers.

• Making sustainability more inclusive. The HKMA will enhance the climate disclosure toolkit and oversee training to close the knowledge gap in sustainable finance.

The HKMA has committed to providing further guidance and developing supporting tools for the financial industry as part of its efforts to implement the Action Agenda. It has also indicated it will continue to review and refine the Action Agenda based on market developments and industry feedback, seeking to ensure that its strategy remains relevant and effective in achieving the HKMA’s overall sustainability objectives.

Link:
Sustainable Finance Action Agenda

Global: ICC Launches Principles for Sustainable Trade Finance

On October 21, 2024, the International Chamber of Commerce (the “ICC”) launched the Principles for Sustainable Trade Finance (the “Principles”) to facilitate industry consensus on sustainable trade finance with the goal of increasing capital flows toward sustainable facilities.

The framework targets four trade finance products:

• Green trade finance, defined as “[t]rade [f]inance products designed exclusively to finance or mitigate financial risk from activities where the Use of Proceeds is clearly and verifiably allocated to green purposes, or, where the purpose is not known, to green goods.” The Principles support trade banks and their customers to (i) reduce greenwashing risks, (ii) facilitate finance for green activities and goods by formally recognizing green trade and (iii) provide uniform guidance on what activities qualify as green trade finance;

• Sustainability-linked trade finance, where the ICC seeks to improve key performance indicators (“KPIs”) and sustainability performance targets (“SPTs”) at a client level by ensuring that they are relevant, measurable and aligned to the client’s core sustainability objectives;

• Sustainability-linked supply chain finance, where the ICC provides guidance for buyers and banks by encouraging them to set SPTs, use reputable ESG scores as KPIs and report regularly, among other things. The ICC further recommends referring to the Loan Market Association’s Sustainability-Linked Loan Principles; and

• Social trade finance, a nascent concept that will require developing bespoke principles in the future, building on the socioeconomic considerations in the ICC’s Principles for Sustainable Trade.

The initiative is currently accepting comments from industry, with the final version of the Principles expected to be issued later this year.

Links:
ICC Press Release
ICC Principles for Sustainable Trade Finance
ICC Principles for Sustainable Trade (2023)
Sustainability Linked Loan Principles

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