EU
ESAs published their final reports on Greenwashing in the financial sector
The ESAs (European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA)) published their final Reports reiterating common high-level understanding of greenwashing within the financial sector following the publication of the FCA legally binding anti-greenwashing guidance in the UK.
EBA
The EBA considers the most effective way forward to address greenwashing by EU banks is by focusing on finalisation and implementation of the existing and planned legislative initiatives, considering that the EU regulatory framework related to sustainability claims has evolved rapidly in recent years and could address several areas of concern.
Following this, in the medium to long term, once sufficient experience of the application of new requirements has been acquired, an identification of potential gaps could be performed and a new legislative initiative on greenwashing in the financial sector could be contemplated, if needed.
The EBA also calls on the European Commission to “consider establishing sectoral transition roadmaps and pathways in line with EU regulations and sustainability objectives as benchmark for sustainability claims and commitments, including transition finance related claims”.
ESMA
ESMA understands maintaining a trusted environment for sustainable investments is crucial and the report assesses the risk of greenwashing that impact investors in their decisions around sustainable investments. ESMA will weigh the need to produce additional guidance for market players and for supervisors in high-risk areas of greenwashing (e.g., claims made on transition, impact, ESG-engagement, etc.).
EIOPA
EIOPA’s report offers practical guidance on the application of the below principles throughout the insurance and pension lifecycle.
- Sustainability claims made by a provider should be accurate, precise, and should fairly represent the provider’s profile, and/or the profile of its product(s)
- Sustainability claims should be substantiated with clear reasoning, facts, and processes
- Sustainability claims and their substantiation should be accessible by the targeted stakeholders
- Sustainability claims should be updated, and any material change should be disclosed in a timely manner and with a clear rationale
A number of EU Green Deal and sustainable finance laws finalised
The European Parliament has approved several key sustainability regulations:
- Corporate Sustainability Due Diligence Directive (CSDDD) [3]
- significant measures to reduce packaging waste [4]
- and bans on certain single-use plastics by 2030
- The Net-Zero Industry Act [5] projected to boost EU production of renewable technologies,
- New eco-design rules [6] focusing on extending product lifespans and making repairs easier,
- banning goods made with forced labour from entering the EU market [7]
In a related move, the European Parliament has also approved the EU’s withdrawal from the Energy Charter Treaty [8] which had the intention to promote international investment in the energy sector, aligning with broader efforts to transition to sustainable energy practices and reduce reliance on fossil fuels. Furthermore, the European Council has adopted a new regulatory package to establish common market rules for renewable gas, natural gas, and hydrogen [9], aimed at advancing Europe’s shift to renewable and low-carbon gases.
Finally, the EU Council has given final approval for the heavily contested EU Nature Restoration Law which will require member states to establish and implement measures to jointly restore, as an EU target, at least 20% of the EU’s land and sea areas by 2030.
UK
UK government published an update on the implementation of the UK’s Sustainability Reporting Standards (SRS)
The UK Government has provided an update on the implementation of Sustainability Disclosure Requirements (SDR) which set out financial product label and disclosures requirements and rules, [9] including an updated timeline for the various components of the SDR:
H2 2024:
- The UK Sustainability Disclosure Technical Advisory Committee (TAC) will conclude its assessment of implementation of the ISSB standards in Q4 2024
- The consultation on the design of the UK Green Taxonomy is still listed for 2024 and emphasises plans for taxonomy disclosures to be voluntary for at least two reporting years before exploring the possibility of mandatory disclosures
Q2 2025:
- Government consultation on draft UK Sustainability Reporting Standards will open in Q1 2025
- Draft UK-endorsed ISSB standards expected to be made available in Q1 2025
Rest of 2025
- FCA consultation on introducing the Sustainability Reporting Standards (SRS) and transition plan expectations (with reference to the TPT framework) is now expected in 2025
- Government consultation on disclosure requirements for UK companies outside of the FCA’s regulatory perimeter will be decided, with decision expected in Q2 2025
- The Government is to launch a consultation in Q2 2025 on transition plan disclosure requirements for UK companies
It is noted that these timelines and political priorities may be impacted by the outcome of the upcoming UK General Election.
UK proposes to expand the Emissions Trading Scheme to new sectors
The UK’s Emissions Trading Scheme (ETS) Authority announced a range of consultations [10] to expand the ETS system to new sectors, including energy from waste and waste incineration sectors. The ETS currently applies to the aviation, power and industry sectors. The Authority’s proposal seeks views on the inclusion of the new sectors from 2028, following a 2-year phase in period from 2026. During the phase-in, emissions from the sector will be monitored, reported and verified, without an obligation to purchase or surrender ETS allowances. The Authority also launched a consultation on the integration of GHG removal technologies to help create a long-term market for GHG removals. The consultations close on 18 July 2024 and 15 August 2024 respectively.
USA
Biden-Harris administration announced new principles for high-integrity voluntary carbon markets
On 28 May, the White House unveiled a Joint Statement of Policy and new Principles for Responsible Participation in Voluntary Carbon Markets. The Principles, which complement the International Emissions Trading Association’s own guidelines, outline the values that US market participants should follow when participating in the voluntary carbon market (VCM), targeting it from supply, demand, and market-level perspectives:
- Carbon credits and the activities that generate them should meet credible atmospheric integrity standards and represent real decarbonisation.
- Credit-generating activities should avoid environmental and social harm and should, where applicable, support co-benefits and transparent and inclusive benefits-sharing.
- Corporate buyers that use credits should prioritise measurable emissions reductions within their own value chains.
- Credit users should publicly disclose the nature of purchased and retired credits.
- Public claims by credit users should accurately reflect the climate impact of retired credits and should only rely on credits that meet high integrity standards.
- Market participants should contribute to efforts that improve market integrity.
- Policymakers and market participants should facilitate efficient market participation and seek to lower transaction costs.
The publication of the Policy and Principles signals the US government’s support for high-integrity VCMs. While the Principles are not legally binding, it should help mobilise the development of clearer “incentives and guardrails” for buyers, offset project developers and crediting agencies.
