Regulation is shaping the sustainability agenda and changing the way companies do business in different jurisdictions but keeping pace with constant regulatory updates has become a mammoth task for businesses and investors. In this recurring series, S&P Global Sustainable1 presents key environmental, social and governance regulatory developments and disclosure standards from around the world.

In this month's update, we look at the UK’s plans to align with new global sustainability disclosure standards, India’s threshold for defining green hydrogen and Canada’s draft regulations to make its electricity grid net-zero by 2035.

International    Europe    United States and Canada  Asia-Pacific   Latin America and the Caribbean

International

Global auditing and assurance body proposes sustainability assurance standard

The International Auditing and Assurance Standards Board (IAASB) launched a consultation on Aug. 2 regarding proposals for a new global sustainability assurance standard. The standard would apply to sustainability information reported across any sustainability topic and prepared under multiple frameworks, the board said. That includes the recently released IFRS Sustainability Disclosure Standards S1 and S2, issued by the International Sustainability Standards Board (ISSB) in June. The proposed IAASB standard can be used by accountants or other professionals that practice sustainability assurance, the board said. Sustainability reporting assurance is used to ensure a company’s disclosures meet international standards. The consultation runs to Dec. 1, 2023, and the final standard will be issued before the end of 2024.

Europe

UK government to create sustainability disclosure standards

The UK is planning to develop sustainability disclosure standards based on the IFRS S1 and S2 disclosure standards developed by the ISSB, the Department for Business and Trade said on Aug. 2. The UK standards would form the basis for legislation or regulation requiring companies to report on their sustainability-related risks and opportunities, including climate disclosures, the department said. It plans to endorse the IFRS S1 and S2 standards and create the UK standards by July 2024. The government has formed the UK Sustainability Disclosure Technical Advisory Committee, which will hold a consultation on the proposed standards until Oct. 11. A second committee, the UK Sustainability Disclosure Policy and Implementation Committee, will analyze how the standards will fit in with existing UK legislation and regulation, the government said.

UK publishes updated strategy to develop hydrogen as low-carbon energy source

The UK government published on Aug. 2 an updated strategy designed to give hydrogen a key role in the country’s energy transition. Under the strategy, the government plans to consult on whether to allow up to 20% hydrogen blending by volume into gas distribution networks. The plans also include the development of a hydrogen production delivery roadmap by the end of 2023 to scale up hydrogen production. The government is targeting up to 10 GW of low-carbon hydrogen production capacity by 2030, with at least half from electrolytic hydrogen. It aims to have up to 1 GW of electrolytic hydrogen and up to 1 GW of carbon capture, utilization, and storage-enabled hydrogen in operation or construction by 2025.

European Commission adopts rules for implementing carbon border levy

The European Commission adopted the rules on Aug. 17 for the implementation of the transition phase of its carbon border adjustment mechanism (CBAM), which imposes a carbon price on imports in the form of a levy. During the transition phase, which will run from Oct. 1, 2023, to end-2025, importers will only have to report on embedded emissions, or the carbon emitted in manufacturing a product, the Commission said. Technology and training materials are currently being developed to guide importers in calculating their emissions, the Commission said. From 2026, importers will need to buy CBAM certificates, based on EU carbon prices. Importers will have to start collecting data as of Oct. 1, 2023, and give their first report from Jan. 31, 2024.

UNITED STATES AND CANADA

Canada announces draft regulations to reach net-zero grid by 2035

The Canadian government announced on Aug. 10 draft regulations to reach net-zero emissions in its electricity sector by 2035. The regulation would introduce emission performance standards for electric generators, setting a cap on the amount of carbon they can emit. It would encourage the development of renewable energy and carbon capture and storage. Under the proposal, the government would supply more than C$40 billion in tax credits and federal investments to finance the construction of new power sources and retrofitting of existing plants. The proposed regulations would cut greenhouse gas emissions by more than 340 megatonnes between 2024 and 2050, the government said. It estimated the costs of implementing the regulation at C$73.6 billion over 27 years, while the cost savings in electricity would be C$102.5 billion. The government is holding a consultation until Nov. 2, 2023. The final regulations are set to be published in 2024.

ASIA-PACIFIC

India announces emission threshold for hydrogen to qualify as green

The Indian government announced on Aug. 19 an emission threshold that must be met for hydrogen to be classified as green or produced from renewable sources. The country’s Ministry of New & Renewable Energy India set an emissions cap of two kilograms of CO2-equivalent for one kilogram of renewable hydrogen as a 12-month average. It plans to specify a detailed methodology for measurement, reporting, monitoring, on-site verification and certification of green hydrogen and its derivatives, the government said in a statement. The Bureau of Energy Efficiency, a division of India’s Power Ministry, will grant accreditations for the monitoring, verification and certification for green hydrogen production projects, the statement said.

Hong Kong financial regulator to adopt ISSB standards

The Hong Kong Monetary Authority said on Aug. 7 it was developing a roadmap for regulation that would be in line with that of sustainability standards issued in June by the International Sustainability Standards Board (ISSB). The regulation would consider local regulatory expectations and circumstances, the regulator said. It also plans to deepen its support for non-listed companies and small and medium-sized businesses (SMEs) as part of the economy’s transition to net-zero, it said. The authority said it would develop a data portal to increase the availability and accessibility of climate-related data collected from non-listed companies and SMEs. It will also explore public-private partnerships to develop technology-driven solutions and collaborate with stakeholders to create a Hong Kong green fintech map to raise the profile of firms in the sector, it said.

Latin America and the Caribbean

Ecuadorians vote against oil exploration in national park

Ecuadorians voted on Aug. 20 against drilling for oil in the protected Yasuni National Park, one of the most biodiverse regions globally as designated by the United Nations Educational, Scientific and Cultural Organization (UNESCO). There will be “a progressive and orderly withdrawal of all activities related to oil extraction” within a year of the referendum’s results, it said in a statement. In another referendum the same day, the inhabitants of Ecuador’s capital Quito voted to ban gold mining in the Chocó Andino reserve in northern Ecuador.

Chile’s financial regulator launches consultation on corporate governance and risk management

Chile’s financial regulator, la Comisión para el Mercado Financiero (CMF), launched a consultation on Aug. 8 over proposals for four regulations on corporate governance and risk management for entities operating in the securities industry, including fund managers and securities’ brokers. The proposals set out requirements for boards of directors on their policies, procedures, and control mechanisms, risk management and internal audit functions. The CMF also proposed an operational risk management framework for securities’ entities to ensure they adequately manage risks about information security and cybersecurity, business continuity, outsourcing of service providers as well as the reporting of operational losses and incidents. The regulator said the proposals were designed to create a consistent regulatory framework for risk management in the securities industry. The consultation closed on Sept. 14, 2023.

Brazil announces environmental transition plan

Brazil announced a far-reaching environmental transition plan as part of an ambitious 1.7 trillion Brazilian reals ($342 billion) infrastructure plan designed to boost the country’s growth, the Brazilian government said in a statement. The government aims to create a regulated carbon market and a sustainable taxonomy. It also plans to issue sustainable sovereign bonds and use the country’s Climate Fund to finance technological innovation in sustainability-related projects. It has earmarked 540 billion Brazilian reals ($108.4 billion) for investment in Brazil’s energy transition and security. Investments will come in part from public-private partnerships, the government said.