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ESG Weekly Update – September 7, 2022 – Environmental Law

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U.S.: EPA Proposes Designating Two “Forever
Chemicals” as Hazardous Substances under CERCLA

The U.S. Environmental Protection Agency (“EPA”) has
proposed to designate two per- and polyfluoroalkyl substances
(“PFASs”) as hazardous substances under the Comprehensive
Environmental Response, Compensation, and Liability Act. The
proposed rule is based on evidence that perfluorooctanoic acid
(“PFOA”) and perfluorooctanesulfonic acid
(“PFOSA”) pose a substantial danger to human welfare and
the environment.

Studies show that such PFASs can dwell in the human body for
years, potentially leading to cancer and developmental effects, as
well as damage to the reproductive, cardiovascular and
immunological systems. If this proposal is finalized, it would
require reporting of PFOA and PFOSA releases to the EPA, thus
providing the EPA with enhanced data on these substances and
allowing it to promote improved waste management. Further, the EPA
would in certain circumstances be able to require a clean-up of
these releases and use its enforcement discretion to seek recovery
of related costs from responsible parties.

Commenting on the proposal, EPA Administrator Michael S. Regan
noted that “[c]ommunities have suffered far too long from
exposure to these forever chemicals” and that this move
“will improve transparency and advance EPA’s aggressive
efforts to confront this pollution.” The EPA will soon publish
a Notice of Proposed Rulemaking in the federal register, after
which comments will be accepted for 60 days.


EPA press release

U.S.: California Passes Climate Package

On August 31, 2022, the State of California passed legislation
and issued a number of new climate policies, codifying a net zero
emissions target and approving a record $54 billion in climate
spending. The three key developments are:

  • Passage of the California Climate Crisis Act
    which, among other things, sets forth plans to:

    • achieve net zero greenhouse gas (“GHG”) emissions in
      California as soon as possible, but no later than 2045, and to
      achieve and maintain net negative GHG emissions thereafter;

    • reduce human-caused GHG emissions to at least 85% below 1990
      levels by 2045.

  • Establishment of the Carbon Capture, Removal, Utilization, and Storage
    – which requires the state to set up a
    program to:

    • evaluate the efficacy, safety and viability of carbon capture,
      utilization and storage technology and carbon dioxide removal
      technologies, and to facilitate the capture and sequestration of
      carbon dioxide from these technologies, where appropriate;

    • develop monitoring and reporting schedules to state regulatory
      agencies for such projects to ensure their efficacy, safety and
      viability; and

    • ensure that all such projects follow certain standards.

  • Establishment of community protections against oil and gas
    – which, among other things:

    • implement new compliance standards for oil or gas productions
      and wells within certain protected zones from January 1, 2025;

    • require all operators with a production facility or well in
      protected zones to develop a leak detection and response plan no
      later than January 1, 2025, and to fully implement this plan by
      January 1, 2027; and

    • require operators with a production facility or well in
      protected zones to report publicly on certain metrics (including
      failures of emissions detection systems and leaks) on an annual
      basis from January 1, 2027.

All but one of California Governor Gavin Newsom’s climate
proposals passed. Aside from the California Climate Crisis Act, a
separate bill to strengthen the state’s 2030 GHG emissions
target was narrowly defeated.


Environmental Defense Fund

UK: Investor Group Calls on Government to Introduce
Mandatory Human Rights and Environmental Due Diligence

Thirty-nine institutional investors, including Abrdn, Brunel
Pension Partnership, Legal and General Investment Management and
Storebrand Asset Management, issued a statement directed at the UK
government in support of a Business, Human Rights and Environment
Act that would require all companies to conduct human rights and
environmental due diligence in its supply chain. This statement was
coordinated by the Corporate Justice Coalition.

Specifically, the statement sets out the following

  • Due diligence processes: In line with
    recommendations in the UN Guiding Principles on Business and Human
    Rights and the OECD Guidelines for Multinational Enterprises,
    businesses should have an obligation to identify, prevent, mitigate
    and account for how they address their potential and actual human
    rights and environmental impacts through an ongoing due diligence
    process. Through this due diligence process, businesses should
    meaningfully engage with actual and potential affected stakeholders
    or their appointed representatives. The form of this engagement is
    not set out in the statement.

  • Scope: The mandated due diligence should be
    cross-sectoral and apply to all public and private business
    enterprises and financial institutions domiciled or operating in
    the UK. To that end, the due diligence framework should ensure
    proportionality in its application; while the responsibility to
    respect human rights and the environment applies to all businesses,
    the means through which a company meets this standard will vary
    according to its size and the severity of its impacts, among other

  • Remedy and accountability: Businesses should
    provide for, cooperate in or use leverage to ensure remediation of
    adverse impacts in their global value chains and within their
    operations. Furthermore, businesses should be held liable for the
    harm, loss and damage arising from their failure to prevent adverse
    human rights and environmental impacts within their operations and
    throughout their global value chain and be required to adequately
    compensate victims of abuse. The forum for this accountability
    mechanism is not set out in the statement.

  • Governance: Corporate boards should oversee
    and be accountable for the implementation of rigorous human rights
    and environmental due diligence processes; monitor, discuss and
    report on their development; and ensure their results are reflected
    in forward-looking targets relevant for the prevention and
    mitigation of human rights and environmental risks and impacts and
    are adequately considered and integrated in the business’s
    overall strategy.

The proposal for mandatory human rights and environmental due
diligence law is not new. In October 2021, companies including
Microsoft, Nestle, Unilever and others signed a statement calling
for such a law. In February 2022, the European Commission adopted a
proposal on a Directive on Corporate Sustainability Due Diligence
that would impose similar due diligence requirements, though this
proposal has not yet been presented to the European Parliament and
Council (see our note on the proposed Directive here).



Global: Leading Financial Market Participants Call for
Stronger Alignment of Regulatory and Standard Setting Efforts
around Sustainability Disclosure

On August 30, 2022, a joint statement was published by the World
Business Council for Sustainable Development, the Principles for
Responsible Investment and the International Federation of
Accountants. The group called for major standard-setting efforts to
align more closely and support a global baseline for reporting
sustainability-related information. The statement was signed by 65
investors, companies and professional accounting firms, including
Deloitte, Ernst & Young, PwC, KPMG, Nestle, Shell and Hewlett
Packard Enterprise.

The statement acknowledges the recent efforts made by the
International Sustainability Standards Board (“ISSB”),
the U.S. Securities and Exchange Commission and the European
Commission, together with the European Financial Reporting Group,
to address sustainability reporting, but notes that the issue of
compatibility has persisted.

To address the inconsistencies between the different
sustainability reporting standards, the statement proposes a
coordinated approach that includes a global baseline of
sustainability disclosures for capital markets and a globally
consistent corporate reporting system. This requires aligning key
concepts, terminologies and metrics on which disclosure
requirements are built.

The statement calls on policymakers to engage with the ISSB
working group to ensure alignment on a global level.



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