8 May 2024

9 min read

ESG Watch | May 2024

May 2024
Australian flag and airplane


Key news in this edition:

  • Australian regulator wins a greenwashing case.
  • Science Based Targets Initiative’s controversial decision on carbon offsets.
  • ECHR finds human rights violations due to insufficient efforts to fight climate change.


Recent weeks have seen some landmark regulation and legal rulings in the global drive against greenwashing and human rights breaches. Regulators have ramped up enforcement against greenwashing in the investment and consumer industry, as demonstrated by the successful case filed by the Australian financial regulator regarding misleading claims about ESG-focussed investment funds, and the European Commission’s warning against 20 airlines which offered passengers to offset their carbon dioxide emissions for a fee. Potential greenwashing also appeared at the core of a debate ignited by the Science Based Targets Initiative’s (SBTi) proposal to allow carbon credits to offset indirect emissions. The reaction to the proposal highlighted the need for transparency and stricter efficiency standards for carbon offsetting projects. Ultimately, there is no getting away from the ramping up of legal action to tackle greenwashing. 

Still focused on the legal environment, the European Court of Human Rights (EHCR) delivered a historic ruling in April, condemning what they see as Switzerland's inadequate efforts to curb greenhouse gas emissions. This is likely to open the floodgates for more climate-related litigation. Meanwhile, just a stone's throw away, the European Parliament approved a regulation to ban products manufactured using forced labour — a promising step towards ethical supply chains, potentially targeting imports from China's Xinjiang region.

Australian regulator wins a greenwashing case 

On 28 March, the Australian Securities & Investments Commission (‘ASIC’) won a landmark first greenwashing court case against Vanguard Investments Australia (‘Vanguard’).

ASIC claimed that Vanguard made false or misleading representations about the ESG exclusionary screens being applied to one of its exchange-traded funds – Vanguard Ethically Conscious Global Aggregate Bond Index Fund. On social media, press releases and disclosure documents, Vanguard claimed that the fund has excluded companies with business activities in fossil fuels, when it had actually neither researched nor screened a significant portion of them against applicable ESG criteria. The court found Vanguard’s claims regarding the product misleading and contravened the law – it has scheduled a hearing on 1 August to decide the appropriate penalty.

Last year, ASIC launched another greenwashing action against Mercer Superannuation, an Australian manager of corporate superannuation funds. Mercer provided an investment option “Sustainable Plus” to pension holders that claimed to have excluded companies involved in carbon-intensive fossil fuels, alcohol production, and gambling. ASIC has, however, named dozens of companies invested by the scheme in these sectors. As of December 2023, Mercer was reportedly in discussion with ASIC to settle the case with a payment of AUD 11.3 million penalty. 

Outside Australia, the European Commission, following work with regulators in Belgium, the Netherlands, Norway and Spain, warned 20 airline companies – including Air France, KLM, and Lufthansa’s Brussels Airlines – for making misleading claims about sustainability. The carriers offered passengers an option of paying additional fees to offset carbon dioxide emissions. At the end of April, the Commission decided that such claims need to be substantiated with scientific proof and elaboration. The airlines have been given 30 days to respond and address regulators’ concerns. Anti-greenwashing efforts are also progressing in the UK, where the Financial Conduct Authority introduced a new rule to combat greenwashing in April; any labelling or references to ESG sustainability topics in a product or service needs to be substantiated and presented in a fair and clear manner.

So what?

Financial and consumer regulators have ramped up enforcement against greenwashing in the investment and consumer industry this year. Although the focus was initially on investors, it has clearly moved to corporates as well. Companies need to make sure that any claims regarding products and services are based on data and free from false or misleading claims about sustainability.

[Contributor: Esther Yu]

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Science Based Targets Initiative’s controversial decision on carbon offsets

On 9 April, the Science Based Targets Initiative (SBTi), the global climate standard-setting organisation, published a statement announcing it is considering allowing the use of carbon credits by companies to offset indirect emissions in their value chain. Carbon credits enable entities to compensate for their emissions by investing in projects that remove emissions elsewhere. However, this statement has sparked a heated debate over the potential use of carbon credits as a greenwashing tool, whereby companies purchase carbon credits at a large scale, rather than making actual cuts to their carbon emissions.

According to the Financial Times, US officials involved in a clean-energy scheme to issue carbon credits to companies, supported by philanthropists who have also been amongst the donors of the SBTi, have lobbied for this change over two years. Opponents of this move have expressed concern that it would enable companies to claim to be reducing their emissions, by offsetting projects such as tree-planting, while actually adding more greenhouse gases.
The uproar, including from employees at the SBTi who reportedly were not consulted prior to this decision, is indicative of some of the challenges at the organisation as it tries to reconcile public and corporate concerns on net zero. The SBTi will publish the full details of its proposed change in July 2024.

So what?

Whilst carbon offsetting is a valuable and practical tool for many companies as they embark on carbon reduction programmes, its widespread use does run the risk of greenwashing and in fact undermining what it seeks to achieve – real emissions cuts. Carbon offset programmes are coming under growing scrutiny for some of their more egregious claims anyway, but any company considering carbon offsetting needs to be prepared for stricter standards and a drive to find better-quality nature-based projects.

[Contributor: Elif Korca]

ECHR finds human rights violations due to insufficient efforts to fight climate change

On 9 April the European Court of Human Rights (‘EHCR’) presented its rulings on the landmark case Verein KlimaSeniorinnen Schweiz and Others v. Switzerland. The case began over nine years ago when the claimants, an association of Swiss women with an average age of 73, claimed that they were most at risk from the effects of climate change. Specifically, they presented the argument that extreme weather, in this case heat waves caused by climate change, were causing and will continue to cause illness and deaths in older people, especially women.

The EHCR ruled that the Swiss Government had not satisfied its obligations to reduce greenhouse gas emissions in line with Article 8 of the European Convention on Human Rights, which guarantees the right to respect for family and private life, as well as one’s home and correspondence. However, it does not outright include any language with regards to the climate or climate change. 

This ruling is the first of its kind and sets significant precedent for the role of the law in addressing climate change. It also creates an underlying obligation of member states to the European Convention on Human Rights to combat climate change.

so what?

The ruling will open the doors for similar climate-related lawsuits to be brought before the domestic courts and, possibly, the ECHR itself. However, it only fuels the debate on the role of the law versus elected governments in determining how a country tackles climate change. 

[Contributor: Nickolas Bruetsch]

EU Parliament approves new regulation to ban forced labor products in move targeting China

On 23 April, the European Parliament adopted a sweeping new law which will ban the sale, import and export of products with any links to modern slavery and human rights abuses. 
The proposed regulation, which was initially tabled by the European Commission in September 2022, passed with 555 votes in favor, 6 against and 45 abstentions and will ensure that any manufacturers of products deemed to have been produced using forced labor will have to remove their products from the EU market and either donate, recycle or destroy them. Companies which fail to comply with the new rules will face fines, to be determined individually by EU member states. 

Although the new regulations make no direct mention of specific countries, it is believed that the move to eradicate forced labor products is targeting imports from China’s northwestern Xinjiang region which has faced increasing international scrutiny for various human rights abuses including forced labor and involuntary sterilisation. 

According to the International Labor Organization, an estimated 28 million people globally are engaged in forced labor across all economic sectors. A recent report found that popular apparel brands had supply chain links in the Xinjiang region where millions of Uyghur people have been detained and there is documented evidence of state-imposed forced labor. 
While undoubtedly a step forwards in the EU’s overall ESG agenda, the new regulation adds to growing concerns over the shifting landscape of EU-China relations as the EU navigates various trade, human rights and geopolitical issues. Additionally, the proposed regulation has been criticized by advocacy groups for being too weak, while industry itself has raised concerns over supply chain disruptions in critical raw materials.

The passed text now requires final formal approval from the Council of the EU before it can be applied in 2027.

so what?

The new regulation will require companies to conduct thorough supply chain due diligence to make sure the products they sell have not been manufactured using forced labor. Otherwise, they risk fines and their products being banned from the EU market. 

[Contributor: Boitumelo Mogale]

Residents demonstrate against mass tourism in Canary Islands

On 20 April mass demonstrations took place across the Spanish Canary Islands in the Atlantic Ocean, with an estimated 57,000 protestors taking to the streets on the islands of Tenerife, Gran Canaria, Lanzarote, Fuerteventura, and La Palma, as well as major cities in mainland Spain. The protestors directed their grievances against the local tourism industry, calling for a moratorium on mass tourism and arguing that the government’s reliance on the industry is a driver of social problems. Protestors allege that a focus on mass tourism has led to limited affordable housing for local residents, caused environmental damage to the Canary Islands’ ecosystem, and is depleting natural resources – primarily freshwater.

so what?

The anti-tourism protests taking place in the Canary Islands reflect similar local concern and dissatisfaction with mass tourism in other places such as Venice, Italy and Barcelona, Spain. Whilst focusing on concerns around sustainability and ecological impacts, these protests have the potential to evolve into larger demonstrations or to pivot their attention to specific corporate or government practices.

[Contributor: Rami Assaf]

ESG Watch is S-RM’s round-up of the latest regulatory and policy updates relating to ESG from around the globe.

To discuss these articles or other related developments in ESG, please reach out to one of our experts.


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