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spring 2023 course materials

Class Policies

Sample Exam

Framing the class
Caroline Bradley, Why Climate Finance
Neil Gunningham, A Quiet Revolution, Central Banks, Financial Regulators and Climate Finance, Sustainability (2020) (this article does a very good job of framing issues in the area of climate finance (especially focusing on regulation))

Fossil fuels and divestment
– Campaigns may induce legislators/regulators to change the rules
– Changing public opinion about an area might affect how judges think about particular legal issues
– The importance of governance that isn’t about legal rules but about norms of behavior: beyond any potential impact on legal rules divestment is about changing how investors and financial firms behave
– Levels of harm: coal, oil, liquid natural gas
Julie Ayling & Neil Gunningham, Non-state Governance and Climate Policy: the Fossil Fuel Divestment Movement, Climate Policy (2015)
Kate J. Neville, Shadows of Divestment: The Complications of Diverting Fossil Fuel Finance 20 Global Environmental Politics 3 (2020)
Mikko Rajavuori, Divestment of Fossil Fuel Assets (January 3, 2020) in Harro van Asselt & Michael Mehling (eds.), Research Handbook on Climate Finance and Investment Law (Edward Elgar 2021) Available at SSRN: https://ssrn.com/abstract=3724464
Auke Plantinga & Bert Scholtens The financial impact of fossil fuel divestment, 21 Climate Policy 107-119 (2021).
Global Fossil Fuel Divestment Commitments Database

Measuring carbon and net zero
See generally, United Nations Net-zero Coalition information
SBTi Net-Zero Standard (Oct. 2021)
Thomas Hale, Stephen M. Smith, Richard Black, Kate Cullen, Byron Fay, John Lang & Saba Mahmood (2022) Assessing the Rapidly-Emerging Landscape of Net Zero Targets, 22:1 Climate Policy 18-29 (2022). DOI: 10.1080/14693062.2021.2013155
IOSCO, Voluntary Carbon Markets Discussion Paper CR/06/22 (Nov. 2022).

Against ESG
Zoe Stern, Retirement Plan Fiduciaries Can Now Consider ESG Factors, The Regulatory Review (Jan. 26, 2023)
Department of Labor, Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, 87 Fed. Reg. 73822 (Dec. 1, 2022) [you can focus on pp 73822-73828]
Complaint in Utah v Department of Labor
The Heritage Foundation, Eliminate Economic Boycotts Act

Securities law and climate related financial disclosures in the US
John C Coffee, Jr., The Future of Disclosure: ESG, Common Ownership, and Systematic Risk, Colum. Bus. L. Rev (2021)
Hannah Vizcarra, The Reasonable Investor and Climate-Related Information: Changing Expectations for Financial Disclosures, 50 Environmental Law Reporter 10106 (2020)
Outline of SEC Climate Disclosure Proposal
[SEC Proposed Rule, The Enhancement and Standardization of Climate-Related Disclosures for Investors 87 Fed. Reg. 21334 (Apr. 11, 2022)] [comments]
Statements by Commissioners at the meeting on March 21 illustrate some of the differences of views about the proposal:
Gary Gensler, Statement on Proposed Mandatory Climate Risk Disclosures
Hester Pierce, We are Not the Securities and Environment Commission – At Least Not Yet
Alison Herren Lee, Shelter from the Storm: Helping Investors Navigate Climate Change Risk
Caroline A Crenshaw, Statement on the Enhancement and Standardization of Climate-Related Disclosures for Investors

EU, Corporate Sustainability Reporting Directive (Directive 2022/2464) OJ No. L 322/15 (Dec. 16, 2022).

Climate change and financial regulation: banking
Because banks are so central to financial activity they are subject to regulation to ensure their safety and soundness, often described as prudential regulation. In addition to requiring that those who manage banks are fit and proper we subject individual banks to capital adequacy regulation, designed to protect the deposit insurance system (to prevent bank runs we insure retail deposits in banks so bank depositors do not have to worry about bank failure). And we worry about the financial system as a whole: systemic risks in the financial system which might cause financial crises.
Federal Reserve Board, Principles for Climate-Related Financial Risk Management for Large Financial Institutions, 87 Fed. Reg. 75267 (Dec. 8, 2022)
Basel Committee on Banking Supervision, Frequently asked questions on climate-related financial risks (Dec. 8, 2022)
NYDFS, Proposed Guidance for New York State Regulated Banking and Mortgage Institutions Relating to Management of Material Financial Risks from Climate Change (DEc. 2022)
Daniel O. Beltran et al, What are Large Global Banks Doing About Climate Change?, Board of Governors of the Federal Reserve System, International Finance Discussion Papers No. 1368 (Jan. 2023)
Mary Brooke Billings, Stephen G. Ryan & Han Yan, Climate Risk, Population Migration, and Banks’ Lending and Deposit-Taking Activities (October 10, 2022).

Additional Materials:
Basel Committee on Banking Supervision, Principles for the effective management and supervision of climate-related financial risks (Jun. 2022)
Financial Stability Board, Supervisory and Regulatory Approaches to Climate-related Risks: Final report (Oct. 13, 2022)
Federal Reserve, Pilot Climate Scenario Analysis (CSA) Exercise: Participant Instructions (Jan. 2023)
European Banking Authority, The EBA Roadmap on Sustainable Finance EBA/REP/2022/30 (Dec. 2022)

Climate change and financial regulation: insurance
Insurance is more directly affected by climate change than other financial businesses because insurance companies underwrite risks (including risks relating to liability). But insurance companies are also affected by climate change as investors (noted when we discussed pension fiduciaries). At the same time, insurance raises some issues that are similar to those involved with banking: insurance products should not become unaffordable or unavailable (bluelining) because of climate risks.
Renee Cho, With Climate Impacts Growing, Insurance Companies Face Big Challenges (Nov. 3, 2022)
Alex Fredman, Regulators Should Identify and Mitigate Climate Risks in the Insurance Industry (Jun. 13, 2022)
NYDFS, Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change (Nov. 15, 2021)
Department of the Treasury, Federal Insurance Office Climate-Related Financial Risk Data Collection, 87 Fed. Reg. 64134 (Oct. 21, 2022)
California Department of Insurance Climate Change Working Group, Protecting Communities, Preserving Nature,and Building Resiliency (Jul. 2021)
UN Environment Program Finance Initiative, Principles for Sustainable Insurance

Climate change and financial regulation: asset management
United Nations Principles for Responsible Investment, An Introduction to Responsible Investment for Asset Owners
Eurosif Responsible Investment Strategies
Lewis Davison, Fiona McNally and Charlotte North, ESG: EU Regulatory Change and Its Implications (Feb. 18, 2023)
EU Regulation on sustainability‐related disclosures in the financial services sector (SFDR) OJ L 317/1 (Dec. 9, 2019)
European Securities Markets Authority (ESMA) Consultation Paper on Guidelines on funds’ names using ESG or sustainability-related terms (Nov. 2022) (focus on pages 4-12)
IOSCO, Recommendations on Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset Management Final Report (Nov. 2021) (this is a long document: you may want to focus on the executive summary and Chapter 6 which contains recommendations)
Joseph Baines & Sandy Hager, From passive owners to planet savers? Asset managers, carbon majors and the limits of sustainable finance, Competition & Change (2022)

Climate change and financial regulation: Greenwashing
ESAs Call for evidence on better understanding greenwashing (Nov. 2022)
ASIC launches first Court proceedings alleging greenwashing (Feb. 28, 2023)
ASIC Information Sheet 271 (INFO 271), How to avoid greenwashing when offering or promoting sustainability-related products (Jun. 2022)
Carbon Market Watch, Corporate Climate Responsibility Monitor 2023 (Feb. 2023) (pp 1-68)
ClientEarth, UK financial regulator faces legal challenge over fossil fuel company’s climate risk disclosures (Feb. 16, 2023)
Proposal for a Regulation on European Green Bonds, COM (2021) 391 final (Jul. 6, 2021)

Green/Sustainable financing
Proposal for a Regulation on European Green Bonds, COM (2021) 391 final (Jul. 6, 2021) (document 1)
The World Bank Green Bond Process Implementation Guidelines
International Bank for Reconstruction and Development Global Debt Issuance Facility for issues of Notes with maturities of one day or longer, Prospectus (2021) (pages 1-17)
ICMA, The Green Bond Principles (GBP) 2021 (with June 2022 Appendix 1)
Asian Development Bank, Detailed Guidance for Issuing Green Bonds in Developing Countries (Dec. 2021)
The Chancery Lane Project (Start using climate aligned clauses in your contracts: “a collaborative initiative of international legal and industry professionals whose vision is a world where every contract enables solutions to climate change”). Please look at the Natwest case study, and the Green or Sustainability-Linked Lending Requirement.

Sustainability, Accountability, Audit: ESG Ratings and Data Providers
Natwest, ESG ratings and benchmarks (Natwest identifies how it performs under a number of different ESG ratings sytems)
Heather Lovell & Donald Mackenzie, Accounting for Carbon: The Role of Accounting Professional Organisations in Governing Climate Change, 43:3 Antipode 704 (2011) (you can access this article through the UM library e-resources)
IOSCO, Report on International Work to Develop a Global Assurance Framework for Sustainability-related Corporate Reporting (March 2023)
HM Treasury (UK), Future regulatory regime for Environmental, Social, and Governance (ESG) ratings providers (Mar. 30, 2023)
ESMA, Call For Evidence on market characteristics for ESG Rating Providers in the EU (Feb. 2023)

Additional Reading (not required)
IOSCO, Environmental, Social and Governance (ESG) Ratings and Data Products Providers (Nov 2021)
OECD, ESG ratings and climate transition (Jun. 2022)
ESG Data and Ratings Working Group (DRWG) (an industry working group mandated by the FCA to develop a voluntary Code of Conduct for ESG data and rating providers)
Financial Services Agency (Japan), The Code of Conduct for ESG Evaluation and Data Providers (Dec. 2022)

Climate change litigation
Isabella Kaminski, An ocean of opportunities? Climate litigation is doing so well it’s now being eyed by investors (Feb. 1, 2023)
Standard & Poors, Climate Change Litigation: The Case For Better Disclosure And Targets (Oct. 6, 2021)
Javier Solana, Climate litigation in financial markets: a typology, 9(1) Transnational Environmental Law 103-135 (2020)
Joana Setzer, Harj Narulla, Catherine Higham & Emily Bradeen, Climate change law in Europe: what do new EU climate laws mean for the courts? (Mar. 2023)

Additional material:
Joana Setzer, Harj Narulla, Catherine Higham & Emily Bradeen, Climate Litigation in Europe (Dec. 2022)