Key news in this edition:
- EU proposes new measures for sustainable finance framework
- Swiss electorate vote in favour of the Climate and Innovation Act
- Monetary Authority of Singapore announces plans to develop a common framework of ESG metrics for micro, small and medium enterprises
Intergovernmental
OECD releases guidelines for Multinational Enterprises on Responsible Business Conduct
On 8 June, the Organisation for Economic Cooperation and Development (‘OECD’) released its updated Guidelines for Multinational Enterprises on Responsible Business Conduct (‘the Guidelines’). The Guidelines consist of a series of recommendations, made by governments, to multinational enterprises with the aim of enhancing the businesses’ positive contributions – and minimising any negative impacts - to sustainable development, and economic, social, and environmental progress. The guidelines cover the key principles of responsible business conduct with respect to the environment, human rights, labour rights, taxation, competition and other factors. While the OECD acknowledges that these recommendations are not legally binding, it has outlined measures to support their implementation. These measures include the establishment of National Contact Points for Responsible Business Conduct (NCPs), which will be tasked with promoting the guidelines, and supporting companies in any issues that may arise during the implementation of the recommendations. The OECD has been releasing these Guidelines since 1976, with the 2023 update reflecting the need to address the new challenges and changes to the business environment since the last review in 2011.
Europe
EU proposes new measures to support its sustainable finance framework
On 13 June, the European Commission proposed a new set of measures to support its sustainable finance framework and to transition towards a carbon-neutral economy. Specifically, the European Union (‘EU’) has proposed new criteria to the EU Taxonomy Regulation, which aims to provide companies and investors with guidance on what economic activities are environmentally sustainable. The EU also proposed new regulations for agencies which provide ESG ratings on companies. The proposals are an effort to improve the standards and transparency of ESG ratings which provide critical information to investors and financial institutions, ultimately, impacting the EU's sustainable finance agenda.
One of the specific standards proposed by the EU will require ESG rating providers to be authorised and supervised by the European Securities and Market Authority, the EU’s independent financial markets regulator, to ensure that ratings are reliable and comparable. Changes to the EU Taxonomy Regulation are expected to apply as early as January 2024, while the proposal on ESG ratings is yet to be approved by the EU Parliament and Council.
Swiss electorate vote in favour of the Climate and Innovation Act
On 18 June, 59 percent of the Swiss electorate voted in favour of the Federal Act on Climate Protection Targets, Innovation and Strengthening Energy Security (‘the Act’). The law was accepted by the Swiss Parliament in September last year, but political opposition meant it had to be put to a public referendum first. The Act aims to transform Switzerland into a climate neutral country by 2050, through measures to reduce the country’s consumption of natural gas and oil. Under the Act, financial incentives will be provided to those who replace their gas, oil, or electric heating systems, as well as to companies that adopt climate friendly technologies. The bill is a counter-proposal to the Glacier Initiative, an initiative that aims to ban fossil fuels.
Ukrainian Parliament passes law to stimulate renewable energy development
On 1 July 2023, the Ukrainian Ministry of Energy (‘MoE’) announced that the Ukrainian Parliament had adopted a draft law to encourage the development of green and renewable energy in the country. According to the MoE, the draft law introduces several innovations to Ukraine’s energy sector, such as: allowing electricity consumers to self-generate electricity which can be sold back to the national grid; allowing for the possibility of verifying the source of electricity being supplied from renewable sources; introducing a model of contracts for green auctions; introducing a market premium system for green energy producers as well as improvements to corporate contract mechanisms; and, allowing investors to complete renewable energy facilities that were suspended due to the outbreak of the war in Ukraine in 2022.
Africa
South African president announces plan to launch a launch USD 1 billion SA-H2 fund for green hydrogen investments
On 20 June 2023, South African President Cyril Ramaphosa (‘Ramaphosa’; 2018-Present) announced his intention to launch a USD 1 billion green hydrogen fund following a business forum that was held in South Africa. The forum was attended by state dignitaries and representatives of Denmark and the Netherlands, as well as private institutions from these respective countries. According to Ramaphosa, the Netherlands has committed USD 1 billion to create a SA-H2 fund, a finance fund that will focus on green hydrogen investments in South Africa. The makeup of the fund was not disclosed. Danish and Dutch private and public entities have also pledged to finance other green energy projects, such as a USD 200 million pledge to set up a new fund market for investments in green energy infrastructure by Denmark-incorporated Copenhagen Infrastructure Partners and the South Africa-incorporated Mulilo Energy Holdings SA.
Asia
Monetary Authority of Singapore announces plans to develop a common framework of ESG metrics for micro, small and medium enterprises
On 22 June, the Monetary Authority of Singapore (‘MAS’) signed a statement of intent with the United Nations Development Programme (‘UNDP’) and Global Legal Entity Identifier Foundation (‘GLEIF’), a Switzerland-based NGO, to develop digital ESG credentials for micro, small and medium-sized enterprises (‘MSMEs’) worldwide. The initiative, known as Project Savannah, aims to establish a common framework of ESG metrics for MSMEs, to enable them to establish their basic sustainability credentials and ultimately meet UN standards.
The project envisions MAS to provide a digital reporting tool for MSMEs to lodge their ESG data according to the metrics provided. These businesses will then generate basic ESG credentials with the reported data. These credentials will be stored in and made accessible to authorised third parties via the Global LEI System maintained by the GLEIF. The initiative aims to strengthen the MSME’s ability to gain access to global financing and supply chain opportunities.
South America
Chile receives USD 150 million World Bank loan to accelerate green hydrogen development
On 29 June, the World Bank Board of Directors announced that it had approved a USD 150 million loan to finance Chile’s Green Hydrogen Facility in an effort to support a green, resilient and inclusive economic development project. The project will primarily support local communities with the potential to produce clean hydrogen, create green jobs, decarbonise local industries and accelerate Chile’s commitment to reach carbon neutrality by 2050. Additionally, green hydrogen development will improve energy security and increase the integration of renewable energy sources. While the World Bank has made an initial investment, the total project cost is estimated at USD 431 million. The World Bank aims to assist the Chilean government to mobilise additional financing from the private sector and other multilateral partners to generate at least USD 280 million.
