Environmental Weekly News Round Up - 1 December 2023

Welcome to our latest weekly Environment Law News Update, where we bring you developments, insights, and analysis in the world of environmental law. Once again, I'd like to acknowledge and thank the following contributors for their valuable input: Jill Crawford, Stefano D'Ambrosio-Nunez, Elizabeth Mutter, Ben Holland, Anastasia Panich and Chloe Moran.

Navigating the Future of ESG: Understanding the Financial Conduct Authority’s New Requirements

Starting next year, firms authorised by the Financial Conduct Authority (FCA) will need to adapt to the newly established Sustainability Disclosure Requirements (SDR).  With an estimated $18.4 trillion in ESG oriented assets managed globally, these rules finalised through consultations with stakeholders including industry experts’ other regulators consumer groups and research is poised to bolster the UK’s status as a leader in asset management and sustainable investment.

FCA’s Measures for Sustainable Investing

The FCA’s comprehensive package including consumer-focused labelling is designed to protect consumers by offering greater clarity in investment decisions, helping them to make informed decisions when investing.  The four labels include: Sustainability Focus; Sustainability Improvers; Sustainability Impact and Sustainability Mixed Goals. Funds using these labels or making sustainability related claims must provide clients with easily accessible summaries.  

The move is hoped to address a critical issue in the sustainable investment market – the credibility crisis due to inconsistent and vague sustainability claims.

Key features of the FCA’s new measures include:

• Anti-Greenwashing Rule to ensure sustainability-related claims by authorised firms are fair clear and not misleading;
• Product Labels: Helping investors understand the use of their money with clear sustainability goals and criteria;
• Naming and Marketing Requirements: Preventing products from being falsely marketed as sustainable;

Sacha Sudan Director of ESG at the FCA emphasised the simplicity and clarity of this regime, vital for consumer protection as sustainable investment becomes increasingly popular.  “By enhancing trust in the sustainable investment market” Sadam noted “the UK can maintain its leading role in sustainable finance”.

Reacting to the developments James Alexander, Chief Executive of the UK Sustainable Investment and Finance Association (UKSIF) welcomed this as a pivotal moment for building trust in the UK’s sustainable investing market.  He praised the revisions made to the regime including the refinement of criteria for labels and marketing rules.  He also emphasised the importance of on-going industry involvement for the successful implementation of the changes and the monitoring of greenwashing risks.  He also advocated for continued engagement with international regulatory authorities to promote global harmonisation in sustainability disclosures and labelling

Consumer-Centric Approach and Extensive Research

At the core of these measures is the consumer.  The FCA tested its approach with 15,000 individuals in addition to insights from the Financial Lives survey which revealed a significant preference among UK adults for environmentally and socially responsible investments

Implementation Timeline and Industry Impact

• 31st May 2024: Anti-greenwashing rules come into effect.
• 31st July 2024: Implementation date for using investment labels.
• 2nd December 2024: Naming and marketing rules for asset managers become operational.

Conclusion

The FCA’s new SDR rules mark a significant step towards greater transparency and accountability in sustainable investing.  As the industry navigates these changes, the focus very much remains on fostering confidence among investors and aligning global practices in sustainability reporting.

Transforming Compliance Assessment Reports: Suez’s Landmark Victory in Environmental Regulation Case

In a significant legal ruling Justice Fordham found for Suez Recycling and Recovery UK in a dispute with the Environment Agency regarding the appeal procedures for Compliance Assessment Reports (CARs).  This decision emerged from a contentious case brought by Suez addressing the intricacies and unfairness faced by operators when challenging CAR’s. 

The case first came before the court as a judicial review in 2020 when Suez challenged the findings of two CAR forms (CAR1 and CAR 2) issued to it by the Environment Agency, both as to their lawfulness and also on their merits.  Permission for Judicial Review was refused at that stage by the court as the Environment Agency successfully argued that Suez should first exhaust its remedy by way of a complaint to the Environment Agency.  

A complaint was duly submitted by Suez and following an internal review in June 2021 by the Environment Agency that upheld the findings of the CAR 1 and CAR2 Suez then commenced a second judicial review.  In its second case three possible routes to challenging the findings of CAR’s were argued namely “appeal” “complaint” and “judicial review”.  At the heart of the arguments about appeal and complaint was the Regulators Code which is a statutory code of practice issued in 2014.

Suez argued that the Environment Agency had failed to comply with the Regulator’s Code particularly concerning the right to appeal against CAR’s.  This argument (referred to as Issue 1 in the Judgement) proved pivotal to the case as it questioned the Environment Agency’s interpretation and application of statutory guidelines, emphasising the need for a broader understanding of the interpretation of ‘regulatory decisions’ within the Code.

Suez also contended that it was entitled to a proper appeal process under common law as well as the Regulator’s Code.  It argued that it was necessary to ensure procedural fairness especially given the significant implications of CAR findings on their operations. 

Suez also questioned the lawfulness and rationality of the odour assessments conducted by the Environment Agency officers asserting that these assessments were not conducted in compliance with the relevant guidelines and may have been based on exaggerated perceptions which on that basis made the findings of the CARs incorrect.

Another aspect of Suez’s case centred on what they perceived to be an inadequate investigation by the Environment Agency particularly the failure to conduct investigations for odour inside the plant.  

Although Justice Fordham dismissed 5 out of the 6 issues that were before the court and ruled in favour of Suez only in relation to “Issue 1”, the significance of this ruling cannot be understated as it addressed a fundamental aspect of the regulatory process – the right to appeal against CARs under the Regulators Code.  In handing down judgement Justice Fordham stated “Suez has shown a material error of law in the Environment Agency’s consideration of the question of providing it a right of merits appeal.  In light of my conclusion the claim must succeed”.

The other issues before the court save for the right to appeal against the findings of a CAR in common law, were more concerned with the specifics of Suez’s individual circumstances and the particular CARs in question.  The ruling on “Issue 1” has far reaching implications that extend beyond the immediate context of Suez and its dispute with the Environment Agency as it offers a remedy that potentially benefits a wider array of operators.

Justice Fordham’s ruling emphasises the need for an effective post CAR appeals process pointing out the procedural unfairness in the current system when an adverse CAR is issued without any prior ‘minded to’ decision phase such as would enable an operator to make informed representations before the finalisation of the CAR.

The case highlights the intricate balance between stringent environmental regulation and the procedural rights of regulated entities.  As Suez were not successful in its attempts to have CAR 1 and CAR 2 revoked and they were remanded back to the Environment Agency for further review the case also suggests that while the courts are open to re-evaluating regulatory procedures, they are cautious in overturning the substantive decisions of expert regulatory bodies unless there are clear legal or procedural errors.

Mark Thompson Suez’s Chief Legal Officer highlighted the ruling as a catalyst for developing a transparent appeal process for CARs advocating for a system that ensures fairness and upholds high environmental protection standards.  Suez’s commitment to environmental stewardship was reiterated emphasising their collaborative approach with the Environment Agency and their exemplary compliance record.  

The Environment Agency have yet to comment on the ruling, but it is noted that the ruling makes reference to no application being made to the court by the Environment Agency for permission to appeal.

COP28

The UAE is hosting COP28, the annual climate summit at Expo City, Dubai from 30 November 2023 – 12 December 2023.

His Excellency Dr. Sultan Al Jaber was announced as the COP28 President-Designate in January 2023, which was seen as a somewhat confusing move by some considering his position as CEO of one of the worlds biggest oil companies, the Abu Dhabi National Oil Company’s (ADNOC). Greta Thunberg stated his ‘dual role’ as completely ridiculous, and while campaigners such as 350.org likened his appointment to “appointing the CEO of a cigarette company to oversee a conference on cancer cures”. 

H.E Dr. Sultan Al Jaber does have other impressive credentials including being co-founder of the UAE’s MASDAR renewables company in 2006, serving two tenures as the UAE Special Envoy for Climate Change and a number of cabinet minister roles since 2013. Perhaps this is why commentators such as Laurence Tubiana, a key architect of the Paris Agreement commented on His Excellencies appointment as “uniquely placed” to bring the fossil fuel industry along on the switch to a clean energy future. These comments came all while ADNOC aggressively continues with plans to expand its oil production capacity from 2.7 million barrels of oil per day in 2021, to 5 million per day by 2027.

In leaked briefing documents, it is clear that the UAE planned to use the platform of COP28 to use its host role as an opportunity to discuss and gain new oil and gas deals. The briefing documents, obtained by independent journalists at the Centre for Climate Reporting, working alongside the BBC were prepared for meetings with at least 27 foreign governments. 

These briefing documents included proposed “talking points”, such as ones with China stating that ADNOC is “willing to jointly evaluate international LNG [liquified natural gas] opportunities” in Mozambique, Canada and Australia. A further document, suggests talks with a Columbian minister and that ADNOC “stands ready” to support Columbia to develop its fossil fuel resources.

These leaked briefing documents also include suggestions that ADNOC aim to work with 13 other countries, including Germany and Egypt to assist their governments to develop fossil fuel projects.

Although these briefing documents show the UAE pushing their fossil fuel agenda, they so also show that the UAE is looking to discuss commercial opportunities for its state renewable energy, MASDAR. The countries that seem to be targeted for these commercial opportunities include the UK, the United States, France, Germany, the Netherlands, Brazil, China, Saudi Arabia, Egypt and Kenya.

Although this does show some of the UAE’s progression and push for renewable energy, MASDAR is owned by three shareholders; ADNOC, TAQA (another government controlled entity), and Mubadala Investment Company (similarly a state owned holding company).

The United Nations Framework Convention on Climate Change (UNFCCC) is the body responsible for the climate change negotiations at COP28. Considering the leaked briefing documents, the UNFCCC said that the "cardinal principle" for COP presidents and their teams is "the obligation of impartiality". When asked, the UAE team did not deny using COP28 meetings for business talks, and said “private meetings are private”.

The COP28 team insist that al Jaber "knows what the industry can do, and he can hold it to account like no other president in the history of COP". Going further, he has used his role to sign up 20 oil and gas companies to a new voluntary climate pledge, with more details to come later in the week.

The success of COP28 in the coming weeks will undoubtedly be judged by citizens around the world who will decide whether his actions are good enough acting as the host of COP28. Similarly, in light of these briefing documents, it will be interesting to see how negotiations pan out with other countries and the UAE’s relationships with these countries. There will be more scrutiny of all deals made, and all countries negotiations this COP more than ever.

A New Record for Making Amends: Yorkshire Water Donates £1m 

Yorkshire Water has made a new record for donating £1m to environmental and wildlife charities after illegally pumping sewage into a stream. The charities are Yorkshire Wildlife Trust and Yorkshire Dales Rivers Trust. 

This is the largest ever voluntary offer accepted by the EA. 

The offer came after Yorkshire Water breached its permit in 2016 when it polluted Hookstone Beck in Harrogate, killing nearly 1,500 fish. The firm said this was caused by a wooden plank within the sewer network. 

As well as the fish being killed, water quality was affected for 1.5 miles downstream because of the pollution according to the EA. Yorkshire Water was able to discharge into the beck when the storm sewage facility was full, due to rainfall or snow. The storm discharge was unauthorised on this day, which was blamed on the wood within the network.

‘We acted quickly to stop the pollution’ said a Yorkshire Water Spokesperson. ‘But when things go wrong, we understand we have a responsibility to make it right and prevent those things from happening at all.’ 

In addition to the £1m donation, Yorkshire Water has also completed a £1.85m sewer network upgrade in the area as part of its enforcement terms. 

Although the unauthorised discharge happened in 2016, it is only now that the agreement has been reached. On a positive note, Yorkshire Wildlife Trust intend o use the donation for new and improved homes for wildlife, mainly on wetland reserves, and Yorkshire Dales Rivers Trust intend to use the payment to develop a programme of improvements along the River Nidd. 

Water Minister Robbie Moore has said that stronger regulations and tougher enforcement would be introduced across the water sector. He said: ‘This record penalty paid by Yorkshire Water demonstrates that those who damage our natural environment will be held to account.’ 

“Our plan includes scrapping the cap on civil penalties by introducing unlimited fines and significantly broadening their scope to target a much wider range of offences- from breaches of storm overflow permits to the reckless disposal of hazardous waste.” 

OEP re-examines data concerning UK’s failure to meet 2020 marine water environmental targets. 

The UK set a target under the Marine Strategy Regulations (2010) to achieve or maintain Good Environmental Status (GES) in its seas by 2020. In England, GES is a key target and commitment in the Environmental Improvement Plan 2023. The 2010 Regulations called for the creation of a “Marine Strategy” which would reflect the UK’s vision for ‘clean, healthy, safe, productive and biologically diverse ocean and seas’. Coordination across all four UK Administrations and cooperation with other countries was also a key requirement.

Unfortunately, after the publication of a government report showing the UK was failing to meet 11 of its 15 marine environmental indicators, it appears that the UK will miss its 2020 target. 

The government’s Nature Recovery Green Paper proposes several chances to the UK Marine Strategy. One of which is to split the single elevated GES target into “individual descriptor level GES targets and to assign specific timelines for achieving GES for each component.” While the OEP supported other propositions in the paper, it advised against separating the 15 GES descriptors into individual targets. The OEP believes it would undermine a joint approach which recognises the interdependence between each descriptor. 

The OEP has therefore taken a step and is calling for “evidence linking drivers, pressures, and data gaps in UK marine waters to the lack of progress in achieving GES”. It is asking interested parties to submit evidence (relating to the type, scale, and pace of interventions required to achieve GES) to better understand, and possible improve, the government’s plans to accomplish GES. 

The UK has committed to ensuring that:

• by 2030 at least 30 per cent of coastal and marine areas, are effectively conserved and managed through protected areas and other effective area-based conservation measures. 
• by 2030 at least 30 per cent of areas of degraded terrestrial, inland water, and coastal and marine ecosystems are under effective restoration. 

This pledge is supported by the targets set out in the Environmental Act to ensure the protection of UK marine waters.