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)

Many companies, governments, and regulators are facing pressures to implement policies and standards around climate and human rights areas (such as decarbonization, recycling, renewable energy, data privacy and security, etc.) which would put them on the path towards achieving public sustainability commitments and provide the ability to monitor and report on progress in a reliable and transparent manner. 

SUPREME COURT OF THE UNITED STATES 

What’s happening? The Supreme Court issued a ruling in West Virginia v. EPA, restricting the Environmental Protection Agency’s (EPA) authority to regulate carbon dioxide from power plants. The Court applied the “major questions doctrine”, which states that the Supreme Court can strike down regulatory action of “vast economic and political significance” if Congress did not specifically authorize an agency to issue a regulation, holding that Congress did not provide the EPA the authority under section 111 of the Clean Air Act to set emission standards for existing power plants. 

Type: Ruling 

Timing: Announced 6/30/2022 

Read more: Here  

G7 LEADERS 

What’s happening? Leaders of major industrial nations at the G7 summit announced plans to establish an international “Climate Club” by the end of 2022. The Climate Club will be aimed at coordinating efforts on climate action. Key focus areas would include advancing ambitious and transparent climate mitigation policies, transforming industries jointly to accelerate decarbonization, and boosting international ambition through partnerships and cooperation. 

Type: Working group 

Timing: Announced 6/28/2022 

Read more: Hereor Here 

GLOBAL REPORTING INITIVE (GRI) 

What’s happening? The GRI, an international independent standards organization which promotes standardized ESG reporting, has launched a new disclosure standard, ‘GRI 13: Agriculture, Aquaculture and Fishing Sectors 2022’. Per GRI, the new standard would increase the completeness and comparability of sustainability information for all organizations around the world involved in crop cultivation, animal production, aquaculture, or fishing. 

Type: Standard 

Timing: Announced 6/28/2022 

Read more: Hereor Here 

EU COUNCIL AND EUROPEAN PARLIAMENT 

What’s happening? The EU Council and European Parliament announced a proposed directive for the Corporate Sustainability Reporting Directive (CSRD). The proposed rules aim to revise and strengthen the rules set out in 2014 in the Non-Financial Reporting Directive (NFRD).  As proposed, the new rules will extend the scope of the reporting requirements to additional companies, introduce more detailed reporting requirements, and require companies to have the information they provide on their impact on climate or human rights to be independently audited and certified. The directive will apply to large European companies, European companies listed on regulated markets, as well as non-European companies which generate over €150 million in the EU. If approved and published in the Official Journal of the European Union, the new rule will be phased-in beginning January 1, 2024.  

Type: Proposed rule 

Timing: Announced 6/21/2022; Compliance expected to be phased in beginning 1/1/2024 

Read more: Hereor Here 

CITI, ING, AND SOCIETE GENERALE 

What’s happening? Citi, ING, and Societe Generale, the top three lenders to the aluminum sector, announced a new partnership with RMI’s Center for Climate-Aligned Finance through the formation of a new Aluminum Climate-Aligned Finance Working Group. The working group will create a climate-aligned finance (CAF) framework which will enhance consistency and transparency by defining how lenders can help the decarbonization of the aluminum sector and measure progress. 

Type: Working group 

Timing: Announced 6/21/2022 

Read more: Here 

GOVERNMENT OF CANADA 

What’s happening? The Government of Canada announced a ban on harmful single-use plastics, including checkout bags, cutlery, foodservice ware made from or containing problematic plastics that are hard to recycle, such as ring carriers, stir sticks, and most straws. The ban on the manufacture and import of such items will take effect December 2022, with the sale of the items to be prohibited beginning December 2023. Additionally, the government will also prohibit the export of such plastics by the end of 2025.  Separately, the Office of the Superintendent of Financial Institutions (OSFI) released a draft guideline setting out its expectations for how federally regulated financial institutions (FRFIs) should manage and disclose climate-related risks.  The draft, Guideline B-15: Climate Risk Management, aims to support financially regulated financial institutions (FRFIs) in developing greater resilience to, and management of, these risks. 

Type: Final regulation; Draft guideline 

Timing: Announced 6/20/2022; Announced 5/26/2022 

Read more: Here (ban on single-use plastics) | Here (Climate risk guidelines) 

INSTITUTIONAL INVESTORS GROUP ON CLIMATE CHANGE (IIGCC) 

What’s happening? The Institutional Investors Group on Climate Change (IIGCC) proposed a new component for the Paris Aligned Investment Initiative (PAII)’s Net Zero Investment Framework (NZIF), which provides asset managers with a common set of recommended actions, metrics and methodologies to maximize their contribution to achieving net zero emissions globally by 2050. The new guidance is for infrastructure investors to align portfolios with net zero goals. It includes metrics and target setting considerations for asset owners and asset managers to measure net zero alignment over time, along with implementation actions. 

Type: Proposed guidance 

Timing: Announced 6/16/2022; Public consultation will run through 7/8/2022, with final publication aimed for Q3 2022 

Read more: Here | Or Here 

BASEL COMMITTEE ON BANKING SUPERVISION 

What’s happening? The Basel Committee on Banking Supervision, the primary global standard and policy setter for the banking industry, published principles for the effective management and supervision of climate-related financial risks. The publication sets out 18 principles to follow for management and supervision of climate related risks in order to address the interrelated physical and transition climate risks to the global banking system. 

Type: Principles 

Timing: Announced 6/15/2022 

Read more: Here | or Here  

U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) 

What’s happening? The U.S. Securities and Exchange Commission (SEC) is investigating Goldman Sachs’ asset management division over its ESG-themed investment funds. The investigation comes as regulators are ramping efforts to fight greenwashing (Reference the March 2022 ESG Regulatory Newsletter spotlight topic). For example, last month, the SEC announced it had charged BNY Mellon Investment Adviser for making misstatements and omissions about the ESG considerations used for investment decisions in some of its mutual funds. Additionally, investigations into similar greenwashing allegations have also led to the resignation of the Deutsche Bank investment arm DWS CEO.

Type: Litigation 

Timing: Announced 6/13/2022 

Read more: Here (Goldman Sachs) | Here (BNY Mellon) | Here (Deutsche Bank) 

Spotlight Topic – Data Privacy and Security

What is it: In today’s digitally driven world, companies are embracing privacy obligations while collecting, processing, and transferring consumer data. The protection of data privacy and security is considered a human right, and as such, it is more important than ever for companies to act responsibly and protect consumer data. Personal data breaches can carry major consequences for companies, including impacts to financial performance, reputation, and long-term viability.  Therefore, data privacy and security are becoming an essential part of the ESG conversation, as consumers seek confidence and transparency in the use and protection of their personal data.

Regulations and Notable Developments:  

    • In June 2022, the bipartisan American Data Privacy and Protection Act (ADPPA) was introduced by Energy and Commerce Committee Chair Frank Pallone, (D-NJ), Ranking Member Cathy McMorris Rodgers (R-WA), and Ranking Member of the Senate Committee on Commerce, Science, and Transportation, Senator Roger Wicker (R-MS), which constitutes the most significant legislative effort to pass a federal privacy law in years. 
    • In June 2022, Senator Elizabeth Warren (D-MA) introduced the Health and Location Data Protection Act of 2022. If passed, the bill aims to make it illegal for a data broker to sell, resell, license, trade, transfer, share, or otherwise provide or make available an individual’s location or health data. 
    • In May 2022, the Federal Trade Commission (FTC) finalized an order against CafePress regarding allegations that it failed to secure consumers’ sensitive personal information, including Social Security numbers and covered up a major data breach. Additionally, in May 2022, the FTC charged Twitter for deceptively using account security data to sell targeted ads. These, and other recent litigations, come after the FTC released a Statement of Regulatory Priorities in December 2021 aimed to protect consumers’ data and to sanction companies that commit data privacy and security abuses (Reference Accenture’s blog for more detail: Another U.S. Regulator is coming after Companies for Data Privacy and Security Violations: The Federal Trade Commission Tries to Up the Ante). 
    • In June 2022, the California Privacy Protection Agency issued draft California Privacy Rights Act (CPRA) regulations and initial statement of reasons. The CCPA expands on the California Consumer Privacy Act (CCPA) and details requirements around the collection and use of personal data, avoiding dark patterns in obtaining consumer consent, privacy notices and policies, opt-out of sale/sharing and preference signals, right to limit use and disclosure of sensitive personal information, requests to correct, and data processing agreements. It is the latest in U.S. state-enacted privacy laws. Other states, including California, Colorado, Connecticut, Utah, and Virginia have also enacted their own laws around privacy, many of which are expected to take effect beginning in 2023. 
    • In June 2022, the Honourable François-Philippe Champagne, Minister of Innovation, Science and Industry of Canada, and the Honourable David Lametti, Minister of Justice and Attorney General of Canada introduced the Digital Charter Implementation Act. The law propels comprehensive reform of the federal private-sector privacy law through three proposed acts: the Consumer Privacy Protection Act, the Personal Information and Data Protection Tribunal Act, and the Artificial Intelligence and Data Act. 

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

Vrushali Gaud

Managing Director – Sustainability Services

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Amanda Gordon

Amanda Gordon

Manager – Strategy & Consulting

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Sarah Johnson

Sarah Johnson

Consultant, CFO & Enterprise Value

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