|
United States
SEC Publishes Spring 2023 Regulatory Agenda
On June 13, 2023, Chair of the U.S. Securities and Exchange Commission (SEC) Gary Gensler announced the release of the SEC’s Spring 2023 Regulatory Agenda (the Regulatory Agenda), which outlines the SEC’s rulemaking priorities over the next 12 months. The Regulatory Agenda includes a total of 55 rules, with 18 rules at the proposed rulemaking stage and 37 rules at the final rulemaking stage. The SEC anticipates finalizing its proposed Climate Change Disclosure Rule in October 2023, proposing its enhanced Human Capital Management Disclosure Rule in October 2023 and proposing its Corporate Board Diversity Rule in April 2024. While the Regulatory Agenda provides insights into Chair Gensler’s priorities and the anticipated timing of proposed and final rules, actual rule adoption or proposal timing may vary significantly, and could come before or after the listed dates.
For additional details about the SEC’s Regulatory Agenda, see our blog post on Known Trends, Wilson Sonsini’s public company blog.
EPA Launches $400 Million Clean School Bus Program
The U.S. Environmental Protection Agency (the EPA) released a notice of funding opportunity for the EPA’s 2023 Clean School Bus Grant Program. The program allocates up to $400 million in federal funding under the Infrastructure Investments and Jobs Act (the IIJA) to accelerate community efforts to replace existing school bus fleets with clean and zero emission fleets. Prospective applicants have until August 22, 2023, to apply for the 2023 Clean School Bus Grant Program.
BOEM Issues Environmental Assessment for Proposed Gulf Offshore Wind Lease
On May 30, 2023, the U.S. Department of the Interior’s Bureau of Ocean Energy Management (the BOEM) issued its final environmental assessment covering proposed offshore wind leasing activities in the Gulf of Mexico, clearing the way for BOEM to conduct an offshore wind lease sale in U.S. waters off the coast of Texas and Louisiana. If BOEM decides to conduct a lease sale, it will develop an Environmental Impact Statement for proposed projects, which identifies project-specific risks for the proposed lease sale.
Treasury and IRS Release Proposed Rules on the Low-Income Communities Bonus Credit
On May 31, 2023, the U.S. Department of the Treasury (the Treasury) and Internal Revenue Service (the IRS) released proposed regulations pertaining to the application and eligibility criteria for the low-income communities bonus credit investment program (the Program), which increases the amount of the Internal Revenue Code (the Code) Section 48 investment tax credit for certain small wind, solar, and energy storage technologies. The proposed regulations provide helpful guidance for applicants who invest in facilities containing such technologies and seek a 10 percent or 20 percent allocation (i.e., bonus credit) of “environmental justice solar and wind capacity limitation” from Treasury. As detailed in our client alert published on June 7, 2023, the Program provides for four “Categories” of capacity allocation: 1) facilities located in a low-income community (as defined by census tract data); 2) facilities located on Indian land; 3) facilities installed on a residential rental building participating in an affordable housing program; and 4) facilities whose “financial benefits” are provided to households with income of less than 200 percent of the poverty line relative to family size, or less than 80 percent of area median gross income. The IRS has requested comments on the proposed regulations by June 30, 2023.
Treasury, Department of Energy (the DOE), and IRS Release Guidance and Proposed Rules on Advanced Energy Project Tax Credits
On June 14, 2023, Treasury and the IRS released two notices of proposed rulemaking regarding the direct payment of certain energy tax credits under Section 6417 of the Code (the Direct Pay Regulations) and the transferability of certain energy tax credits under Section 6418 of the Code (the Transferability Regulations). These proposed rules will have a significant impact on existing and future tax credit transactions. The Direct Pay Regulations provide guidance on when and how “applicable entities” (generally, tax-exempt and governmental entities) can elect to receive the value of certain tax credits in the form of a cash payment even if that entity has no federal tax liability. Certain tax-exempt entities and governmental entities are eligible to receive direct pay for 11 energy tax credits; for-profit companies and other entities can receive direct payment of 3 energy tax credits—carbon sequestration, hydrogen production, and advanced manufacturing production. The Transferability Regulations provide guidance for “eligible taxpayers” to transfer (sell) certain tax credits for cash, which will enable new types of financing of renewable energy projects apart from the traditional tax equity partnership structure. The IRS has requested comments on the proposed regulations by August 14, 2023, with a hearing to be held on August 21, 2023.
Please see our client alert for additional information related to the HBER and related Guidelines.
Also, on May 31, 2023, the Treasury, DOE, and the IRS jointly released Notice 2023-44 (the Notice), providing guidance on the program under Code Section 48C(e)(1) to allocate $10 billion of tax credits for qualifying investments in eligible advanced energy projects. The Notice, which updates prior guidance (Notice 2023-18) pertaining to the Code Section 48C program, provides new technical review criteria and application requirements. The review criteria now include: 1) commercial viability of the project; 2) impact of the project on greenhouse gas emissions; 3) whether the project will strengthen U.S. supply chains and domestic manufacturing for a net zero economy; and 4) whether the project will produce workforce and community engagement. The Notice also sets forth the process for submitting project concept papers and joint applications for DOE recommendations and advanced energy project credit certifications. Concept papers must be submitted by noon on July 31, 2023. The IRS will make final decisions for Round 1 allocations by March 31, 2024. The Notice reiterates that projects placed in service prior to being awarded an advanced energy project certification are not eligible to receive an allocation.
DOE Releases Clean Hydrogen Plan
In June, the DOE released the U.S. National Clean Hydrogen Strategy and Roadmap. The roadmap, which was produced pursuant to the IIJA, represents the DOE’s plan to facilitate domestic clean hydrogen production, processing, delivery, storage, and use. The roadmap identified three core strategies to support the development of a domestic clean hydrogen industry: 1) target high-impact, difficult-to-electrify end-markets, such as steelmaking, aviation, and heavy-duty transportation; 2) reduce the cost of clean hydrogen; and 3) deploy regional clean hydrogen hubs, which offer the potential for cost savings through co-locating hydrogen production near its end-uses.
DOE Launches EV Charging Industry Consortium to Improve Charging Experience
The National Charging Experience Consortium (the ChargeX Consortium), a consortium organized by the DOE’s national laboratories and authorized by the IIJA, held its inaugural meeting on June 1, 2023. The ChargeX Consortium aims to bring electric vehicle charging industry stakeholders together to address charger reliability issues and improve the charging user experience by June 2025. Interested organizations may express an interest in joining at the ChargeX Consortium website.
DOT Releases Interoperability Standards for Publicly-Funded Chargers
On March 30, 2023, the Federal Highway Administration and the U.S. Department of Transportation promulgated the National Electric Vehicle Infrastructure Standards and Requirements, which apply to all chargers constructed under the National Electric Vehicle Infrastructure (NEVI) program, as well as to all projects for funds made available under Title 23, United States Code. Title 23 includes charging programs under the IIJA. The regulation included detailed interoperability standards governing charger-to-EV communication, charger-to-network-communication, and charging network-to-charging network communication. For example, chargers subject to the rule must, by February 28, 2024, be capable of Plug and Charge under the ISO 15118-2 standard. Additionally, charger communications with charger networks must comply with the Open Charge Point Protocol, and communications between charging networks must comply with the Open Charge Point Interface.
Europe
EU Launches the European Single Access Point for Corporate Financial and Sustainability Information
On May 23, 2023, the Council of the European Union (the Council) announced that provisional agreement has been reached to create the European Single Access Point (ESAP) as a part of the Capital Markets Union (the Action Plan). The ESAP would create a centralized access point for financial and sustainability-related information already made public by European companies and would impose no new disclosure obligations on European companies. The ESAP is expected to gradually phase in beginning in the summer of 2027.
EU Publishes New Sustainability Rules in Revised Horizontal Guidelines
On June 1, 2023, the European Commission (EC) adopted revised Horizontal Block Exemption Regulations (HBER) and related Guidelines to include new rules on agreements among companies on sustainability goals. The updated legislative package covers research and development and specialization agreements, and will be effective starting July 1, 2023, for a period of 12 years. The package provides guidance for businesses in evaluating the compliance of their cooperation agreements with EU competition law. The new guidelines clarify that antitrust rules are not intended to prohibit agreements among rivals that want to pursue sustainability goals under certain conditions. While it is a shift towards a more flexible approach to sustainability collaboration, especially compared to other jurisdictions such as the U.S., the EC remains cautious and does not significantly depart from its traditional approach to horizontal cooperation.
Please see our client alert for additional information related to the HBER and related Guidelines.
EU Publishes Q&A on the EU SFDR
On April 5, 2023, the European Commission (EC) published a Decision answering questions raised by European Supervisory Authorities (ESAs) regarding what is a “sustainable investment” for the purposes of the Sustainable Finance Disclosures Regulation (SFDR). Published in 2019, the SFDR sets out a mandatory disclosure regime on a wide range of ESG metrics and criteria, applicable to asset managers and other financial market participants. The recent guidance contains the third set of questions and answers (Q&As) by the EC, following two previous Q&As in decisions published in July 2021 and May 2022. The new Decision includes guidance on the boundaries of “Article 9” products (i.e., those with the highest sustainability ambitions and disclosure obligations) and what it means to have sustainable investment as their objective. The Decision also contains interpretation of sustainable investments, as defined in Article 2(17) of the SFDR.
European Parliament Adopts Negotiating Position on Corporate Sustainability Due Diligence Rules
On June 1, 2023, the European Parliament adopted its negotiating position on the Corporate Sustainability Due Diligence Directive (CSDDD), which will require companies to integrate human rights and environmental impact into their corporate governance frameworks. The CSDDD would mandate that companies report on how their business model affects their sustainability, and on how external sustainability factors (such as climate change or human rights issues) influence their activities. European lawmakers have also suggested imposing penalties of up to five percent of a company’s global turnover if they are found to have breached their CSDDD obligations. EU Member States, via the Council, will now begin negotiations on the final text before its adoption. The new rules will apply to EU-based companies meeting certain thresholds. Importantly, non-EU companies with a turnover higher than €150 million, if at least €40 million was generated in the EU, will also be covered by the CSDDD.
EU Seeks Feedback on New Sustainability Reporting Standards
On June 9, 2023, the EC published a draft of the first set of European Sustainability Reporting Standards (ESRS) for consultation. The annual sustainability reporting required under the EU’s Corporate Sustainability Reporting Directive (CSRD), which applies also to U.S. companies that meet certain thresholds, must be done in accordance with the ESRS. The draft encompasses 12 ESRS in total (two cross-cutting standards that provide guidance on how to prepare the sustainability report, and 10 topical standards on climate change, pollution, water and marine resources, biodiversity and ecosystems, circular economy, own workforce, workers in the value chain, affected communities, consumers and end-users, and business conduct). The draft appears to ease the burden of the CSRD, including through proposals to make certain disclosures voluntary.
The ESRS draft will be open for public consultation until July 7, 2023. The draft will then be revised as necessary, before being approved and adopted into EU law in the form of an EU Delegated Regulation (making it directly applicable in the EU Member States). Adoption is expected by the end of 2023. For more information on the CSRD, see our client alert.
EU Adopts New Rules to Hamper Deforestation Worldwide
On May 16, 2023, the Council gave its sign off to new rules aiming to address the risks of deforestation and forest degradation brought about by the placement or exportation of certain products from the EU market. The EU Deforestation Regulation (EUDR) will require companies that place and make available on, or export from, the EU market, cocoa, coffee, soy, palm oil, wood, rubber, cattle, and their derivatives to prove that the products are “deforestation-free” and that their production process complies with the relevant legislation of the country of production (e.g., land use rights or environmental protection laws). The new law was published in the EU’s Official Journal on June 9, 2023, and it will enter into force by the end of the month. Companies will then have 18 months to comply with the new obligations.
European Parliament Supports New EU Directive on Green Claims
On May 11, 2023, the European Parliament voted to support the proposed EU Directive on Green Claims (DGC), which aims to give EU consumers more certainty about labels such as “eco-friendly” and “green,” and seeks to ban generic claims. The DGC would only permit sustainability labels that are based on official certification schemes, established by public authorities, or registered as certification marks. Once the DGC is formally adopted following negotiations between the EU’s co-legislators (unlikely before 2024), Member States will have to transpose it into their national legal systems within 18 months from its coming into force, with the rules applying six months later.
European Commission Takes Further Steps to Boost Sustainable Investment
On June 13, 2023, the EC published a new sustainable finance package covering the EU Taxonomy and ESG ratings. The EU Taxonomy Regulation (in force since July 2020) sets out the world’s first “green list” of sustainable business activities and aims to provide investors and other stakeholders with a universal set of sustainability metrics. The EC adopted targeted amendments to the EU Taxonomy Climate Delegated Act, which includes a list of economic activities contributing to the environmental objectives of climate change mitigation and climate change adaptation. The EC also adopted, in the form of the Environmental Delegated Act, a new set of eligibility criteria for economic activities making a substantial contribution to four additional environmental objectives: 1) ensuring sustainable use of water and marine resources; 2) protecting and restoring biodiversity and ecosystems; 3) transitioning to a circular economy; and 4) preventing and controlling pollution. The EC suggested giving a “green” label to, among others, ecosystem restoration activities, the manufacture of plastic packaging under specific conditions, and the collection and transport of hazardous waste. The EU Taxonomy Delegated Acts are approved in principle and are expected to apply as of January 2024. The EC also issued a Staff Working Document on the usability of the EU Taxonomy and the wider EU sustainable finance framework, providing an overview of the key pillars and taking stock of the recently adopted measures.
Additionally, as part of its efforts to promote sustainable private investment in green projects, the EC proposed a Regulation on the Transparency and Integrity of Environmental, Social, and Governance (ESG) Rating Activities to improve the reliability of ESG rating activities, by, among other things, requiring ESG rating providers, who will need to be authorized and supervised by the European Securities and Markets Authority (ESMA), to split out their services from any other business that could create a conflict of interest, including consulting. The proposal will now be debated with the European Parliament and Council in the formal “trialogue” process before proceeding to adoption.
Japan
Japan Publishes Draft Policy to Address Gender Inequality at Companies
Earlier in June 2023, Japan’s Council for Gender Equality approved a plan published by the Gender Equality Bureau to require companies listed on the Prime Market Index of the Tokyo Stock Exchange to have at least 30 percent women directors by 2030. The plan, which asks the Tokyo Stock Exchange to revise its rules for listed companies, if implemented, would also require all companies listed on the Prime Market Index to have at least one woman on their board of directors by 2025.
Standards and Frameworks
World Economic Forum and the IFRS Foundation Announce the Formation of a “Best Practices” Sustainability Reporting Committee
On June 6, 2023, the World Economic Forum and International Financial Reporting Standards (IFRS) Foundation announced the formation of the Forum ISSB Preparers Group. Forum ISSB Preparers Group members will be 20 “corporate leaders with diverse expertise in sustainability reporting,” tasked with sharing insights and best practices from corporations that use the International Sustainability Standards Board’s (ISSB) new sustainability disclosure standards, the first of which were published on June 26, 2023.
SBTi Releases Draft Financial Sector Resources
On June 15, 2023, the Science Based Targets initiative (SBTi) announced the publication of consultation drafts of its Fossil Fuel Finance Position Paper, Financial Institutions Net-Zero Standard, Near-Term Financial Sector Science Based Targets Guidance, and Near-Term Criteria and Recommendations for Financial Institutions. SBTi is soliciting public comment and input until August 14, 2023, and is hosting online discussion sessions on July 6, 2023.
|
