The Sillion Briefing 15.11.2024
Need-to-know corporate sustainability and ESG news, delivered fortnightly
In this edition...
Trump wins
COP16, COP29
TPT to IFRS
EU triple update
ESRS report through CDP
Esquel Group barred
Ofgem new grid connections
Politics
Trump wins - what’s next?
You may have heard news that the United States had an election last week. The outcome – a Trump presidency – is almost certainly the worse result for the climate, a message echoed by reactions from across the sustainability universe.
The incoming president is not pro-sustainability. He has expressed climate change denialist views, his stance on the fossil fuel industry is “drill, baby, drill”, and those close to his administration have called for the repeal of large swathes of the Inflation Reduction Act (IRA), the outgoing administration’s flagship climate legislation. COP29 negotiations, from the US side, may be a dud this year.
Trump’s administration last time out, however, was also famously unpredictable, and much of what was promised in campaign rhetoric was not, in practice, pursued as a goal. We may not know how much attention climate change and related policies will receive until after the inauguration, compared to other goals including immigration.
More widely, action on sustainability and climate change is at a far more advanced stage than it was in 2016. The enormous momentum and opportunities stemming from the US (and the world’s) build out of renewable energy and clean technology innovation, driven by the IRA, is unlikely to be easily stymied or repealed. And US companies have, over the past four years, put huge time and effort into building their sustainability work and internal capacity. There are many good reasons to be concerned, but the global economy’s macro-trends towards sustainability have significant inertia of their own, which a Trump presidency will not halt.
What might this mean for companies?
On US-specific regulation, two pieces are of main concern – the SEC’s Climate Rule, and California’s CCDAA, or Climate Corporate Data Accountability Act (also known as SB 219). As this latter regulation affects companies doing business in California, it has a wider effect than just California-based companies. Both these regulations require, in broad, two things: GHG emissions reporting (including scope 3 in the Climate Rule’s case) and TCFD-style reporting on climate-related risks with financial impact. Trump has promised to fire SEC head Gary Gensler, the Climate Rule’s main advocate – and given the headwinds already facing the rule, this may see it being delayed beyond its FY25 start date. The CCDAA passed a legal hurdle recently, and is likely to apply from 2026.
We therefore recommend that US companies at least assess their capability to meet these requirements now, as although the steps towards mandatory reporting is now more uncertain, the direction of travel remains clear.
On ESG and sustainability more broadly, it is likely companies will tread carefully concerning their external positions. Over the past few years, we have seen ongoing red state pushback on ESG investments, and metrics which indicate an overall drop in sustainability attention from investors and companies – trends which will likely now accelerate. We expect more caution around loud communication on sustainability, at least until the lay of the land is known.
As ever, if you want to understand what this might mean for you, or are a non-US company with US operations trying to understand your position, please be in touch with Sillion.
Events
COP16 concludes without consensus
The COP16 biodiversity summit in Columbia finished a day later than planned and failed to reach a concrete decision on financing strategy for a new ‘global nature fund’, to build on the $20bn of nature finance to the Global South target that was agreed at last year’s summit. The Guardian reports a mood of ‘disarray’, with wealthy nations largely responsible for delaying decisions until after a significant number of developing-country delegates had already departed. Nonetheless, breakthrough was made on indigenous rights through a new permanent body for indigenous peoples, which would allow them to advise and offer their view at future biodiversity COPs.
COP29 begins in Azerbaijan
COP29 kicked off this week, and the spotlight’s been on UK Prime Minister Keir Starmer so far. He used his first address to announce a new climate target for the UK - reducing the country’s emissions by 81% by 2035 against 1990 levels. He also announced that up to £200 million is set aside to reward offshore wind farm developers for local supply chains and communities. Concerns on the decision to host in Azerbaijan’s capital have been exacerbated after the chief executive of COP29 was discovered negotiating fossil fuel deals by the BBC.
Lots of updates to follow over the next couple of weeks, but key world leaders from the US, Europe, China, Japan and Brazil are among those expecting to remain absent from negotiations.
One Number: 8%
Drop of net GHG emissions across the EU in 2023
A new report released by the European Commission has credited a substantial increase in renewable energy for the drop in emissions, which is now the leading source of electricity in the EU.
Regulation
Transition Plan Taskforce disbands, passes to IFRS
The UK-led Transition Plan Taskforce (TPT), which produced the influential TPT recommendations for companies to use to develop climate transition plans, has issued its final report and disbanded. The IFRS Foundation, parent body of the International Sustainability Standards Boards (ISSB), has taken over responsibility of the TPT recommendations. It’s expected that the IFRS will officially endorse the TPT’s materials for use in the creation of IFRS-aligned transition plans, meaning that using this framework to develop your own transition plan is a safe move.
In its final report, the Taskforce noted that according to CDP data, over 5,900 companies which reported to the CDP in 2023 now have a transition plan – up from 4,100 in the previous year.
EU triple update - ESAP, feedback on burden, and transition plans
Three stories on EU-related reporting for you this Briefing:
The European Single Access Point (ESAP), a repository for corporate data reported according to EU regulations, has seen a final report published on implementation. We now expect ESAP to start collecting from July 2026, with this information public from July 2027.
Axel Voss of the European Parliament wants to hear your inputs on how to reduce EU reporting overload, via his email – we hope his inbox doesn’t get overloaded too! This is in the context of the EU Parliament’s ongoing investigation into how it can reduce disclosure burdens for companies.
EFRAG, the body which created the European Sustainability Reporting Standards (ESRS) which are mandated by CSRD, has published its fourth Implementation Guidance (IG 4) – which is on building transition plans in alignment with CSRD. Although the overall aim is not different to transition plans such as described by TPT guidance, IG 4 is more insistent on disclosing financial expenditure to meet the plan, and asks for disclosure on alignment with the EU Taxonomy. If you’re working through figuring out the draft of IG 4 and what it means for your own company, be in touch with us and we can help.
ESRS to be easy to report through CDP
Okay, one more on the EU then! – If you report your company’s progress to CDP and are also tackling ESRS / CSRD at the moment, you’ll be pleased to hear that the CDP and EFRAG (ESRS’ creator) have stated that they have found close overlap between the CDP’s disclosure platform and the standards. Additionally, both organisations will continue to make sure that CDP and ESRS are well aligned. This will make CDP submissions easier in the long run, and follows an agreement to play nicely together a year ago. A comprehensive mapping between CDP and ESRS E1 (the climate standard) is set to be released in early 2025.
Manufacturing
Esquel Group barred from US exports
The Esquel Group, a major textile and apparel manufacturer based in Hong Kong, has been barred from exporting to the United States under the Uyghur Forced Labor Prevention Act (UFLPA). The U.S. Department of Homeland Security (DHS) placed Esquel on the UFLPA’s "entity list," which targets companies specifically restricted from U.S. trade due to alleged connections to forced labour in China's Xinjiang region. Esquel has historically denied the allegations, after being dropped by major brands like Nike and Tommy Hilfiger.
Energy
Ofgem: 'tough but fair' rules for new grid connections
UK electricity regulator Ofgem has proposed a number of grid connection reforms that would help to better assess the viability of project proposals. This includes prioritising those that will become operational within five years, greater consideration of how they would meet local energy demand, and how they would work towards the UK Government’s 2030 grid decarbonisation goal. Meanwhile, Ofgem has also approved projects to lay five subsea interconnector cables capable of powering millions of homes and provide greater connection to power grids including across Germany, Ireland and Northern Ireland. These will be crucial to support the Government’s plans to be a major exporter of clean energy, and also provide means to import energy to balance out any intermittent grid access.
Calendar
2024
COP: COP29 in Baku, Azerbaijan – 11th-22nd November 2024
SBTi: Draft Corporate Net-Zero Standard (CNZS) V2.0 public consultation – Q4 2024
ESMA: ESMA Guidelines on fund names using ESG or sustainability-related terms to apply to funds – 21st November 2024
2025
CSRD: Undertakings previously subject to the EU's NFRD must report ESRS in their Annual Report this year (i.e. FY24 reporting) – 1st January 2025
UK SRS: UK Sustainability Reporting Standards (SRS) published – Q1 2025
UK SDR: UK Sustainability Disclosure Requirements (SDR) rules on labelling of sustainability-focused funds to come into force – April 2025
ESMA: ESMA Guidelines on fund names using ESG or sustainability-related terms to apply to funds which existed before the rule change – 21st May 2024
London Climate Action Week 2025 – 21st-29th June 2025
COP: COP30, Belém, Brazil – November 2025
SBTi: Corporate Net-Zero Standard (CNZS) V2.0 to come into force – by end of 2025
2026
CSRD: All large undertakings must report ESRS in their Annual Report this year (i.e. FY25 reporting). In CSRD parlance, a 'large undertaking' is a company exceeding two of the three following thresholds: Balance sheet total €25 million, net turnover €50 million, 250 employees – 1st January 2026
UK SRS: UK listed companies need to begin work on their IFRS Sustainability Standards (ISSB Standards) and transition plan reporting, in order to be ready for next year
2027
UK SRS: UK Sustainability Reporting Standards (SRS) to become mandatory for FY26 reporting, making the IFRS Sustainability Standards S1 and S2 (the ISSB Standards) and transition plan reporting mandatory – FY26 reporting
CSRD: Listed SMEs must report ESRS in their Annual Report this year (i.e. FY26 reporting). In CSRD parlance, an SME is a company which exceeds only one (or none) of the following thresholds: Balance sheet total €25 million, net turnover €50 million, 250 employees – 1st January 2027
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to very large companies (over 5,000 employees and over €1.5 billion turnover) – 26th July 2027
2028
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to large companies (over 3,000 employees and over €900 million turnover) – 26th July 2028
2029
CSRD: Non-EU undertakings with EU branches / subsidiaries must report ESRS for the previous business year. This applies if the non-EU undertaking has a net turnover generated within the EU above €150 million, and if it has either subsidiaries that are large undertakings or SMEs (CSRD definitions of these are given in the calendar above) with securities traded on an EU market; or if it has branches with net turnover generated in the EU above €40 million – 1st Jan 2029
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to all remaining companies within its scope (over 1,000 employees and over €450 million turnover) – 26th July 2029
Any questions, comments, or feedback?