Commonwealth Climate and Law Initiative (CCLI)’s Post

⁉️ What happened in 2024 in UK directors' duties regarding climate risk and sustainability disclosures ⁉️ 👇 See my high level reflections below, and the Commonwealth Climate and Law Initiative (CCLI) spotlight on the UK section of our 'Directors' Duties Navigator' (published in September) below. 🔻Liability risk remains high, despite unfavourable court decisions 🔻 Many directors in the UK (and elsewhere) took comfort from the decision in #ClientEarth v #Shell, where the UK courts dismissed ClientEarth's novel attempt as a nominal shareholder in Shell to hold its directors legally accountable and personally liable for the alleged mismanagement of climate risks. However, the case was dismissed on procedural grounds (i.e. without discussion of the underlying arguments) and has attracted high-profile criticism from prominent members of the judiciary, leaving the door open for future derivative claims from (brave) shareholders and meaning directors are not off the hook. In fact, legal, regulatory and policy developments over the past year – all discussed in the Navigator – demonstrate that UK directors cannot simply sit back and relax now that the ‘immediate’ threat legal liability has been dampened. 🔻 Clarification of directors' legal duties 🔻 In fact, several publications in 2024 have sought to clarify and provide guidance for directors on their legal duties in relation to climate and nature risk. For example, in 2024, two new UK legal opinions from separate leading corporate barristers (commissioned by Commonwealth Climate and Law Initiative (CCLI) Pollination & Social Value International) found that directors have legally binding duties to: 👉 identify, consider and address nature- and climate-related risks when governing the company more broadly (#CorporateGovernance); and 👉 consider how to reflect climate-related information specifically in #FinancialReporting. This last opinion, coupled with ongoing efforts seeking guidance from international #accounting standards bodies and regulators on how to quantify and reflect climate- and nature-related information in financial statements, heightens the risk of directors and companies being held liable for failing to reflect a “#TrueandFair” view of the company, for greenwashing, and more.. 🔺 As the climate and nature crises worsen, the liability risk landscape for corporations and their directors grows. Directors must #upksill and #educate themselves to better understand what these legal duties mean *in practice* ⭐ The Directors' Duties Navigator, drafted by the Commonwealth Climate and Law Initiative (CCLI) in partnership with the Climate Governance Initiative, is a tool for directors, decisionmakers, lawyers and more to understand how legislative, policy, regulatory, and legal developments fit together to create the risk landscape in which directors and businesses operate, and to provide directors with practical suggestions on how to navigate this. Check it out 👇

Investor Coalition Calls for Mandatory Climate Reporting and Sectoral Transition Strategies o  A global coalition of investors, representing over $29 trillion in assets, has urged governments worldwide to implement mandatory climate-related disclosures and sectoral transition strategies. o  These initiatives aim to align economic policies with the goals of the Paris Agreement. 𝐖𝐡𝐲 𝐈𝐭 𝐌𝐚𝐭𝐭𝐞𝐫𝐬: Mandatory climate disclosures will transform how businesses approach sustainability, putting climate risks and mitigation strategies at the forefront of corporate governance. Law firms that specialize in ESG policy must anticipate these regulatory changes to help clients align with both current and future climate-related reporting requirements. As regulatory frameworks tighten, those unprepared for these changes may face financial penalties or investor divestment. Being proactive in this space ensures that businesses remain compliant and competitive. As climate-related risks increasingly impact financial markets, the demand for transparency through mandatory climate reporting is gaining momentum. Legal and regulatory frameworks must evolve to include robust environmental disclosure standards. This shift will require businesses across sectors to adopt detailed climate action plans and compliance measures. For law firms advising clients on ESG (Environmental, Social, and Governance) matters, staying informed on these evolving regulations is crucial for guiding clients through the complexities of compliance, sustainability, and regulatory oversight. #withlaw #WLpeople #WLconsultech #LearnWithLaw #ClimateReporting #ESGRegulations #Sustainability #InvestorCoalition #ClimateDisclosure #CorporateGovernance #EnvironmentalLaw #RegulatoryCompliance #ParisAgreement #SectorTransition #LawAndPolicy #ClimateAction #ESG https://lnkd.in/dDe9A5x2 Disclaimer: The Content in this post is for informational purposes only derived from references and does not constitute any professional advice. We do not claim ownership of any data or Information referenced.

⁉️Did you know the U.S. SEC Is Getting Serious About Climate Change? The United States SEC's proposed climate disclosure rule is poised to transform how publicly traded companies report on their environmental impact. The SEC is set to issue a final rule THIS Wednesday, March 6. This is a huge deal, and here's why: 💡 Shining a Light on Emissions: Companies will be required to disclose their greenhouse gas emissions (Scope 1 & 2) - a crucial step towards quantifying the environmental footprint of businesses across industries. While estimates vary, this could potentially cover emissions from millions of companies across the US, giving investors a clearer picture of the climate impact of their investments.  💥Quantifying the Impact: In 2021, publicly traded US companies generated approximately 3.2 billion metric tons of CO2e according to S&P Global Market Intelligence. 🔎 Making it all Public: Climate disclosures would be made in annual filings companies make to the SEC, such as a Form 10-K, and in registration statements filed before an initial public offering. ⏳Timing is Everything: The final rule is expected imminently, with reporting likely starting in late 2024 or early 2025. This gives companies a window to prepare their data collection and reporting processes. ⚖️ Don't Mess Around… Potential Penalties: The SEC has a range of tools at its disposal, and companies that disregard the rule could face serious consequences. While not finalised, failing to comply could lead to enforcement actions, reputation damage, lawsuits, monetary fines etc. ♣️ Joining the Club: Many other nations including Chile, China, Egypt, European Union member countries, India, New Zealand and the United Kingdom, already require climate reporting by public companies. 🤔 My thoughts: This is a wake-up call for businesses. The SEC's climate disclosure rule is a game-changer, pushing for greater transparency on environmental issues. Companies that embrace this change can gain a competitive edge by demonstrating their commitment to sustainability. But those who lag behind risk falling out of favour with investors and regulators alike. Source: CNBC, S&P #ClimateDisclosure #Sustainability #ESG #Investing #ClimateAction #GlobalTransition #NetZero #Climate #ClimateFinance #CarbonMarkets #carbon #UnitedStates #CarbonCredits #ghg #greenhousegas

🚨 Australia Takes a Major Step Towards Mandatory Climate Reporting 🌿📊 The Australian Senate has just passed a bill introducing mandatory climate reporting for large and medium-sized companies. This will provide much-needed clarity for investors and companies alike, supporting Australia's transition to a net-zero economy. Key points: ➡ Aligns with ISSB standards ➡ Includes climate-related risks, opportunities, and GHG emissions across the value chain ➡ Phased implementation starting 2025 for largest companies https://lnkd.in/gnrNfG2r

https://lnkd.in/eGVDmwuf Such a re visiting and re writing tricky trend again and again could proove as a real boomerang in the hands of the new US brilliant political leaders ... <<“With the Trump regime's commitment to rollback ESG legislation, it is not outwith the realms of possibility that [those businesses] would be prohibited from producing that data,” Watson said. It would difficult, he added, for businesses affected by CSRD and any conflicting US legislation to “marry those two competing regimes”. Watson said, though, that even if the federal government retrenches, states such as California are unlikely to, leading to further complexity. Any rollback or slowing of climate policy in the US would have global implications, Watson said, highlighting how it could impact on funding for climate action initiatives and “create greater divergence” between US regulation and regulation in Europe and parts of Asia where there has been “significant regulatory and other progress on climate change”.>> #CSDR #ESG #SEC #EU #US #California #climate #Asia #policies #UN

Looking for insight into the final SEC Climate Disclosure Rule? Check out this The Wall Street Journal Sustainable Business Journal article about 5 key takeaways from the new rule on how U.S. public companies will disclose their greenhouse gas (GHG) emissions. These new mandates for disclosing climate-related risks and mitigation activities will significantly change how U.S. public companies report on climate. Follow my Deloitte colleagues Kristen Sullivan and Dina Trainor for regular updates. https://lnkd.in/duPxxFbP

🚨 Climate bill passes Parliament The House of Representatives has confirmed the Senate amendments to the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, meaning mandatory climate-related reporting will become law in Australia commencing 1 January 2025. The sustainability reporting measures are contained in Schedule 4 of the Bill and will commence the day after the Bill receives Royal Assent. The Bill mandates that entities perform scenario analyses to evaluate their climate resilience with proposed amendments, including assessing at least two potential future climate scenarios: a low global warming scenario consistent with a 1.5°C increase above pre-industrial levels, and a high scenario exceeding 2.5°C Key Updates: 📊 Sustainability Report: Entities are now required to prepare a new sustainability report for each financial year, in addition to their regular financial reports. This report includes: ▫️A climate statement for the year ▫️Notes to the climate statement ▫️Any statements prescribed by regulations ▫️Notes to those prescribed statements ▫️A directors’ declaration on compliance with sustainability standards 🌍 Standards Compliance: Climate statements must align with sustainability standards issued by the AASB. 📅 Phased Implementation: The obligation to prepare sustainability reports will be phased in, starting with very large entities and progressively including other large entities based on size thresholds related to consolidated gross assets, revenue, and employee numbers. First group to report: entities that exceed 2 of the 3: 500+ employees, 500m+ revenue, 1bn+ assets). 🔍 Exemptions and Modified Liability: Small and medium entities below the size thresholds, along with those exempt from lodging financial reports, are not required to make climate-related financial disclosures. A modified liability approach will be in place during the transitional period to help entities adapt to these new requirements. These amendments aim to enhance #transparency and #accountability in climate-related financial reporting, reflecting the growing importance of sustainability in business. #sustainabilityreporting #climatedisclosures #Australia https://lnkd.in/g8J5HfGq

The sustainable investment community has reluctantly accepted the final SEC rule on climate change, resigned to a weaker reporting framework in the US, at least for now. So attention now shifts to Canada, which has a choice to make between full-scope reporting as in Europe, or the lower ambition disclosure rule in the US. My report in Corporate Knights. https://lnkd.in/ghy2je98

📢 Australia mandates climate reporting beginning January 2025 The Australian Accounting Standards Board (AASB) has adapted the ISSB standards by issuing Australian sustainability reporting standards (AASB S1 and AASB S2). 🔍 Who is covered? All public companies and large proprietary companies required to provide audited annual financial reports to the Australian Securities and Investments Commission (ASIC) that meet specific size thresholds, starting with companies with over 500 employees, revenues over $500 million or assets over $1 billion, as well as asset owners with more than $5 billion in assets. 📆 When will reporting begin? The first group will begin reporting on financial years beginning on or after January 1, 2025. 🗺 Where will disclosures be made? A separate Sustainability Report alongside the Financial Report. ❓What disclosures are required? Climate disclosures in accordance with AASB S2 are required. Requirements are based on TCFD pillars of governance, strategy, risk management, metrics and targets, BUT require more granular and prescriptive quantitative disclosures (e.g., Scope 1, 2 and 3 GHG emissions, board oversight, transition planning, scenario analysis, carbon pricing, executive remuneration tied to climate goals). There is also a proposed timeline for assurance, with limited assurance phased into reasonable assurance. ⏭ How can organizations prepare? Deloitte recently co-authored a guide for directors overseeing their organizations’ disclosures under Australia’s mandatory climate reporting laws.

The passing of the Australian Government's landmark climate reporting Act is a game-changer for businesses across the country. With mandatory climate-related financial reporting soon becoming a reality for over 6,000 entities, the time to act is now. Establishing a sustainability plan, regardless of your organisation’s size, is increasingly important for navigating the evolving reporting landscape. Taking action not only ensures compliance preparedness but also strengthens your positioning with key stakeholders and trading partners. Proactive steps today will set the foundation for future success and resilience. The team at Certified Sustainable is here to assist organisations on their journey toward a more sustainable future. MinterEllison #Sustainability #Certification #CertifiedSustainable #ClimateReporting #ESG #CorporateGovernance https://lnkd.in/gahaDePD