EU: European Securities and Markets Authority Publishes Priorities Statement

On October 24, 2024, the European Securities and Markets Authority (“ESMA”) released its annual European common enforcement priorities statement (the “Statement”), which sets out ESMA’s and member state enforcers’ enforcement priorities for issuers admitted to trading on European Economic Area regulated markets. ESMA states that it will pay particular attention to the areas identified in the Statement when examining the application of reporting requirements.

This year’s Statement includes a section on enforcement priorities related to sustainability statements, particularly requirements introduced by the Corporate Sustainability Reporting Directive (“CSRD”) and the EU Taxonomy:

1. the first priority relates to materiality considerations in reporting under the European Sustainability Reporting Standards, required for companies subject to the CSRD. The Statement emphasizes the importance of conducting a thorough materiality assessment to determine which information should be disclosed in the sustainability statement;
2. the second priority, which addresses the scope and structure of a firm’s sustainability statement, emphasizes that it should relate to the same entity as the one issuing financial statements. This means that for consolidated statements, once metrics have been determined to be material for the group, data for the entire group must be included, rather than, for example, data relating to a single entity within the group. Furthermore, ESMA encourages issuers to produce their sustainability statement in the template set out in Annex F of the ESRS 1 (General requirements); and
3. the third priority refers to disclosures relating to Article 8 of the Taxonomy Regulation. In connection with this, ESMA notes that the use of the Taxonomy template, without adaptation or amendment, is mandatory.

Large public interest entities subject to the CSRD are required to publish their first ESRS sustainability statements in 2025. For more, see our article on “Complying with—and Benefitting From—the EU’s Sustainability Reporting Requirements.”

Link:
ESMA Common Enforcement Priorities

UK: High Court Rejects Human Rights Challenge to Government Plans for Tackling Climate Change Risks

 On October 25, 2024, the High Court rejected a legal challenge to the third National Adaptation Programme, published on July 17, 2023, which sets out the UK government’s objectives in relation to climate change adaptation, as well as proposals and policies for meeting those objectives, as required by the Climate Change Act 2008 (“CCA”).

The claimants – the NGO Friends of the Earth, an individual who lost his home as a result of coastal erosion, and an individual whose health condition makes him vulnerable to extreme heat – argued that the UK government: (i) erred in law by setting vague “objectives” under the CCA; (ii) failed to consider or publish information relating to the risks in meeting those objectives; (iii) breached its duty to consider the equality impacts of the National Adaptation Programme under the UK Equalities Act 2010; and (iv) breached the claimants’ procedural and substantive rights under the European Convention on Human Rights (“ECHR”).

The High Court rejected the first argument, finding that the National Adaptation Programme had set objectives, as required by the CCA, and that there was no requirement as to how specific the objectives must be. In deciding the first argument, the High Court considered the European Court of Human Rights’ judgment against Switzerland, which found that Switzerland’s inaction on climate change mitigation could amount to a breach of the ECHR (for more on this judgment, see our Debevoise In Depth on the topic). The High Court considered that, unlike Switzerland at the time of the case, the United Kingdom has established a legal framework and carbon budgets consistent with the 2050 carbon neutrality target under the Paris Agreement. The High Court further distinguished the analysis in that case on the grounds that there is no equivalent in the field of climate change adaptation to the quantitative target of carbon neutrality by 2050 that exists in the context of climate change mitigation. The judge therefore concluded that there is no common framework by which to determine what is required in terms of adaptation measures.

The High Court rejected the second argument on the basis that there was evidence that “‘delivery risk’ (in the sense of uncertainty in relation to whether particular proposals and policies would achieve what they set out to achieve)” had been considered at various stages. Similarly, the third argument was rejected on the basis that the government had considered its public sector equality duty when it produced equality impact assessments in relation to the National Adaptation Programme. Lastly, the High Court concluded in relation to the fourth argument that the individual claimants’ procedural and substantive ECHR rights had not been breached.

Link:
Judgment

Global: 500+ Organizations Have Committed to TNFD Recommendations

On October 25, 2024, the Taskforce on Nature-related Financial Disclosures (“TNFD”) announced that 502 companies and financial institutions, from 54 jurisdictions, have committed to making nature-related disclosures in line with the TNFD’s nature-related disclosure framework (for more on the TNFD, see our Debevoise Update on the topic). This brings the total number of financial institutions registered as TNFD Adopters to 129, collectively representing $17.7 trillion in assets under management. The 318 publicly traded companies registered as TNFD Adopters represent $6.5 trillion in market capitalization. The TNFD Adopters have committed to publishing TNFD-aligned disclosures as part of their annual corporate reporting for FY2024.

The TNFD published its final disclosure recommendations and guidance in September 2023. The framework is aligned with the goals of the 2022 Kunming-Montreal Global Biodiversity Framework and aims to help entities report and act on their nature-related dependencies, impacts, risks, and opportunities.

Links:
TNFD Press Release

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