On September 24, 2022, the Environmental Protection Agency
(“EPA”), the U.S. federal agency tasked with
environmental protection matters, announced the creation of a new
Office of Environmental Justice and External Civil Rights
(“Office”). The Office is tasked with engaging with
marginalized communities with environmental justice concerns to
understand their needs and to provide technical assistance to
address these issues. This includes overseeing the implementation
and delivery of a $3 billion climate and environmental justice
grant program designed to help address pollution in marginalized
communities.
The Office will also work alongside other departments to
incorporate environmental justice policies into EPA’s existing
processes and systems. It will commit 200 staff toward working on
these environmental challenges – nearly quadrupling the
number of EPA staff already dedicated to the issue – and will
be led by a Senate-approved Administrator, yet to be nominated.
The creation of the Office follows the launch of other
initiatives aimed at addressing environmental justice and civil
rights. These include the establishment of the White House
Environmental Justice Advisory Council, which advises the federal
government on how it can address current and historic environmental
injustice through strengthening environmental justice monitoring
and enforcement, and the launch of the Justice40 Initiative, which
aims to ensure that 40% of the benefits of certain federal
environmental investments go to communities suffering from
environmental injustice.
Link:
EPA Press Release
Global: IMF and Barbados Agree on $300 Million Loan Under Climate
Trust
On September 28, 2022, the International Monetary Fund
(“IMF”) and the Government of Barbados agreed to a credit
arrangement scheme which will see the IMF lend Barbados
approximately $300 million for the purpose of providing affordable,
long-term financing to help build resilience against climate
change. The program will include the provision of $110 million in a
three-year extended fund facility and $183 million under the
Resilience and Sustainability Trust (“RST”).
Barbados, which is vulnerable to hurricanes and flooding and
particularly exposed to the effects of climate change, is the first
country to be granted access to the RST.
Under the agreement, the funds will be put toward
“enhancing resilience to climate change while also focusing on
Barbados’ continued efforts to reduce public debt and
facilitate capital expenditure to boost growth.” The RST will
provide financing to support Barbados’ goal of transitioning to
a fully renewable-based economy by 2030. In particular, the country
will work with the World Bank and other international partners
to:
- mainstream climate change in the budget and enhance risk
management, including for the financial sector; - introduce “green” Public Financial Management,
including in procurement; and - incentivize private investments in climate resilient
infrastructure and renewable energy initiatives.
The agreement is subject to approval by the IMF Executive Board;
it is not yet clear when the RSF will become operational.
Link:
IMF Press Release
Global: Net-Zero Asset Owner Alliance Urges Policymakers to Close
Climate Investment Gap in Emerging Markets
On September 28, 2022, the UN-backed Net-Zero Asset Owner
Alliance (“NZAOA”), a group of institutional investors
with more than $10 trillion of assets under management, called on
policymakers to facilitate the scaling of blended finance schemes
in order to achieve climate goals. Blended finance enables both
public and philanthropic capital to be leveraged in order to
improve the risk profiles of certain investment opportunities, in
doing so mobilizing important sources of private funds.
In its “Call on Policymakers,” NZAOA argues that
blended finance could enable the flow of private capital toward
emerging markets and developing economies, and in doing so address
structural deterrence to investments in these economies. Though
capital is available to finance clean technology and low-carbon
infrastructure – both key tenets of the Paris Agreement and
the Sustainable Development Goals (“SDGs”) – not
enough is being diverted to emerging markets and developing
economies because of the level of risk in investment opportunities.
NZAOA outlines five solutions to achieve progress toward an
investment environment where capital can flow to those areas where
it is most needed, namely:
- scale and aggregate pools of concessional capital that create
fiduciary investment assets; - modernize the governance and business models of multilateral
development banks and development finance institutions
(“DFIs”) to align with the SDGs and the Paris
Agreement; - support accurate risk pricing by providing access to core
credit risk data; - prioritize thematic parameters in official developmental
assistance; and - make guarantees eligible for official developmental
assistance.
NZAOA argues that the success of blended finance schemes relies
on multilateral development banks and DFIs, who not only provide
capital and have an increased appetite for risk compared to typical
institutional investors, but also have experience and expertise in
emerging markets and developing economies.
Link:
Call on Policymakers
EU: Questions of Practical Relevance Raised by ESAs
Regarding the Definition of Key Terms Under the SFDR
On September 9, 2022, the European Supervisory Authorities
(“ESAs”) submitted a list of queries relating to the EU
law interpretation of certain key terms under the Sustainable
Finance Disclosure Regulation (“SFDR”). The questions
address some significant points of uncertainty under the SFDR, and
the Commission’s answers will therefore be very important in
practice.
The ESAs raise eight queries, including the question as to
whether an investment qualifies as a “sustainable
investment” – which is currently defined in the SFDR as
an investment that contributes to a specific environmental or
social objective, such as climate change mitigation – where
only part of the company’s activities contribute to the
specific objective. They also raise the question of whether an
investment must directly contribute to an environmental or social
objective in order to qualify as sustainable, by virtue of the
inherent environmental or social benefits of the business, or
whether activities that are carried on in a measurably sustainable
way, such as manufacturing that is best in class in terms of
emissions, can also qualify.
Another key question relates to the definition of the term
“consider” under Article 7 SFDR. The SFDR requires
disclosures around principal adverse impacts (“PAI”),
including a clear and reasoned explanation of whether, and, if so,
how, a financial product “considers” PAIs. The ESAs have
asked the Commission to clarify whether “consider” means
that a fund simply needs to report the potential PAI, or whether it
requires an action to be taken to address the PAI, such as
engagement with the portfolio company. The ESAs further ask whether
there are minimum criteria for any such actions, noting that the
table to report PAI factors includes a column for “actions
taken” to be listed.
Answers are expected from the European Commission later this
year.
Link:
List of queries
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