Key ESG Developments – July and August 2022

The Platform on Sustainable Finance calls for feedback on its Draft Report on Minimum Standards until the 22^nd of September

The EC’s Platform on Sustainable Finance published its Draft Report on Minimum Standards and is seeking feedback from interested stakeholders. The report identifies four core topics in relation to which compliance with minimum standards should be defined:

• Human rights, including workers’ rights
• Bribery/corruption
• Taxation
• Fair competition

The report gives guidance on the application of minimum standards in relation to the Taxonomy Regulation, with the objective of ensuring “alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organization on Fundamental Principles and Rights at Work and the International Bill of Human Rights.”

The report recommended to :

1. Consider inadequate or non-existent corporate due diligence processes on human rights, including labour rights, bribery, taxation, and fair competition as a sign of non-compliance with MS.
2. Consider final conviction of companies in court in respect of any of these topics as a sign of noncompliance with MS.
3. Consider a lack of collaboration with a National Contact Point (NCP)2 , and an assessment of noncompliance with OECD guidelines by an OECD NCP as a sign of non-compliance.
4. Consider non-response to allegations by the Business and Human Rights Resource Centre as a sign of non-compliance.

The Special Rapporteur on Human Rights and the Environment published a Policy Brief entitled “Essential elements of effective and equitable human rights and environmental due diligence legislation”

On the 4^th of July 2022, the Special Rapporteur on Human Rights and the Environment, David Boyd, published a policy brief with sets out key elements that should be included in mandatory human rights and environmental due diligence laws.

The briefs starts by pointing out how corporate activities can jeopardize the right to a clean, healthy and sustainable environment and emphasizes the interconnections between environmental harms and human rights. It also highlights that “environmentally destructive business activities are often outsourced from high-income to low- and middle-income states where protections for human rights and the environment are generally weaker.” In addition, it underlines the lack of effective remedy faced by rightsholders when extensive environmental degradation and adverse human rights impacts do occur.

In particular, it affirms that: “the most vulnerable rightsholders affected by business activities—such as children, women, Indigenous Peoples, Afro-descendant Peoples, local communities, peasants, persons with disabilities and especially those whose identities extend across multiple vulnerable groups—commonly face the most formidable obstacles to effective remedies, including those related to money, language, access to information, social stigma associated with certain human rights abuses, lack of access to legal representation and corruption of law enforcement officials.”

The brief then goes on to highlight the inadequacy of voluntary measures and to analyse existing mandatory human rights and environmental due diligence laws which exist across jurisdiction and underlines their limitations in mandating respect for the human right to a clean, healthy, and sustainable environment, which continues to be violated.

The policy brief then presents 10 key elements that should be included in all national, regional and global-level HREDD laws:

1. Mandate comprehensive human rights and environmental due diligence that includes the human right to a clean, healthy and sustainable environment and applies to all business appraisal, implementation and exit processes;
2. Establish comprehensive duties of care, inclusive of environmental, climate and biodiversity assessments, plans and targets;
3. Address all business actors;
4. Require dynamic, responsive and continually improved due diligence practices;
5. Be rightsholder-centered;
6. Ensure effective remedies for rightsholders;
7. Protect rightsholders from threats, intimidation and reprisals;
8. Address monitoring and enforcement;
9. Foster harmonization;
10. Facilitate international cooperation

Indonesia re-establishes flow of workers to Malaysia after agreement by both countries on safer recruitment channels

In the beginning of July Indonesia announced a temporarily interruption on sending its citizens to Malaysia after the continued use by Malaysian authorities of a online recruitment system linked to human trafficking and forced labour of domestic workers. The risky behavior constituted a breach in labour rights included in a work recruitment deal signed between the two countries.

The flow of workers resumed on the 28^th of July  after both countries agreed to trial a single channel to facilitate the recruitment and entry of Indonesian workers.

Scrutiny over the treatment of migrant workers in Malaysia has been intensifying, with seven Malaysian companies having been banned in the US over accusations of use of forced labour.

New Model of Bilateral Investment Treaty for African States proposed by the African Arbitration Academy

The African Arbitration Academy has published a report containing an alternative Bilateral Investment Treaty for African States (AAA Model BIT), with the aim of promoting two objectives: attracting Foreign Direct Investment (FDI) to African states and promoting sustainable development. The proposed renewed model aims to bring cohesion between different Policies from African states aiming to reform the much-criticized Investor-State Dispute Settlement (ISDS).

The new Model Treaty reaffirms state’s rights to regulate and approve different policies which relate to investments in order to protect national policy objectives, and induces local culture into different articles.

UK High Court declares the government’s Net Zero Strategy to be in breach of the Climate Change Act

In a lawsuit brought by Friends of the Earth Limited, Client Earth, Good Law Project and environmental campaigner Joanna Wheatley v. Secretary of State for Business Energy and Industrial Strategy, the UK High Court ruled that the government’s Net Zero Strategy (setting out plans to decarbonize the economy) was unlawful and failed to meet previously legally established national goals. The court found that the Net Zero Strategy “doesn’t meet the government’s obligations under the Climate Change Act to produce detailed climate policies that show how the UK’s legally-binding carbon budgets will be met. It also finds that parliament and the public were effectively kept in the dark about a shortfall in meeting a key target to cut emissions.”. Further, the judges ordered the executive to publish and updated strategy by the end of March 2023.

Authors: Ana Carina Duarte, Rafaela Oliveira and Mariana Ferreira