Nov 2023 Update: Wilson Sonsini’s Sustainability & ESG Advisory
TL/DR –
California Governor Gavin Newsom signed three climate laws in October 2023, such as the Voluntary Carbon Market Disclosures Act, which requires businesses to disclose certain information about their carbon offset projects. The law also imposes fines on businesses that fail to disclose these details, with fines of up to $2,500 per day per violation, not exceeding $500,000. The U.S. Global Change Research Program released the Fifth National Climate Assessment, which outlines key messages related to climate change mitigation and adaptation, including the necessity of reaching net-zero emissions and the need for investment in adaptation strategies.
New California Climate Laws Take Effect
On October 7, 2023, California Governor Gavin Newsom introduced and signed new climate laws in the form of Senate Bills 253, the Climate Corporate Data Accountability Act; 261, the Greenhouse gases: climate-related financial risk; and Assembly Bill 1305, the Voluntary Carbon Market Disclosures Act (VCMDA). These acts mandate disclosure starting in 2024 and 2026, with a particular focus on businesses that market or sell voluntary carbon offsets in California, as well as those making certain climate-related claims.
Fifth National Climate Assessment (NCA5) Published
The U.S. Global Change Research Program (USGCRP) published the NCA5 on November 14, 2023. This comprehensive report covers the effects of global change on various societal and environmental aspects and calls for a drastic reduction in emissions.
Climate Disclosure Rules from the U.S. Securities and Exchange Commission (SEC) Delayed
SEC Commissioner Mark Uyeda stated that the commission’s proposed climate disclosure rules, the Climate Proposal, continue to be delayed. Investors are making investment decisions based on climate risk, bolstering the need for standardized climate disclosure.
Changes to Investment Duties Rule
The U.S. Department of Labor (DOL) finalized the 2022 Investment Duties Rule (2022 Rule), which emphasizes the role of ESG factors in fiduciaries’ investment decisions. This rule has sparked numerous lawsuits and legislative proposals.
Implementation Update on the Inflation Reduction Act of 2022 (IRA)
The Treasury Department and the Internal Revenue Service issued proposed regulations to update the investment tax credit under Internal Revenue Code Section 48. These regulations redefine energy property and specify conditions for qualifying for the investment tax credit.
European Green Bond (EuGB) Regulation Approved
The EuGB regulation, which sets standards for bond issuers who wish to use the EuGB label, received approval on October 23, 2023. This regulation seeks to prevent greenwashing by requiring issuers to provide clear information to investors.
European Financial Regulator Highlights Climate Disclosure
The European Securities and Markets Authority (ESMA) published a statement and report on enforcement priorities and how to disclose climate-related matters in 2023 financial statements.
Brazil Adopts Mandatory ISSB-Linked Reporting Rules
As of November 1, 2023, certain Brazilian businesses are required to comply with the new International Sustainability Standards Board (ISSB) standards according to Resolution 193. This makes Brazil the first country to mandate the disclosure of sustainability-related financial information complying with the ISSB standards.
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