Welcome to the North America ESG Regulatory Newsletter! The goal of this newsletter is to inform practitioners about current and upcoming ESG regulations, and to provide other information helpful to navigating the rapidly evolving ESG regulatory landscape.
U.S Regulations (Current & Upcoming)
What’s happening? In November 2021, the U.S. House of Representatives passed the Build Back Better (BBB) Act. Among other key provisions, the BBB Act, along with the Bipartisan Infrastructure Law signed into law on 11/15/21, makes the most significant investment to date in America’s fight against climate change.
Update: The BBB Act remains stalled in Congress. However, there are ongoing talks of breaking-up the Act into smaller bills with the hope of enabling the provisions which have received broad bipartisan support, such as those involving climate change, to pass in the near future.
Type: Law and funding
Timing: Announced 11/19/2021; Updated 1/19/2022
SECURITIES AND EXCHANGE COMMISSION (SEC)
What’s happening? In September 2021, the SEC released a “Sample Letter to Companies Regarding Climate Change Disclosures,” which identified certain categories of information the SEC would likely consider relevant when evaluating the sufficiency of public companies’ climate change disclosures.
Update: A draft rule was scheduled to be published in October 2021. This timeline, however, has been pushed back to early 2022. The delay may be attributed to the SEC determining whether and how to disclose Scope 3 emissions, which are difficult to calculate and may expose companies to litigation.
Type: Proposed Rule (likely to be published in early 2022)
Timing: Released 9/22/2021; Updated 1/19/2022
ENVIRONMENTAL PROTECTION AGENCY (EPA)
What’s happening? In November 2021, the EPA proposed a new Clean Air Act rule outlining plans to expand and strengthen emissions reduction requirements for new, modified, and reconstructed oil and gas sources. The EPA also requested comment on additional sources of methane.
Update: The EPA added 1-bromopropane (1-BP) to the list of Hazardous Air Pollutants (HAP) under the Clean Air Act. 1-BP is a solvent used in degreasing, dry cleaning, spray adhesives, and aerosol solvents, as well as an intermediate chemical in the manufacture of pharmaceuticals and agricultural products.
Type: Final Rule (effective 2/04/2022)
Timing: Proposed 11/02/2021; Updated 1/05/2022
NASDAQ AND THE STATE OF CALIFORNIA
What’s happening? In August 2021, the Nasdaq Stock Market LLC (“Nasdaq”) finalized rules for boards of director diversity requirements beginning in 2022. This followed diversity requirements mandated for public companies by the State of California beginning in 2021.
Update: Multiple lawsuits have been filed, which argue that California’s diversity rules and the SEC’s approval of the Nasdaq’s diversity rules violate the Equal Protection Clause and anti-discrimination laws.
Type: Final Rule (NASDAQ) and Law (California)
Timing: Issued 8/6/2021; Updated December 2021
U.S. DEPARTMENT OF THE TREASURY – FINANCIAL STABILITY OVERSIGHT COUNCIL (FSOC)
What’s happening? In December 2021, FSOC approved its annual 2021 report, including recommendations regarding climate-related financial risk, which recognized the importance of climate-related risk assessments, management, and disclosures.
Timing: Approved 12/17/2021
OFFICE OF THE COMPTROLLER OF THE CURRENCY (OCC)
What’s happening? In December 2021, the OCC announced draft “Principles for Climate-Related Financial Risk Management for Large Banks” (greater than $100B in total consolidated assets). The principles include areas such as Governance; Policies, Procedures, and Limits; Strategic Planning; Risk Management; Data, Risk Measurement and reporting; and Scenario analysis.
Type: Request for Feedback through February 14, 2022
Timing: Announced 12/16/2021
U.S. GOVERNMENT: DEPARTMENT OF LABOR (DOL) & EQUAL EMPLOYMENT OPPORTUNITY COMMISSION (EEOC)
What’s happening? The EEOC and the DOL’s Office of Federal Contract Compliance Programs launched a Hiring Initiative to Reimagine Equity (HIRE). The goal of this intra-governmental collaboration is to enhance hiring and recruitment practices in ways that advance equal employment opportunities and expand access to good jobs for underrepresented communities.
Type: Multi-year initiative
Timing: Announced 1/19/2022
STANDARD-SETTING ORGANIZATIONS: INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
What’s happening? During COP26, the 26th United Nations Climate Change conference held in Scotland from October-November 2021, the IFRS announced the formation of the International Sustainability Standards Board (ISSB) with a goal to develop a comprehensive global baseline of ESG disclosure standards. By June 2022, the IFRS plans to consolidate the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF) into the ISSB.
Update: The IFRS has begun its formal search for the inaugural board members of the ISSB.
Timing: Announced 11/03/2021; Updated 1/14/2022
BANKING INDUSTRY: RISK MANAGEMENT ASSOCIATION (RMA)
What’s happening? The RMA announced the formation of a Climate Risk Consortium made up of 19 major North American banks. The goal of this collaboration is to develop standards for banks to integrate climate risk management throughout their operations.
Timing: Announced 1/12/2022
Read more: Here