CHECKING IT TWICE — The new year is now upon us, and there’s sure to be no shortage of high-stakes political drama in 2024. It’s also shaping up as a pivotal year for policymakers, regulators and industry to wrestle with some key sustainability issues. Here’s a non-exhaustive list of what you can expect our team to be tracking, always with an eye toward the big picture, the power forces at play and, of course, the politics behind it all. The ESG battles The battle over environmental, social and governance policies is poised to heat up this year as the backlash that has silenced Wall Street rolls on. Republicans are raising the temperature with new subpoenas and lawsuits targeting asset management giants — despite apparent voter indifference. And supporters of corporate climate action are planning to push back with help from a new eight-figure spending campaign. Red states will likely continue to consider policies that push back on ESG considerations. But some new legal and enforcement fronts could be opening up, including a state of Tennessee lawsuit against BlackRock and potential legal action from a red-state coalition accusing financial firms of violating antitrust law through involvement with groups pushing net-zero emissions efforts. Another thing to watch is how states that have already blacklisted firms accused of boycotting fossil fuels go about actually implementing those laws. There are signs of division among Republicans in terms of how to balance the desire to root out ESG against potential negative impacts for taxpayers and retirees. The evolving climate disclosure landscape We’re hitting a make-or-break moment for the U.S. Securities and Exchange Commission to finalize its long-awaited rule compelling publicly traded companies to disclose their carbon footprint and climate risk. The agency is facing pressure on both sides as progressives push for a strong rule that can help hold corporations accountable for their role in causing global warming, while conservatives and business groups are warning SEC Chair Gary Gensler against overreach and threatening legal challenges if he goes too far. The focus will be on how the final rule addresses Scope 3 emissions, those generated by a company’s supply chain. The agency’s initial proposal in March 2022 required them to be disclosed only when a company deemed them material or tied them to an emissions reduction goal. The final rule would come amid an evolving global corporate climate disclosure landscape. California enacted a first-in-the-nation law last year requiring all large companies operating in the state to disclose their emissions, including Scope 3, and climate risks. That law, which takes effect in 2026, is inspiring lawmakers in New York and Washington to consider copycat measures this year. And the European Union and other jurisdictions are implementing their own climate disclosure regimes that will impact some U.S. companies. A beleaguered carbon market Standard-setters like the Voluntary Carbon Markets Integrity Initiative and the Integrity Council for Voluntary Carbon Markets have been trying to bring more credibility to the voluntary carbon offset market on the heels of reports that some offset projects don’t provide the environmental benefits that they claim. It will be worth watching whether these efforts succeed in bringing order and spark additional demand for legitimate carbon credits. ICVCM is expected to soon come out with results from assessments for its Core Carbon Principles, the framework the organization released on what makes a high-quality carbon credit. We’re also still waiting on elements of the 2015 Paris agreement related to carbon markets to be ironed out. Negotiators at COP28 failed to reach an agreement on components of Article 6 of the Paris Agreement that calls for the setup of an international carbon market governed by a U.N. body. That means the issue is further punted down the road and will be taken up at COP29 in Azerbaijan. Plastics treaty crunch time Global efforts to reduce plastic pollution are running up against diplomats’ timeline to finalize a U.N. treaty by the end of this year. Two rounds of formal talks remain, one in Ottawa in April and another in South Korea in November. Countries will now need to sift through draft text and come to agreement on key issues, such as whether to limit plastic production, bans or limits on specific chemicals, financing and waste management measures. It’s not clear whether recent talks in Nairobi yielded much progress, as countries including China, Russia, Iran, Saudi Arabia, Cuba and Bahrain launched a coalition to oppose production caps. That group is in direct conflict with the EU and other countries that support binding limits to plastic production. The U.S. favors a treaty built off national plans that work toward agreed-upon goals. Recycling reforms While countries hash out ways to reduce global plastic pollution, states at home will be weighing efforts to overhaul recycling systems to put more of the financial burden on producers to dispose of their products. The goal is to incentivize producers to shift production to include more recyclable material through an extended producer responsibility system, which in theory cuts plastic pollution and stabilizes recycling programs and end markets. Politics got in the way for more than a half-dozen states looking to pass such laws in 2023 in what was supposed to be a breakthrough year for the EPR movement. Expect renewed efforts in similar states this year. We’ll also be tracking developments related to implementation in the four states that do have packaging EPR laws on the books: California, Colorado, Oregon and Maine. Those states will be looking to organize their programs this year, and California just last week released draft regulations and other documents to get their system moving.
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