Tag: Corporate Governance and ESG

Carbon Border Adjustment Mechanism

Implementation of the EU’s Carbon Border Adjustment Mechanism and its Implications

Insights | January 9, 2025 | Practice Area: , , , , ,

The European Union’s Carbon Border Adjustment Mechanism (“CBAM”), applicable to imports from ‘third countries’ (i.e., non-EU countries), endeavors to impose a price on emissions in respect of the production and supply of carbon-intensive goods. By ensuring that a price is paid for such embedded emissions, the CBAM aims to make the carbon price of imports equivalent to that of domestic production, especially when third countries do not appropriately impose such price.
Although the CBAM has been mainly presented as a climate measure, it may also end up operating as a unilateral trade restriction designed to protect EU manufacturing. Several countries, including India, have labeled the CBAM as protectionist. While the global implications of the CBAM appear to be diverse, certain countries, including developing and newly industrialized nations, have claimed to be the worst hit, while developed countries are likely to have less carbon-intensive production processes.
The CBAM’s compliance requirements are expected to reduce the profits of Indian exporters in key sectors. Indian manufacturers from key trade-exposed industries (including those that are energy-intensive) are further poised to incur an increase in fuel costs, leading to a decrease in export earnings.
While India has discussed retaliatory measures, it is also pursuing the option of getting its Carbon Credit Trading Scheme, 2023 recognized by the EU and aligning it with the CBAM. Separately, the EU and India are engaged in talks on a proposed Free Trade Agreement, where India has raised concerns about the CBAM being similar to non-tariff barriers.
However, consistent with India’s own goals, the CBAM could also offer potential synergies, including in terms of green hydrogen partnerships and increased renewable energy deployment. Indian producers and exporters could view the CBAM as an opportunity to scale up sustainability-driven practices, including to enhance their positioning in a globally competitive market. Going forward, while carbon reporting and emissions monitoring will be essential, Indian companies should also consider investing in appropriate R&D, including with respect to emerging technologies.

openai

Lessons from OpenAI: Boards and the Spin of Corporate Governance

Insights | November 18, 2024 | Practice Area: , , ,

Widely regarded as the most innovative AI organization in the world, OpenAI’s management model presents a unique approach to corporate governance involving a majority-independent board of directors as final decision makers. In 2023, OpenAI’s CEO was fired and immediately reinstated, within a short period of a week. Such events highlight the reality of independent corporate governance models and suggest that truly independent structures may struggle in modern business environments. This note also briefly considers removal of directors from an Indian perspective.

Green Hydrogen in India

Landscape for Green Hydrogen in India

Insights | September 19, 2024 | Practice Area: , , , ,

Hydrogen is the most abundant element in the universe and has the potential to store tremendous amounts of energy. Under the right circumstances, it can be a viable alternative to fossil fuels and can significantly contribute to decarbonization. Accordingly, in India’s quest to decarbonize and achieve net zero emissions by 2070, it seeks to manufacture and deploy Green Hydrogen (“GH2”), and its derivates such as Green Ammonia. Policy initiatives including the National Green Hydrogen Mission (“NGHM”), and the Green Hydrogen Certification Scheme (“GHCI”) create a framework, while incentivizing investments in the sector by providing financial incentives and creating robust and transparent monitoring systems. Other key consideration for investors would be the ease of financing and longevity of business operations, dependent in part on the regulatory framework. The availability of low cost renewable energy and skilled workforce also show good promise to transform the country’s energy infrastructure and position it as an export hub for international trade. In this backdrop, investors are keenly looking at the landscape for GH2 in India to meet both financial and ESG goals.

esg considerations

Climate Change and ESG Considerations in India’s AI-Driven Future

Insights | August 14, 2024 | Practice Area: , , ,

As AI continues to transform industries in crucial ways, the training of large AI models remains highly energy- and resource-intensive, resulting in significant emissions and waste.
For countries and companies which have ambitious net-zero goals, balancing AI ambitions with existing decarbonization strategies is important. As India accelerates its journey towards becoming a global economic powerhouse, it may want to address the environmental implications of increased AI deployment, including by regulating AI with the aim of making increased adoption sustainable. Where companies are concerned, investing in ‘green AI’ will not only benefit the environment but may also enhance their ESG profiles. Going forward, the integration of climate considerations into AI policy is likely to become an important element of responsible AI development.

biodiversity and climate

Safeguarding Biodiversity or Mitigating the Impact of Climate Change: A Novel Dilemma

Insights | July 29, 2024 | Practice Area: , ,

In a landmark judgement delivered in March 2024, in MK Ranjitsingh & Others vs. Union of India & Others, the Supreme Court of India sought to balance two goals which it considered “equally crucial” – the conservation of a “critically endangered species”, the Great Indian Bustard, and the conservation of the environment.
The Supreme Court has proposed a way ahead to address the dilemma presented to it. Balanced and prompt follow up action will be critical to approach both biodiversity and climate goals in a meaningful way.

coerced voting

Can Controlling Shareholders Influence the Votes of Public Shareholders? An Analysis of ‘Coerced Voting’ in an Indian Context

Insights | July 5, 2024 | Practice Area: , ,

“Coerced voting” as understood in the US context, refers to situations where controlling shareholders compel other public shareholders to vote in a predetermined manner in relation to a specific matter. This may potentially involve instances of bribing, offering incentives, or entry into arrangements to make them vote in a certain way. Such voting mechanisms inherently involve a level of influence exerted by the controlling shareholder.
This note considers “coerced voting” in an Indian context and reflects on the jurisprudence of Delaware courts in this regard.

Indo-Pacific Economic Framework

The Indo-Pacific Economic Framework for Prosperity: Opportunities for Indian Companies

Insights | June 25, 2024 | Practice Area: , , , , ,

Along with 13 other countries (including the US, Japan, Singapore, South Korea and Australia), India has joined the Indo-Pacific Economic Framework for Prosperity (“IPEF”). Representing 40% of global GDP and almost 30% of international trade in goods and services, the IPEF is expected to promote economic activity, investment, and sustainable growth in the Indo-Pacific region. It also aims to address emerging economic challenges – such as those related to trade, supply chains, clean energy (including green infrastructure), taxation and anti-corruption.
While agreements in respect of a clean economy and a fair economy, respectively, were reached in June 2024 at the IPEF Ministerial meeting held in Singapore, the IPEF agreement on supply chains, signed in November 2023, came into force earlier this year (February 2024).
The IPEF presents a unique opportunity for Indian companies to enhance competitiveness and expand their markets. By actively engaging with the framework, businesses in India can position themselves as key players in the dynamic Indo-Pacific landscape. Further, the IPEF presents an opportunity for India to strengthen economic cooperation with the US – which relationship, in turn, is likely to prove valuable for both Indian and American companies.

Identification of Promoters

Regulatory Spotlight on Identification of Promoters

Insights | April 3, 2024 | Practice Area: , ,

Identification of “promoters” ahead of an initial public offering in India is a critical step given the resultant disclosure requirements, obligations and other implications. In the recent past, the Indian securities regulators have increased their scrutiny over the persons and entities being identified as promoters in offer documents.
This note provides an overview of certain recent developments in connection with the identification of promoters.

REITs and InvITs

REITs and InvITs: Evolution of the Regulatory Landscape in India

Insights | March 15, 2024 | Practice Area: , , , ,

Business trusts play a significant role in Asian and global capital markets. India introduced real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) in 2014. As the regulatory regime approaches the completion of a decade, this note reflects on the evolution of the regulatory landscape for REITs and InvITs in India.

Innovative Constructions

Innovative Constructions: Assessing the Investment Viability of New Construction Technologies

Insights | November 20, 2023 | Practice Area: , , , , ,

Every year, Indians require 10 million new homes. At the same time, global markets are increasingly focused on sustainability, climate change and ESG-related goals. The confluence of such factors has created various opportunities to employ climate-responsive construction techniques, including through the use of eco-friendly and sustainable material. Relatedly, the interplay of energy-efficient solutions, green-certified buildings, targeted investments and financing, key legislative changes, government incentives and a coordinated regulatory framework, as well as increased digitalization, may change this ecosystem in fundamental ways.