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ESG Weekly Update – August 31, 2022 – Clean Air / Pollution

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UK: Occupational Pension Scheme Reporting Requirements Come
into Effect in October

Starting on October 1, 2022, the United Kingdom’s
Occupational Pension Schemes regulations for 2022 (the “2022
Regulations”) will come into force, creating new requirements
for trustees of UK occupational schemes.

The 2022 Regulations amend the UK’s 2021 Climate Change
Governance and Reporting Regulations, which introduced reporting
requirements aligned with the Task Force for Climate-Related
Financial Disclosures (“TCFD”) and aimed to improve both
governance quality and action by trustees in assessing and managing
climate risk. The 2022 Regulations introduce new obligations for
in-scope trustees in calculating and reporting climate-related risk

Among the new obligations are that trustees select, calculate
and report on a “portfolio alignment metric” for the
assets of their scheme, in addition to calculating an absolute
emissions metric, an emissions intensity metric and an additional
climate change metric as currently required. The 2022 Regulations
note that this new portfolio alignment metric does not apply in
respect of a scheme year which ends before October 1, 2022.


The 2022 Regulations (See also status and Consultation Outcome)

Explanatory Note

2021 Regulations

EU: ESMA Advocates for a New EU ESG Benchmark Label

The European Securities and Markets Authority (“ESMA”)
has recommended a new ESG benchmark. The recommendation comes in
response to a consultation by the European Commission (the
“Commission”) on the Benchmarks Regulation
(“BMR”) ? which regulates the indices used to measure the
performance of investment funds – through which the
Commission identified shortcomings in the current BMR

ESMA recommends the new benchmark as a means of raising
standards and ensuring consistency among sustainable finance
metrics and indices currently being offered to investors. In
addition, ESMA says, the new benchmark would create a barrier
against greenwashing, preventing asymmetry of information between
users and benchmark providers.

Following its review, the Commission will submit a report to the
European Parliament and Council by next summer.


ESMA letter

U.S.: California Bans Sales of New Gasoline Cars by 2035

The California Air Resources Board (the “Board”) voted
last week to pass the Advanced Clean Cars II rule, requiring all
new cars sold in the state by 2035 to be free of greenhouse gas
emissions. The rule imposes interim targets including requiring 35%
of new passenger vehicles to produce no emissions by 2026. This
target rises to 68% by 2030.

The Board predicts that the new rule will cause a 25% reduction
in smog-causing pollution and a reduction in negative health
effects of up to $13 billion due to fewer cardiopulmonary deaths,
hospitalizations for cardiovascular or respiratory illness and
emergency room visits for asthma. The Board estimates that, as a
result of the new rule, greenhouse gas emissions from cars, pickups
and SUVs in the state will be cut in half by 2040.

Eighteen states currently follow or plan to follow
California’s previous vehicle rules including New York, Oregon
and Nevada. These states have adopted California’s Low-Emission
Vehicle criteria, GHG emission regulations and Zero-Emission
Vehicle regulations under the Clean Air Act, and such states
together constitute 40% of new car sales in the United States. The
Board has indicated that it expects many of these states to also
adopt the California rule. Section 177 of the Clean Air Act (42
U.S.C. § 7507) authorizes other states to adopt
California’s motor vehicle emissions standards in lieu of
federal requirements.


California Air Resources Board press

U.S.: Florida Adopts Anti-ESG Resolution

On August 23, 2022, the State Board Administration (the
“SBA”) of Florida adopted a resolution on the investment
policy and proxy voting policies for the Florida state-administered
pension plan, revising the policies to exclude “the
consideration of the furtherance of social, political or
ideological interests.”

The resolution directs the SBA to prioritize investment return
and risk-return assessment over nonpecuniary factors and, regarding
proxy voting, directs the SBA to act solely in the interests of
beneficiaries over nonpecuniary factors. The resolution also
mandates a comprehensive review and report on the governance
policies of the pension plan by December 2023.

The resolution, titled “A Resolution Directing an Update to
the Investment Policy Statement and Proxy Voting Policies for the
Florida Retirement System Defined Benefit Pension Plan, and
Directing the Organization and Execution of an Internal
Review,” is one of a number of state-level initiatives to
prevent ESG considerations by state pension plans. Other states,
including Texas, recently have passed laws limiting state
entities’ ability to do business with firms perceived as
“boycotting” certain industries such as oil and gas or
firearms. The result is an increasingly bifurcated landscape at the
U.S. state level when it comes to ESG, with some states requiring
state entities to consider ESG factors and others prohibiting it,
presenting considerable challenges for firms seeking to do business
across the United States.


Florida ESG

Pensions & Investments

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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