ESG Global Vision

Financial Reporting

The amendments to the ICA  expanding on the Names Rule came into force on 11 December 2023.

Investment fund groups with net assets of USD 1bn or more will have until 11 December 2025 to comply with the amendments, while those with net assets of USD1bn or less will have until 11 June 2026.

SEC registered funds

The Securities and Exchange Commission (“SEC”) has brought in amendments to the longstanding “Names Rule” (the “Rule”), in force under the ICA.

The amendments to the Rule require SEC registered funds with investment names or labels that suggest focuses on specific types of investments, industries, or groups of industries to invest at least 80% of the value of the relevant assets in investments reflecting those names or labels.  

The amendments are designed to give institutional and individual investors clarity as to the nature of the funds they’re investing in, including implementing strict requirements as to which funds and products can be labelled as ‘ESG compliant’ or with similar tags.  

Funds will be barred from using “materially deceptive or misleading names”, with the SEC stating that the terms used to describe the fund(s) and which suggest an investment focus “must be consistent with those terms’ plain English meaning or established industry use”. 

The 2023 expansion is estimated to increase the percentage of registered funds subject to the Names Rule from 60 to 76%, with funds affected not just those using ESG tags, but nomers including but not limited to: the fund’s returns, industry, geographic location, type of security, and others all targeted. 

The Rule now requires more detailed disclosure in funds’ prospectuses to define the terms used in a fund’s name, as well as the criteria used for selecting the investments making up the fund. Funds will also be required to keep detailed records of the investments making up individual products, as well as the methodology used to determine which investments met the criteria for inclusion.

The amendments include a 90 day ‘grace period’ to allow funds to either relabel the fund, or change the makeup of the underlying investments, should the investments in the fund which adhere to the fund’s label drop below the 80% threshold.

For more details see these pages on the SEC's website (here and here).

Financial reporting.

Adopted on 6 March 2024, but stayed on 4 April 2024 pending judicial review, after a number of legal challenges. 

All SEC registrants, including those conducting IPOs, as well as all Foreign Private Issuers (FPIs) with a few limited exceptions. The CRDR will be gradually phased in over the next three years, with applicability depending on the size, categorisation, and business purpose of the in-scope companies.  

It is unclear if the stay and related legal challenges will impact the compliance timeline(s) stipulated in the rule. 

The CRDR is an evolution of the rules originally proposed by the SEC in 2022, reflecting feedback from relevant stakeholders on the proposals, and is significantly less burdensome than the previously proposed regulation.  It mandates that in-scope companies make climate related disclosures, particularly with regards to their Scope 1 and 2 emissions, as well as their climate goals, risks posed to their business by climate change, and any carbon offsets and carbon accounting.  In a significant departure from the previous proposals, companies are not required to disclose their Scope 3 emissions (emissions up and down a company’s value chain).

In-scope companies are required to publish their carbon accounting methodologies, as well as their wider methodologies for putting together the relevant disclosure.  

The CRDR is a complex and multi-layered piece of regulation; for more information, please see this detailed article.

Corporate governance policy

In force

1. Publicly traded companies (“issuers”) and their officers, directors, employees, agents, and stockholders acting on behalf of the company.
2. Domestic concerns, comprising:
   1. any individual who is a citizen, national or resident of the United States; and
   2. any corporation, partnership, association, joint-stock company, business trust, unincorporated organisation, or sole proprietorship which has its principal place of business in the United States, or which is organised under the laws of a State of the United States or a territory, possession, or commonwealth of the United States.
3. Any legal person (including individuals and entities, acting within the territory of the United States, including foreign nationals and businesses.

The FCPA is aimed at preventing in scope individuals, as detailed above, from influencing or otherwise coercing foreign government officials, political figures, or political parties, through making “corrupt payments” or bribes to further their business or other interests.

The Act makes it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business.  Compliance is monitored partly through increasingly stringent accounting provisions, which requires public companies to (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) devise and maintain an adequate system of accounting controls.

The FCPA also contains anti-bribery provisions (designed to operate alongside the accounting provisions detailed above) which prohibit in scope entities and individuals to “make a payment to a foreign official for the purpose of retaining business for or with, or directing business to, any person”.  There are five elements which must be met to constitute a violation of these provisions:

1. Who (in scope entities referred to above);
2. Corrupt intent – the person making or authorising the payment must have a corrupt intent in doing so;
3. Payment – there must be a transfer of money or value;
4. Recipient – the provisions only apply to corrupt payments made to foreign government officials, political figures, or political parties; and
5. Business purpose – the payment must be designed to obtain or retain busines.

Enforcement

Enforcement of the FCPA is the joint responsibility of the Securities and Exchanges Commission (“SEC”), and US Department of Justice (“DOJ”). Enforcement action is generally taken against individuals acting for in scope entities, rather than the entities themselves, however, there are still significant fines issued every year to entities in breach of the terms of the Act.

Penalties for non-compliance

A violation of the FCPA can result in:

1. A fine of up to USD 2m for each offence for companies; or
2. A fine of up to USD 250,000 and imprisonment of up to five years for individuals, including directors, stockholders, employees, and agents of the company.

For more detail, please see here.

Note – the FCPA has recently been frozen by the current US administration (20.02.25).  This page will be updated as and when there is a change to the position. Please see this article for further detail.

Corporate governance policy, financial reporting

In force

All publicly traded companies doing business in the USA (and their wholly owned subsidiaries), securities firms, accounting firms conducting audits on publicly traded companies, and certain individuals and private companies (for more detail, please see here).

The SOX was created to reform and enhance regulation surrounding corporate responsibility and financial disclosures and to combat corporate and accounting fraud, after a number of high profile accounting and auditing failures in major US public companies (the most famous of which was the Enron scandal).  As part of its implementation,  the Public Company Accounting Oversight Board (the “PCAOB”), was created and tasked with setting, implementing, assessing, and updating rules and guidelines for:

1. registration of accounting and audit firms responsible for auditing US public companies;
2. inspecting US public companies with regards to their accounting and audit practices;
3. creating and maintaining auditing and ethical standards for registered audit and accountancy firms; and
4. investigating, enforcing, and sanctioning/penalising breaches or violations of the standards.

The SOX is composed of twelve key elements, each of which address regulating their subjects and enforcing against breaches thereof, the detail of which is beyond the scope of this note to address, but comprise the following:

1. the PCAOB, as referenced above;
2. auditor independence;
3. corporate responsibility;
4. enhanced financial disclosure;
5. analyst conflicts of interest;
6. commission resources and authority;
7. studies and reports;
8. corporate and criminal fraud accountability;
9. white collar crime penalty enhancement;
10. corporate tax returns;
11. corporate fraud accountability; and
12. obstructing an official proceeding.

The SOX is a complicated (and controversial) piece of legislation, with proponents and opponents on both sides of the political divide.  It has been updated a number of times, as well as challenged in the federal courts, but remains in force, largely as it has been since 2002, when it was enacted.

Enforcement and penalties

Penalties for violation of the SOX vary widely, particularly depending on which of the regulations laid out in the twelve elements listed above, but range from fines and warnings for accounting failures, to criminal convictions and imprisonment for directors and agents for premeditated fraud offences.

For more information, please see this helpful site here.

Corporate governance policy, financial reporting

In force

Companies trading in securities exchanges and related individuals

• Establishes requirements for companies listed on stock exchanges. Requirements include registration of securities, disclosure, proxy solicitations, and margin and audit requirements. It also includes provisions on insider trading.
• Authorised formation of the Securities and Exchange Commission.

Corporate governance policy, social policy

In force

Private sector employees and state and local government workers only if they work in a state that has an OSHA-approved state plan.

OSHA protects worker safety and health standards. It creates a duty of employers to provide workplaces that are free from known dangers to employees. Among other things, an employer must inform workers about hazards (i.e. through trainings, color-coded systems, chemical information sheets, etc), keep records of work-related injuries and illnesses, perform air sampling tests, and not retaliate against workers that report work-related injuries.

It also created the Occupational Safety and Health Administration, which sets and enforces standards set forth in OSHA, and provides training and assistance to employers and employees.

Corporate governance policy, social policy

In force

Coal or other mines that enter products into commerce or operations of which affect commerce; operators of such mines; every miner of such mine.

Protects the health and safety of miners in the coal, metal, and non-metal industries by establishing mandatory safety and health standards, requiring routine inspections of mines, enhancing miner protection from employer retaliation and establishing mandatory training requirements.

The Mine Act granted enforcement responsibilities to the Department of Labor and created the Mine Safety and Health Administration.

Corporate governance policy, social policy

In force

Private sector employees

A foundational statute in US labour law that protects the rights of employees and employers in the workplace. With respect to employees, the statute protects their right to organize into trade unions and take collective action, engage in collective bargaining, and seek better working conditions without fear of retaliation. 

The NLRA created the National Labor Relations Board which oversees and adjudicates the rights of employees and employers arising under the NLRA.

Corporate governance policy, social policy

In force

Employers whose annual sales total $500,000 or more or who are engaged in interstate commerce

The FLSA establishes minimum wage, overtime pay, recordkeeping and youth employment standards affecting employees in the private sector and in federal, state and local governments. Workers covered by the FLSA are entitled to a minimum wage of $7.25 an hour, and overtime pay at a rate of one and one-half times the regular rate.

Most states and some cities in the US also have their own analogous laws.  These state and local laws often provide greater protections for employees than the FLSA does. For example, state and local minimum wage rates may be higher than the federal minimum wage rate, such as in New York City where the minimum wage is $15 per hour.

Law: 29 USC Ch. 8: FAIR LABOR STANDARDS (house.gov)

Regulations: eCFR :: 29 CFR Chapter V -- Wage and Hour Division, Department of Labor

Corporate governance policy, social policy

In force

Employers covered by the FLSA.

EPA amends the FLSA and prohibits wage discrimination based on sex. States and localities have civil rights laws, human rights laws or labour laws which prohibit wage discrimination based on sex.

Corporate governance policy, social policy

In force

Employers with 15 or more employees and their agents

Title VII prohibits employment discrimination against individuals based on their race, colour, national origin, religion and sex (including gender, pregnancy, sexual orientation and gender identity). State and local jurisdictions have enacted similar laws affording the same or more protections. Most states and localities have their own civil rights or human rights laws that protect the same or more characteristics. For example, New York State and New York City each have a distinct Human Rights Law which provide greater protection against discrimination, harassment and retaliation than Title VII does.

Corporate governance policy, social policy

In force

Employers with 15 or more employees

The ADA prohibits employment discrimination against qualified individuals with a disability and/or individuals perceived as having a disability. In addition, the ADA requires employers to reasonably accommodate such individuals so that they may meet the basic job requirements of their role, unless the employer can show that providing a reasonable accommodation would cause an undue hardship.

Many states and localities have analogous or more enhanced protections for individuals with disabilities in their civil rights or human rights laws.

Law: Americans with Disabilities Act of 1990, As Amended | ADA.gov

Title II Regulations: Americans with Disabilities Act Title II Regulations | ADA.gov

Title III Regulations: Americans with Disabilities Act Title III Regulations | ADA.gov

Corporate governance policy, social policy

In force

Private, federal, state, and local employers with at least 20 employees

The ADEA prohibits discrimination against employees and applicants aged 40 and older and imposes specific requirements on employers entering into separation agreements with older workers. Many states and localities have analogous or more enhanced protections against age discrimination in their civil rights or human rights laws.

Corporate governance policy, social policy

In force

Employers with at least 50 employees

The FMLA requires employers to provide employees with up to 12 weeks unpaid job-protected leave during a 12 month period for a qualifying reason, such as the birth and care of a newborn, placement of an adopted or foster child with the employee, care of an immediate family member with a serious health condition, and the employee’s own serious health condition.

Many states and localities have enacted their own family leave laws offering similar or better benefits.  For example, in New York, employees may be eligible for paid parental leave pursuant to the New York State Paid Family Leave Law.

Law: 29 USC Ch. 28: FAMILY AND MEDICAL LEAVE (house.gov)

Regulations: eCFR :: 29 CFR Part 825 -- The Family and Medical Leave Act of 1993

Corporate governance policy

In focus

Employers with 100 or more full-time employees

WARN requires employers to provide 60 days’ advance notice in the event of a plant closing or a mass layoff. Many state and localities have enacted their own mini-WARN laws that require greater advance notice, among other things.

Law: 29 USC Ch. 23: WORKER ADJUSTMENT AND RETRAINING NOTIFICATION (house.gov)

Regulations: eCFR :: 20 CFR Part 639 -- Worker Adjustment and Retraining Notification

Environmental policy, non-financial reporting

In force

Any individual or company discharging pollutants into the waters of the USA.

The CWA is the primary federal law governing water pollution, and establishes a structure to regulate and prevent the discharge of pollutants into the waters of the United States (“WOTUS”). The definition of WOTUS was recently addressed by the US Supreme Court (see here), which defined WOTUS as all waters with "a continuous surface connection" to "navigable waters".

The stated aim of the CWA is to “restore and maintain the chemical, physical, and biological integrity of the nation's waters”, including working with states to address their responsibilities, as well as providing funding and guidance to address issues such as the treatment of wastewater, the discharge of pollutants into water bodies, and the maintenance of protected bodies of water, such as wetlands.

The CWA provides for the implementation of pollution control programs by the Environmental Protection Agency (“EPA”), and its administration is carried out by the EPA.  This includes the National Pollutant Discharge Elimination System (“NPDES”) permit program that allows for certain discharges of pollutants into navigable waters. Under the CWA, the EPA also conducts compliance management of municipal wastewater and stormwater as well as discharges from Concentrated Animal Feeding Operations (“CAFO”).

Under s. 309 of the CWA, the EPA is empowered to seek civil or criminal penalties against individuals/entities/authorities in violation of the provisions of the CPA, alongside the ability to impose fines for breaches of up to USD 1m.

Environmental policy, non-financial reporting

In force

States, polluting entities, and individuals caught by the scope of the Act.

The Clean Air Act (“CAA”) is the primary federal air quality law in the USA, and is designed to preserve and enhance the nation’s air quality, and to prevent the emission and creation of harmful air pollutants that may be damaging to human health and/or the environment more generally. 

The CAA is an umbrella law, that requires that the Environmental Protection Agency (“EPA”) (and a number of agencies with more minor roles) to implement a number of regulatory programmes, aimed at meeting the key goals of the CAA.  The major programmes are listed below (this list is subject to update, and for brevity’s sake does not include a number of important programmes, such as ozone protection, fuel controls, and interstate pollution control):

1. National Ambient Air Quality Standards (“NAAQS”). The NAAQS set out maximum permissible levels of various pollutants in the atmosphere, principally comprising those hazardous to humans, such as carbon monoxide, lead, particulate matter, and sulphur dioxide.  These standards are frequently updated and revised, either as requirements change or as technological or scientific understanding moves.  They are implemented at the state level, with the states and the EPA working to identify “attainment” and “non-attainment” areas, and to address the causes of “non-attainment” areas failing to meet the required standards. 
2. National Emissions Standards for Hazardous Air Pollutants (“NESHAPs”). The NESHAPs are a set of standards operating on the same basis as the NAAQS, but covering a wider set of rarer pollutants (for example, phosphine, hydrochloric acid, asbestos) that pose a direct risk to human health, and aiming to more precisely target the “Major” and “Area” level sources contributing to the presence of these pollutants in the atmosphere. 
3. Greenhouse gas regulation. The emission of greenhouse gasses is largely covered by the other regulations, as well as international climate targets, however the EPA now has express authority to address greenhouse gas emissions under the Inflation Reduction Act of 2022 (“IRA”), which specifically designated the major greenhouse gasses as within the remit of the EPA, as well as allocating it significant funds to assist its work in doing so.
   1. Under the terms of the IRA, the CAA was amended such that the EPA was empowered to allocate up to USD 27bn to “green banks”, which are financial institutions designed to invest in and expedite the use and deployment of clean energy initiatives and technologies.
        
      The idea behind this amendment was to spur the development of clean energy technologies, whilst also producing a return for the US Treasury through investment into fast growing and technologically innovative energy production methods.
         
4. Mobile Source Programmes (“MSPs”). The EPA regulates emissions from vehicles using internal combustion engines, as mandated by Congress.  The EPA is required by law to create and update regulations addressing emissions and air pollutants caused by motor vehicles, particularly those which may be detrimental to public health. 
5. New Source Performance Standards (“NSPSs”). NSPSs are a set of standards which require industrial facilities to be constructed in such a manner as to incorporate the “best system of emission reduction which (taking into account the cost of achieving such reduction) the [EPA] determines has been adequately demonstrated.".  The list of industrial facilities and technologies covered is extensive, but it is important to note that NSPSs only apply to new facilities, which gives the owners of such facilities an incentive to continue using older facilities, which are not bound by the relevant NSPS.

Enforcement

Under the provisions of the CAA, the EPA is able to issue fines, penalties, and to compel compliance with the relevant regulatory programme(s), and has significant latitude to take major and repeat offenders to court over breaches.  There have been a number of high profile victories for the EPA in the courts recently, including against major automotive corporates for their failures in relation to the diesel emissions reporting scandal.

Implementation

The CAA requires individual states to develop State Implementation Plans (“SIPs”), to implement the requirements of the Act.  The EPA sets minimum standards for air pollution, air quality, and various other metrics that states have to adhere to in their SIPs, but the states are able to decide on and set the methods by which these standards are met.  Should a state fail to implement a SIP properly, or implement a SIP that does not result in the state meeting the required minimum standards, the EPA is empowered to implement a Federal State Implementation Plan in that particular state.  It is worth noting that the state of California is afforded a carve-out from the regulation, so that it can implement stricter minimum standards to address its chronic smog and dust problem.

Legal challenges

The CAA and its underlying regulations have consistently been challenged in the courts, most recently in West Virginia v EPA. 597 U.S. (2022), where the Supreme Court ruled that a major Obama era regulation, the Clean Power Plan, was invalid due to a lack of ‘narrow congressional approval’.  We would expect further challenges in the coming years.

Environmental policy, non-financial reporting

In force

Facilities generating hazardous or non-hazardous wastes.

Creates a framework for the management of hazardous (Subtitle C) and non-hazardous (Subtitle D) solid waste. It grants the Environmental Protection Agency authority to control hazardous waste in its generation, treatment, storage, and disposal.

Environmental policy

In force

Privately and Federally-owned facilities, and other private parties.

Grants the President authority to clean up hazardous waste sites through its removal or remedial provisions. It also identifies potentially liable parties for the clean-up. Liable parties include current and former owners of facilities where hazardous substances were disposed as well as those responsible for transporting and arranging for the hazardous substance.

Environmental policy

In force

Federal agency actions.

Requires environmental review of major federal actions that significantly affecting the quality of the human environment. NEPA does not mandate a specific result or substantive outcome, but instead requires that environmental impacts be considered through the creation of an Environmental Impact Statement or an Environmental Assessment. Recently, the Council on Environmental Quality issued an update to the regulations implementing NEPA.

Environmental policy

In force

Federal agency actions

Ensures that actions authorised, funded, or carried out by federal agencies are not likely to jeopardise listed species or result in destruction or adverse modification of designated critical habitats. It also prohibits actions that constitute a "taking" of listed species, unless a proper permit is procured.

The ESA is implemented by the U.S. Fish and Wildlife Services and the U.S National Oceanic and Atmospheric Administration Fisheries Service.

Environmental law

In force

Businesses in California and Washington.

Plastic manufacturers in the two states will have to have their products contain certain minimum percentages of recycled plastic, increasing on 5 yearly timescales.

In California, this will be limited to plastic bottles, but in Washington, the law encompasses a wider range of plastic products.

Corporate governance policy

In force

Companies and individuals.

Antitrust law that promotes economic fairness and competitiveness to regulate interstate commerce. It outlaws contracts that unreasonably restrict trade and monopolies or conspiracy to monopolise.

Contains both civil and criminal penalties. Criminal penalties can be as high as $100 million for corporations and $1 million for individuals, but are typically limited to intentional and clear violations.

Corporate governance policy, social policy, financial reporting

In force

Public companies and individuals.

Series of federal regulations that provide revisions to a wide range of regulations including those related to consumer protection, trading restrictions, credit ratings, regulation of financial products, corporate governance and disclosure, and transparency. 

ESG policy

Voluntary standards

PE funds.

The American Investment Council membership has adopted a set of comprehensive responsible investment guidelines that its members apply prior to investing in companies and during their period of ownership. The guidelines cover environmental, health, safety, labour, governance and social issues.

Corporate governance policy, social policy

In force

Employers whose annual sales total $500,000 or more or who are engaged in interstate commerce

The FLSA establishes minimum wage, overtime pay, recordkeeping and youth employment standards affecting employees in the private sector and in federal, state and local governments. Workers covered by the FLSA are entitled to a minimum wage of $7.25 an hour, and overtime pay at a rate of one and one-half times the regular rate.

Most states and some cities in the US also have their own analogous laws.  These state and local laws often provide greater protections for employees than the FLSA does. For example, state and local minimum wage rates may be higher than the federal minimum wage rate, such as in New York City where the minimum wage is $15 per hour.

Law: 29 USC Ch. 8: FAIR LABOR STANDARDS (house.gov)

Regulations: eCFR :: 29 CFR Chapter V -- Wage and Hour Division, Department of Labor

Corporate governance policy, social policy

In force

Product importers, including non-resident importers, located in the United States.

Bans the importation and allows the detention or seizure of products produced using forced, convict, or indentured labour.

Recent developments: In 2019, the U.S. Customs and Border Protection blocked the importation of products suspected.

Corporate governance policy, social policy

In force

Entities engaged in the manufacture, processing, packing, transporting, distribution, reception, holding, or importation of food.

Authorises the U.S. Food and Drug Administration (FDA) to prevent food safety problems and, in doing so, to hold imported foods to the same standards as domestic foods.

Corporate governance policy, social policy

In force

Product importers, specifically of products manufactured in China.

Specified retailers must make specific disclosures on their website about efforts taken to eradicate slavery and human trafficking form direct supply chains for tangible goods offered for sale.

Corporate Governance Policy

Coming soon

Companies trading in securities exchanges.

Would establish requirements for publicly held companies to report greenhouse gas emissions by suppliers and partners in their annual 10K reports or elsewhere. The new rules may require specific metrics for certain industries.

Disclosures may include both qualitative and quantitative information requests, such as information on the company’s progress towards climate-related goals, effects of climate-related legislation and how the company’s leadership manages climate-related risks and opportunities.

Environmental policy

Voluntary standards

All companies

The Taskforce consists of 40 members who represent financial institutions, corporates and market service providers with over US$20trn in assets.

The Taskforce’s aim is to develop an international risk management and disclosure framework to enable organisations to report on, and subsequently act on, nature-related risks. By facilitating the transfer of information regarding nature-related risks, the framework will strive to encourage companies to incorporate these environmental considerations into their strategies and operations.

The Taskforce published the third version of its beta framework in November 2022. The final version will be published in September 2023.