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.

Trending Topics (in Collaboration with Fintech Studios)

ESG trending topicsPolitical leaders and standard setting bodies are continuing to encourage actions to combat climate change and seeking feedback on proposed guidance and regulations. Although some progress has been made, many also acknowledge that there is still much more which can be done to substantively address climate change.

U.S. SENATE 

What’s happening? Senator Manchin struck a deal with Senate Majority Leader Schumer to add the Inflation Reduction Act of 2022 to create a broader $740 billion reconciliation package, which includes measures that target taxes, lower drug prices, and combat climate change. The bill includes $369 billion in investments towards energy security measures and efforts to address climate change over the next ten years, which would be the single largest climate investment in U.S. history. Notably, Senator Manchin proclaimed that the bill would put the U.S. on a path to roughly 40% emissions reduction by 2030. The next step is for the legislation to be reviewed by the Senate Parliamentarian to confirm it complies with the reconciliation rules. 

Type: Legislation 

Timing: Announced 7/27/2022 

Read more: Here | Or Here 

U.S. SENATE 

What’s happening? Senator Manchin struck a deal with Senate Majority Leader Schumer to add the Inflation Reduction Act of 2022 to create a broader $740 billion reconciliation package, which includes measures that target taxes, lower drug prices, and combat climate change. The bill includes $369 billion in investments towards energy security measures and efforts to address climate change over the next ten years, which would be the single largest climate investment in U.S. history. Notably, Senator Manchin proclaimed that the bill would put the U.S. on a path to roughly 40% emissions reduction by 2030. The next step is for the legislation to be reviewed by the Senate Parliamentarian to confirm it complies with the reconciliation rules. 

Type: Legislation 

Timing: Announced 7/27/2022 

Read more: Here | Or Here 

BIDEN HARRIS ADMINISTRATION 

What’s happening? President Joe Biden announced a series of executive actions to combat climate change. These include opening the Gulf of Mexico and other waters to offshore wind development, increasing funding for climate resiliency, and expanding access to cooling resources and energy efficiency upgrades for low-income households. Citing climate as a “clear and present danger” and “existential threat” , the President acknowledged the economic opportunity and environmental benefits that can be realized by a transition to clean energy. 

Type: Executive action 

Timing: Announced 7/20/2022 

Read more: Here | Or Here 

COMMODITY FUTURES TRADING COMMISSION (CFTC) 

What’s happening? The CFTC has extended the comment period for the Request for Information (RFI) on Climate-Related Financial Risk, which was published in the Federal Register on June 8, 2022. The comment period for the RFI is extended until October 7, 2022. 

Type: RFI comment period extended 

Timing: Announced 7/21/2022; Comment period through 10/07/2022 

Read more: Here | Or Here 

EU – U.S. JOINT FINANCIAL REGULATORY FORUM (“THE FORUM”) 

What’s happening? The Forum met on July 13-14, 2022, to exchange views on financial regulatory topics including, among others, sustainable finance and climate-related financial risks. Participants discussed issues related to sustainable finance and management of climate-related financial risks, acknowledging the importance of addressing climate and other sustainability related challenges for the financial sector, consistent with their respective mandates. The Forum agreed to continue the bilateral exchange on sustainability-related disclosures and to continue to engage in international forums, including with regard to the standards being developed by the International Sustainability Standards Board (ISSB). 

Type: International financial regulatory forum 

Timing: Held 7/13/2022 – 7/14/2022 

Read more: Here  

FINANCIAL STABILITY BOARD (FSB) 

What’s happening? The FSB published its Roadmap for Addressing Financial Risks from Climate Change: 2022 progress report. This first annual progress report presents a consolidated update on the progress made by the standard-setting bodies and relevant international organizations across a wide variety of initiatives to assess and address the financial risk from climate change and identifies areas that continue to require attention. The report is expected to serve as input into broader international policy considerations, such as at the G20, G7 and UN, as well as into work supporting the G20 Sustainable Finance Working Group (SFWG) roadmap on sustainable finance. 

Type: Roadmap progress report 

Timing: Published 7/14/2022 

Read more: Here  

U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) 

What’s happening? The SEC voted to adopt proposed amendments to the federal proxy rules governing the basis for exclusion of shareholder proposals in a company’s proxy statement.  Specifically, the proposed amendments would modify the standards for exclusion under the “substantial implementation”, the “duplication”, and the “resubmission” bases for exclusion under Rule 14a-8.  If finalized, the changes would likely make it much harder for companies to avoid votes on ESG matters in the future.  Relatedly, in the same meeting, the SEC adopted final amendments to the proxy rules that govern proxy voting advice.  These final rules rescind two sections of the rules governing proxy voting advice that the SEC adopted in 2020.  Several business trade associations have filed a lawsuit against the SEC over these final rules. 

Type: Adopted amendments 

Timing: Announced 7/13/2022 

Read more: Here | Or Here 

U.S. DEPARTMENT OF THE TREASURY 

What’s happening? US Secretary of the Treasury, Janet Yellen, met with the heads of several of the multilateral development banks (MDBs) and urged them to rapidly align their portfolios with the goals of the Paris Agreement and redouble their efforts to mobilize significantly more private capital for climate change adaptation.   

Type: Roadmap progress report 

Timing: Announced 7/06/2022

Read more: Here  

Spotlight Topic – Energy Efficiency

What is it: According to the EPA, increasing energy efficiency is one of the fastest, most cost-effective ways to save money, reduce greenhouse gas (GHG) emissions and other pollutants, create jobs, and meet growing energy demand. Companies, as well as federal and local governments, can promote energy efficiency and reduce energy consumption in various ways, including investing in modernization of new or existing facilities, equipment, or technology. Additionally, regulators are publishing guidance related to energy production to facilitate a transition to net zero emissions and other carbon neutrality goals. 

Select Federal Regulations and Notable Developments:  

  • In July 2022, the U.S. and Canada requested dispute settlement consultations with Mexico under the United States-Mexico-Canada Agreement (USMCA), relating to certain measures by Mexico that prioritize Mexico’s state-owned electrical utility, the Comisión Federal de Electricidad (CFE), and state-owned oil and gas company, Petróleos Mexicanos (PEMEX), over energy produced by the U.S., Canada, and other private competitors. This request follows the Mexico Supreme Court decision in April 2022 to uphold key components of the country’s Electric Industry Law (LEI) including providing priority to electricity generated by the CFE on the national grid and not requiring power to be bought from the supplier selling it at the lowest price.  That law was originally passed in 2021 and has been criticized  by opposition party senators, the Federal Economic Competition Commission, and the state of Colima for violating the right to free competition in the energy sector and hindering the transition to renewable energy. 
  • In June 2022, the Biden-Harris Administration launched the New Building Codes Initiative to modernize energy codes and promote resilience to climate change. 
  • In May 2022, the Department of Energy (DOE) proposed new energy-conservation standards which would require commercial water heating equipment to incorporate condensing technology, resulting in reduced energy consumption.  If finalized, DOE expects that the proposed standards would go into effect in 2026, with the potential to save businesses and operators $140 million in operating costs and reduce methane emissions by an amount equivalent to 2.3 million gasoline cars per year. 
  • In April 2022, Canada’s Department of Natural Resources proposed an amendment to the Energy Efficiency Act to update energy efficiency and testing standards used in the residential sector. 
  • In April 2022, the Department of Energy (DOE) updated its baseline energy efficiency standards for federal commercial and multi-family high-rise residential and for the design and construction of new federal low-rise residential buildings.   
  • In March 2022, the Government of Canada (GOC) released the 2030 Emissions Reduction Plan, which lays out actions for Canada to take to reduce greenhouse gas emissions 40-45% below 2005 levels by 2030, as part of Canada’s larger plan to achieve net zero greenhouse gas emissions by 2050. The plan provides a set of frameworks to scale regulatory standards and frameworks for energy usage and efficiency.  
  • In March 2022, Federal Energy Regulation Commission (FERC) released their Strategic Plan FY 2022-2026 which outlined the Commission’s priorities to modernize and improve the U.S energy infrastructure. These consist of modernizing electricity market design, improving the siting and review process for regulated energy infrastructure, safeguarding electric infrastructure from emerging threats to reliability and security, facilitating development of the electricity infrastructure needed for the changing resource mix, improving accessibility and participation in FERC proceedings, and promoting a strong and robust enforcement program.

For additional information on ESG regulations, please contact Vrushali Gaud, Amanda Gordon, and Sarah Johnson.

Vrushali Gaud

Managing Director – Sustainability Services

View Profile

Amanda Gordon

Amanda Gordon

Manager – Strategy & Consulting

View Profile

Sarah Johnson

Sarah Johnson

Consultant, CFO & Enterprise Value

View Profile

Cristian Casanova

Senior Analyst - Applied Intelligence Practice

View Profile


Submit a Comment

Your email address will not be published.