Regulation is shaping the sustainability agenda and changing the way companies do business in different jurisdictions, but keeping pace with constant regulatory updates has become a mammoth task for businesses and investors. In this recurring series, S&P Global Sustainable1 presents key environmental, social and governance regulatory developments and disclosure standards from around the world.

In this month's update, we explore two proposals in the US to limit carbon emissions at fossil fuel-fired power plants, a consultation on Hong Kong’s green taxonomy and Australia’s plans to create a national Net Zero Authority.

International    Europe    United States and Canada   Asia-Pacific   Africa   Latin America and the Caribbean

International

ISSB seeks feedback on future priorities, including biodiversity and human rights

The International Sustainability Standards Board (ISSB) on May 4 launched a consultation on its proposed priorities for the next two years. The ISSB is proposing three research projects on sustainability-related risks and opportunities related to biodiversity, human capital and human rights. It is also considering another research project on how to integrate sustainability-related disclosures into financial reporting. The ISSB’s first two standards on climate and sustainability-related financial disclosure were scheduled to be finalized in June 2023 and could form the basis for a unified climate and sustainability disclosure framework for companies and investors globally. The consultation ends on Sept. 1. The ISSB also requested feedback in a separate consultation on May 11 on its proposals to make standards by the Sustainability Accounting Standards Board internationally applicable. That request for feedback lasts until Aug. 9.

Europe

EU supervisory bodies define ESG disclosures for securitizations

The three European supervisory bodies on May 25 submitted to the European Commission the final draft regulatory technical standards on sustainability-related disclosures with regard to new EU securitization rules. The supervisors, which include the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority, said the standards detail ESG disclosures that would apply to originators of Simple, Transparent and Standardized securitizations where the underlying exposures are residential loans, car loans and leases. The standards are designed to be consistent with those of the Sustainable Finance Disclosure Regulation, which requires asset managers, pension funds and insurers to disclose how they consider ESG risks in their investment decisions. The European Commission will next decide whether to accept the standards.  

European Commission proposes new rules on sustainable investments for consumers

The European Commission on May 24 proposed a set of new retail investor protection rules, which include requirements on sustainability-related investment products. Under the sustainability section of the new rules, investment firms would have to ensure that sustainability-related aspects of their products were visible, comparable and understandable for retail investors, the Commission said. The rules would build on existing disclosure regulations including the EU taxonomy, a classification system of sustainable business activities. Investment firms would have to disclose the minimum proportion of the investments of their retail and insurance-based financial products associated with the economic activities set out in the taxonomy, according to proposed amendments to existing EU rules. They would also have to disclose the expected greenhouse gas emissions intensity of their products, the proposed amendments said.

EU and South Korea ink partnership to cooperate on climate change, environmental protection

The European Union and South Korea on May 22 said they had established a partnership under which they intend to work together on climate adaptation, carbon pricing, methane emissions and climate finance, the EU said in a press release. The EU-Korea Green Partnership will also focus on reversing biodiversity loss and deforestation, promoting the circular economy and addressing the full lifecycle of plastics. The EU and South Korea also plan to cooperate on the development of renewable energies, energy efficiency, renewable and low-carbon hydrogen phasing out coal-fired power regeneration without negatively affecting communities. They also pledged to help developing nations implement policies related to climate change and environmental protection.

United States and Canada

US proposes carbon emission limits on fossil fuel-fired power plants

The US Environmental Protection Agency on May 11 proposed strict emission limits on new and existing fossil fuel-fired power plants in a move that the agency estimates will generate $85 billion in climate and public health benefits over the next two decades. Under the proposals, nearly all coal-fired power plants without carbon capture and sequestration technology would be expected to cease operating by 2035. Larger natural gas-fired power plants would also be required to use 30% clean hydrogen by 2032, with the target increasing to 96% by 2038. Existing coal-fired units intending to operate beyond 2040 would be required to install CCS equipment capable of capturing 90% of a facility's carbon emissions starting in 2030. Coal plants that commit to retiring by 2035 and operating with an annual capacity factor of less than 20% could otherwise run routinely. The proposals are open for comment for 60 days after publication in the federal register.

New York State adopts plans to restrict fossil fuels in new construction

New York State Governor Kathy Hochul announced a new policy on May 3 that would limit the use of fossil fuels in new construction, making the state the first in the US to pass statewide restrictions on natural gas use in new buildings into law. The policy was passed as part of New York’s annual budget process and requires zero-emission construction in new buildings seven stories or lower, except large commercial and industrial buildings, by Dec. 31, 2025, and all other new buildings by Dec. 31, 2028. The policy permits fossil fuel combustion for backup power and will not apply to manufacturing facilities, restaurants, and hospitals, among other kinds of buildings, as well as certain critical infrastructure. Buildings account for more than 30% of greenhouse gas emissions in New York State, according to the state governor’s office.

Asia-Pacific

Hong Kong Monetary Authority launches consultation on green taxonomy

The Hong Kong Monetary Authority on May 30 launched a consultation on its own green taxonomy as it seeks to strengthen its position as a green finance hub and provide a standardized framework for classifying sustainable investments. Its key objective would be climate change mitigation, which refers to actions taken to lower emissions and limit global warming. The proposed framework is based on five core principles. They include ensuring that economic activities are in line with the goals of the Paris Agreement on Climate Change, protecting against greenwashing, compatibility with other taxonomies, adherence to science-based criteria and thresholds as well as making sure activities do not harm the environment. Taxonomies have been springing up globally as a means to steer investment into sustainable activities.

Australia plans to create Net Zero Authority to oversee energy transition

The Australian government on May 5 announced plans to create a national Net Zero Authority that would be responsible for managing Australia’s transition to a carbon-neutral economy. The new authority will support workers in high-emitting sectors to retrain for new jobs related to the energy transition, the government said. It also said the authority will help regions and communities attract new clean energy industries as well as encourage investors and companies to take advantage of opportunities in the economy’s transition to net-zero. The government will provide additional funding from its A$1.9 billion Powering the Regions Fund to support sectors such as rail and aviation and new clean energy industries, with the creation of a A$400 million Industrial Transformation Stream. The government said it would recommend the creation of an executive agency as of July 1, 2023, to devise legislation that would establish the Net Zero Authority.

Africa

Mozambique and Zimbabwe sign agreements on water resources management

Mozambique and Zimbabwe signed three agreements on May 17 over the management and sustainable use of the Buzi, Pungwe and Save rivers which flow in both countries to combat the impact of climate change and to provide the two nations with data on the risks of natural disasters, Mozambique’s Ministry of Public Works, Housing and Water Resources said in a statement. The agreements are designed to improve water management, forecasting and warning systems for floods and droughts and create mechanisms to respond to extreme weather events, the ministry said. One of the agreements will create the Buzi, Pungwe and Save River Bassin Commission. Both Mozambique and Zimbabwe pledged to cooperate on the construction of dams that would regulate water flows and leverage agricultural and livestock development.

Zimbabwe announces national carbon credit framework

Zimbabwe’s government announced on May 16 its national carbon credit framework, which it said would help the country reduce greenhouse gas emissions and mobilize financing for projects to protect against the impact of climate change. The framework sets out processes for carbon credits to help lower emissions in sectors including energy and forestry, the government said. The framework also stipulates that the government should take 50% of the total revenue generated from carbon credit projects, while foreign and local investors will be entitled to 30% and 20%, respectively. All previous carbon credit deals would be "null and void," Zimbabwe's Minister of Information, Publicity and Broadcasting Service, Monica Mutsvangwa told a media briefing, according to reporting by S&P Global Commodity Insights.

Latin America and the Caribbean

Uruguay rolls out green investment program for small businesses

Uruguay’s Ministry of Labor and Social Security said on May 10 it was rolling out a green investment program designed to bring financial support to small- and medium-sized businesses or individuals interested in developing sustainable jobs. The first stage of the program will require interested parties to present plans to purchase equipment that would improve working conditions in a sustainable manner. The ministry will assess how efficiently each project aims to manage its use of energy, fuel and water. It will also consider factors such as waste management, reduction of pollutants and reuse of materials.

This piece was published by S&P Global Sustainable1 and not by S&P Global Ratings, which is a separately managed division of S&P Global.