Speaking Sustainability

The Financial Conduct Authority (FCA) has announced that in-scope issuers for financial years starting on or after April 1, 2022, will be required to provide disclosures with respect to the diversity of their boards and executive management. In-scope issuers will be required to either meet a new set of diversity targets (described below) and disclose their existing board diversity metrics through standardized table formats or, alternatively, issue disclosures explaining why the issuer is not complying with the new requirements.

On April 8, 2022, the Office of the Assistant Secretary for Health (OASH) under the U.S. Department of Health and Human Services (HHS) solicited public comment on the agency’s 2022 Environmental Justice Strategy and Implementation Plan Draft Outline. In support of the Biden administration’s policy priorities related to environmental justice, the plan will identify priority actions and strategies to best address environmental injustices and health inequities for people of color and disadvantaged, vulnerable, low-income, marginalized and indigenous populations. These policy priorities mirror those of the Office of Climate Change and Health Equity (OCCHE), which HHS established in August 2021.

A draft of “The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021” (the “Regulations”) was released by the U.K. government on October 28, 2021, which requires climate-related financial disclosures under the Companies Act 2006 (with further regulations expected in early 2022 to address such disclosures for limited liability partnerships (LLPs) under the Limited Liabilities Partnerships Act). These draft Regulations follow the U.K. government’s consultation launched on this topic in March, and the detailed responses to the consultation can be found in the consultation response. These Regulations will broaden the scope of existing disclosure rules that require certain large companies to disclose certain nonfinancial information. The changes will require the disclosure of climate-related financial information in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) at a group level on a consolidated basis and will apply to all companies currently required to produce a nonfinancial information statement (i.e., companies with more than 500 employees and with transferable securities admitted to a U.K. regulated market or are banks or insurance companies) and extend to all companies with securities admitted to an Alternative Investment Market (AIM) with more than 500 employees and U.K. registered companies or LLPs with more than 500 employees and a turnover of more than £500 million. Subject to parliamentary approval, the changes will take effect for financial years beginning on or after April 6, 2022.

On Thursday, November 4, proxy advisory firm Institutional Shareholder Services (ISS) launched an open comment period on 16 proposed policy changes. The request for comment grouped the proposed changes within five general topics: (i) Board Diversity; (ii) Board Accountability – Unequal Voting Rights; (iii) Board and Other Governance Structure Elections; (iv) Climate; and (v) Compensation. Focusing primarily on the impact to the U.S. benchmarks, these general topics are summarized below; however, this blog post focuses on ISS’s updates regarding climate issues.

On November 3, 2021, the U.S. Securities and Exchange Commission (SEC) issued a Staff Legal Bulletin (SLB 14L) limiting the ability of public companies to exclude from proxy statements shareholder proposals that relate to significant social issues and providing clarification regarding certain procedural requirements applicable to shareholder proposals. SLB 14L rescinds prior SLBs 14I, 14J and 14K and is expected to ease the path for shareholder proposals, notably those related to environmental, social and governance (ESG) matters, to make it into the proxy statement.

Akin Gump was pleased to recently host its inaugural global virtual Environmental, Social and Governance (ESG) Summit. ESG leaders and Akin Gump lawyers and advisors shared their perspectives on a wide range of topics at the forefront of ESG—including key developments and risk factors for investors, companies and stakeholders both in the United States and internationally.

The U.S. House of Representatives has approved a bill backed by President Biden supporting the Corporate Governance Improvement and Investor Protection Act (the “Act”), H.R. 1187. The Act supports the Securities and Exchange Commission’s (SEC) efforts to require every public company to disclose climate-specific metrics in public financial statements. Currently, companies must only disclose climate risks in securities filings if they deem such risks “material” according to the SEC’s 2010 guidance.¹ In an effort to increase transparency and standardize comprehensive environmental, social and governance (ESG) disclosures, the Act provides the SEC with, among other things, discretion to amend securities laws in order to incorporate ESG disclosure standards.

According to media reports, during last week’s annual Conference on Financial Market Regulation—hosted jointly by the Securities and Exchange Commission’s (SEC) Division of Economic and Risk Analysis, Lehigh University and the University of Maryland—SEC Chair Gary Gensler announced that the SEC plans to propose a rule requiring public companies to provide certain human capital disclosures. These disclosures would include, among other things, workforce metrics relating to diversity, turnover rate and a breakdown of the number of full and part-time employees.