| Regulatory and Reporting Developments |
United States
U.S. Department of Agriculture (USDA) Releases Guideline on Substantiating Animal-Raising or Environment-Related Labeling Claims
In late-August 2024, the USDA released a revised version of the Food Safety and Inspection Services’ Guideline on Documentation Needed to Substantiate Animal-Raising or Environment-Related Claims for Label Submissions (the Food Labeling Guidelines). The Food Labeling Guidelines cover the documentation required to substantiate claims like “Pasture Raised,” “Grass Fed,” “Cage Free,” and “Raised Antibiotics Free.”
California Senate Passes Law to Delay Climate Law Implementation
On August 31, 2024, the California Senate passed SB 219, which, if it becomes law, would delay the deadline for the California Air Resources Board (CARB) to promulgate implementing regulations for the Climate Corporate Data Accountability Act (SB 253). SB 253 requires reporting entities (as defined in the law, including corporations with total annual revenues in excess of $1 billion that do business in California) to annually disclose their Scope 1, Scope 2, and Scope 3 greenhouse gas emissions. SB 253 and SB 219 provide that CARB may set the initial compliance date for reporting entities in its regulations.
For additional details about SB 253, please see our client alert.
Federal Trade Commission (FTC) Non-Compete Ban Blocked Nationwide
On August 20, 2024, the U.S. District Court for the Northern District of Texas blocked the final rule issued by the FTC that would have prohibited all for-profit employers nationwide from using non-compete agreements with any worker (the Rule) as an unfair method of competition. The Rule was set to take effect on September 4, 2024, and would have required employers to send notices to all current and former workers who had entered into covered non-compete agreements informing them that their covenants not to compete would not be enforced.
The court’s decision bars the Rule from being enforced. As a result, employers are relieved of the obligation to notify workers that their covenants not to compete are unenforceable. Additionally, employers may continue to enter into and enforce noncompetition agreements with workers as permitted by applicable state law. However, just last month, a federal district court in Pennsylvania declined to block the Rule based on findings that directly contradict the Texas federal court’s decision, and it is likely that the dispute over the enforceability of the Rule will continue in appellate courts. Given such conflicting rulings and the uncertainty regarding the ultimate determination of the Rule’s enforceability, employers should continue to consider alternative options for protecting non-public, competitively sensitive information.
For more information on this update, please see our client alert.
U.S. Department of the Treasury (Treasury) and Internal Revenue Service (IRS) Release Proposed Regulations for Low-Income Communities Bonus Program Under Section 48E
On August 30, 2024, the Treasury and the IRS in coordination with the U.S. Department of Energy issued a notice of proposed rulemaking (the Proposed Regulations) regarding the new clean electricity low-income communities bonus credit program (the Low-Income Bonus Credit Program), which increases the amount of the Clean Electricity Investment Tax Credit (the Tech-Neutral ITC) under Section 48E of the Internal Revenue Code of 1986, as amended (the Code), pursuant to changes authorized by the Inflation Reduction Act of 2022. Section 48E(h) of the Code provides for up to an additional 10 percent or 20 percent investment tax credit on eligible property to taxpayers who apply for and receive an allocation of “capacity limitation” (i.e., a fixed amount that the IRS may allocate to eligible property on an annual basis). The Proposed Regulations provide updated rules regarding the qualification of applicable facilities, including requirements for facility categories, nameplate capacity limitations, geographic location tests, placed in service requirements, and reservations for capacity limitation. The Low-Income Bonus Credit Program will become effective on January 1, 2025. The Treasury and the IRS have requested comments to the Proposed Regulations, which must be received by October 3, 2024.
For more information on the Proposed Regulations, please see our client alert.
U.S. Securities and Exchange Commission (SEC) Reportedly Drops Climate and ESG Enforcement Task Force
The SEC has deleted the webpage for its Enforcement Task Force Focused on Climate and ESG Issues (the Task Force). The Task Force was created in March of 2021 and had been involved in several high-profile SEC enforcement actions. The SEC has reportedly disbanded the Task Force, although the SEC has not issued any official statement.
Europe
Dutch Banks Cleared to Collaborate When Preparing Reports Under Corporate Sustainability Reporting Directive (CSRD)
On August 14, 2024, the Dutch competition agency (ACM) provided guidance to the Dutch Banking Association (NVB) allowing its members to collaborate in drawing up their sustainability reports under the CSRD. The guidance allows members of the NVB to work together in a pilot project to identify the data and calculation methods needed to prepare CSRD-compliant sustainability reports in the transportation, agricultural, and real estate sectors. The ACM stated that it did not see any adverse impacts on competition arising from the collaboration, such as price increases or quality reductions.
European Securities and Markets Authority (ESMA) Guidelines on Fund Names Involving ESG-Related Terms to Apply Beginning November 21, 2024
On August 21, 2024, the ESMA published translations in all official European Union (EU) languages of its final guidelines on funds using ESG or sustainability-related terms in their name (Guidelines). The Guidelines will take effect on November 21, 2024. New funds will have to comply with the Guidelines immediately, while pre-existing funds will have until May 21, 2025, to become compliant. The ESMA published the final Guidelines in May 2024. Compared to an earlier draft, the Guidelines no longer require that funds fulfill a 50 percent sustainable investment threshold if they use the terms “sustainable” or “sustainability” (and similar variations) in their names. Instead, such funds are only obligated to invest “meaningfully” into sustainable investments. Additionally, the ESMA softened the rules for funds using transition strategy-related names and removed certain fossil fuel-based exclusions.
United Kingdom (UK) Financial Conduct Authority (FCA) Offers Temporary Measures on Naming and Marketing Sustainability Rules
On September 9, 2024, the UK’s financial regulator, the FCA, announced it will give firms until April 2, 2025, to comply with the “naming and marketing” rules in the ESG sourcebook related to a sustainability product, which were promulgated under the Sustainability Disclosure Requirements regime and otherwise come into force on December 2, 2024.
ESMA Publishes Report on Trends, Risks, and Vulnerabilities
On August 29, 2024, the ESMA published a report on trends, risks and vulnerabilities, including a section on sustainable finance and the effect of the financial system on transition plans to a greener economy. The ESMA highlighted the need to increase sustainable investments, and risks that could delay sustainable investments such as political pressures in the U.S., and uncertainty associated with elections in the EU and in the U.S. |
