13 September 2023

9 min read

ESG Watch | September 2023

September 2023
ESG Watch | September 2023 placeholder thumbnail


Key news in this edition:

  • Germany commits EUR 57 billion for investment into green infrastructure 
  • The EU adopts implementing regulation for its Carbon Border Adjustment Mechanism
  • Canada proposes Clean Electricity Regulations to address climate change


North America 

Canada proposes Clean Electricity Regulations to address climate change

On 19 August, the Government of Canada proposed Clean Electricity Regulations (‘CER’), to ensure that Canada’s electricity generating sector is on track to supply electricity from low or non-emitting sources by 2035. This will keep Canada on track to deliver on its promise to become a net zero greenhouse gas (‘GHG’) emissions economy by 2050. The CER will set performance standards with the aim of ensuring the electricity sector goes through a significant transformation by 2035, generating clean electricity that can be used for other electric technologies across different areas of the economy, while reducing GHG emissions from fossil fuel generated electricity. The cost-benefit analysis for the proposed regulations estimated that a net reduction of 342 million metric tonnes of carbon dioxide equivalent units of greenhouse gas emissions will be achieved between 2024 and 2050. The CER is currently under a consultation period until 2 November 2023. The proposed regulations are expected to come into force in 2024, after being published in the Canada Gazette, Part II – however, the performance standards will be in effect from 1 January 2035 onwards.


Azerbaijan and Uzbekistan sign energy cooperation agreement 

On 22 August, Azerbaijan and Uzbekistans energy ministers’ committed to deepening the energy partnership between their two countries by signing a strategic roadmap for increased cooperation and joint projects between 2023 and 2025. The roadmap covers 14 different areas of cooperation, including in the identification and extraction of hydrocarbon resources, as well as renewable energy, reforms to the energy sectors of both countries, decarbonisation and information exchange on hydrogen production. The roadmap also highlights the continuation of cooperation between JSC Uzbekistan National Electric Network and Azerenergy JSC, the state-owned power providers in Uzbekistan and Azerbaijan respectively.   


Indonesia’s finance regulator issues rules for its first carbon exchange 

On 23 August, Indonesia’s Financial Services Authority (‘OJK’), the regulator of the country’s financial sector, introduced new carbon trading rules, ahead of the planned launch of Indonesia’s first carbon exchange in late September 2023. The rules establish products traded on carbon exchanges as securities and allow carbon exchange operators to facilitate cross-border trade subject to certain prerequisites. Under the new regulations a carbon exchange operator will need to acquire a licence from the OJK, and the license holder must be an Indonesia-based entity with a paid-up capital of IDR 100 billion (c. USD 6.57 million). Carbon exchange operators will also have the ability to develop products based on carbon units after obtaining OJK approval. Despite the government’s aim to launch the carbon exchange in September, the operators of the carbon exchange have yet to be announced.  


Japan’s Financial Services Agency proposes a new set of guidelines for impact investing

On 31 July, the Financial Services Agency (‘FSA’), Japan’s market regulator, proposed a new set of guidelines for impact investing with the aim of improving understanding of the term. The FSA framework sets out four governing principles for impact investing. The first requires investors to specify the positive social, environmental, and financial impact they hope to achieve and the strategies they will adopt. Secondly, investors should show engagement with investee companies to create additional value and positive impact. Thirdly, investors are to identify and set appropriate key performance indicators and metrics, together with their portfolio companies, on social or environmental issues in order to measure impact. Lastly, innovative ideas and technologies should be prioritised during the investment allocation. The market has until 10 October to provide feedback on the FSA’s proposed impacts.   


The EU adopts implementing regulation for its Carbon Border Adjustment Mechanism

On 17 August, the EU adopted the rules governing the implementation for its Carbon Border Adjustment Mechanism (‘CBAM’), a European carbon tariff which is expected to take full effect in 2026. Under the CBAM framework, the EU expects to regulate the price of carbon intensive products entering the EU, such as cement, iron, steel, aluminium, fertilisers, electricity, and hydrogen. The implementing regulation sets out the transitional reporting obligations of EU-based importers of CBAM goods, and provides a transitional methodology for the calculation of emissions released during a CBAM goods’ production process. The CBAM will enter into force in its transitional phase in October 2023 and will expand its scope of application, gradually, until 2026, when it is expected to take full effect. Once the CBAM is fully rolled out, importers in the EU will be required to declare, each year, the quantity of goods imported into the EU in the preceding year and their embedded greenhouse gas emissions.


Germany commits EUR 57 billion for investment into green infrastructure 

On 9 August, the German Ministry of Finance (‘MoF’) announced that it had earmarked EUR 57.6 billion in planned expenditure for 2024 as part of the German government’s Climate and Transformation Fund (‘KFT’), a sustainable investment fund established by the German government in July 2023 to promote environmental protection and green energy. The largest portion of the money, EUR 18.9 billion, will be allocated to Germany’s building sector. The MoF has also committed EUR 12.6 billion for renewable energy subsidies; EUR 4.7 billion in expanding electromobility infrastructure, including electrical vehicle charging; and, EUR 4 billion in developing Germany’s railway infrastructure. The MoF plans to provide EUR 211.8 billion in total between 2024 and 2027 to promote sustainable and green investments to meet Germany’s target of reaching net zero by 2045.


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south america

São Paulo to host the first plant for renewable hydrogen production from ethanol 

A campus from the Universidade de São Paulo (‘USP’), a public research university located in São Paulo, Brazil, will host the world’s first experimental plant for renewable hydrogen production from ethanol. The project is a collaboration between USP, private oil and gas companies, as well as government agencies. The pilot plant, covering 425 square meters, will have the capacity to produce 4.5 kilograms of hydrogen per hour and is set to be operational by the second half of 2024. This initiative aims to offer a low-carbon solution for heavy transportation, transitioning vehicles from diesel to hydrogen produced from ethanol. The hydrogen produced will power buses that will exclusively be used within university grounds, and a Toyota vehicle, in order to test the performance of hydrogen as a fuel.  


World Bank approves USD 650 million to finance Argentinian micro, small, medium enterprises 

On 22 August, the World Bank Board of Directors approved two new projects worth USD 650 million for Argentina: The Access to Sustainable Finance for Micro, Small and Medium Enterprises Project (‘MSMEs’) and Strengthening Food Programs for Vulnerable Populations Project (‘SFVP’). The projects aim to support Argentina’s micro, small and medium enterprises and strengthen food programs in the country, while integrating climate risks, environmental and social issues into its overall development plans. 

The MSME will provide USD 200 million worth of financing to micro, small and medium enterprises to improve their ability to respond to climate risks and participate in green markets. The project will prioritize providing support to businesses led by women and vulnerable groups and will be financed through the Argentine Development Bank. Meanwhile, the USD 450 million SFVP will support the implementation of food programs by the Ministry of Social Development.  Both project loans are payable in 32 years and have a seven-year grace period.  


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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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