I move amendment No. 1:
In page 3, to delete lines 13 to 29 and substitute the following:
“(a) by inserting the following new section after section 49:
“Investment in Fossil Fuel Businesses
49A. (1) In this section--
‘fellow subsidiary undertakings’, ‘higher holding undertaking’, ‘holding undertaking’ and ‘undertaking’ have the same meanings as they have, respectively, in section 275 of the Companies Act 2014;
‘fossil fuel’ means coal, oil, natural gas, peat or any derivative thereof intended for use in the production of energy by combustion;
‘fossil fuel business’ means an undertaking which is--
(a) engaged, for the time being, in the exploration for or extraction or refinement of a fossil fuel where that activity is not an incidental or marginal part of the business of that undertaking, or
(b) a holding undertaking or, as the case may be, a higher holding undertaking of an undertaking or undertakings of the kind referred to in paragraph (a) where the turnover of that undertaking or those undertakings comprises at least 15 percent of relevant turnover;
‘group of undertakings’ means an undertaking or undertakings of the kind referred to in part (a) of the definition of fossil fuel business together with its fellow subsidiary undertakings;
‘investment’ includes both debt-based and equity-based investment and cognate words shall be construed accordingly;
‘relevant turnover’ means the turnover of a group of undertakings in the most recently completed financial year of the holding undertaking or, as the case may be, of the higher holding undertaking thereof;
‘turnover’ in relation to an undertaking or a group of undertakings means the amounts of revenue derived from the provision of goods and services falling within the undertaking’s or group of undertaking’s ordinary activities, after deduction of--
(a) trade discounts,
(b) value-added tax, and
(c) any other taxes based on the amounts so derived.
(2) The definition of a fossil fuel business in subsection (1) may, by a regulation adopted by the Minister pursuant to this subsection, be expanded to include any type of activity engaged in by an undertaking that relates in any way to the use of a fossil fuel.
(3) (a) The Agency shall endeavour to avoid the direct investment of the assets of the Fund in a fossil fuel business.
(b) Where the assets of the Fund are directly invested in a business which is or becomes a fossil fuel business, the Agency shall divest itself of its investment in that business at the first point in time at which it becomes possible to do so without causing the Fund to incur a contractual penalty for doing so.
(4) The Agency shall avoid making any investment of the assets of the Fund in a collective investment undertaking or investment product at any time after the commencement of this section unless, having exercised due diligence, it is satisfied that there is not a significant probability that the assets of the Fund will be invested in a fossil fuel business.
(5) Notwithstanding subsections (3) and (4), the Agency may invest the assets of the Fund in a fossil fuel business or in a collective investment undertaking or investment product which thereafter invests its assets in a fossil fuel business, where--
(a) the making of such an investment by the Agency contributes to the achievement by the State of the national transition objective as defined in section 3 of the Climate Action and Low Carbon Development Act 2015 (hereafter the ‘national transition objective’), the implementation of any existing or future obligations of the State referred to in paragraphs (a) and (b) of section 2 of that Act (hereafter the ‘State’s climate change obligations’) and the implementation of the policy of the Government on climate change,
(b) prior to the making of an investment pursuant to this section, the Agency conducts or procures the conducting of an assessment of the extent to which the making of such an investment would contribute to the achievement by the State of the national transition objective, the implementation of the State’s climate change obligations and the policy of the Government on climate change or, where such an assessment has been conducted by the Department of Communications, Climate Action and the environment, has regard to that assessment, and
(c) no later than two months prior to the making of an investment pursuant to this subsection, the Agency publishes on the internet the assessment referred to in paragraph (b).
(6) When publishing, in accordance with paragraph (c) of subsection (5), an assessment referred to in paragraph (b) of that subsection, the Agency may redact such part thereof as is necessary, and for such time as is necessary, to ensure the protection of commercially sensitive information or to ensure compliance by the Agency with any other provision of law for the time being in force.”.”.
This is a substantial amendment, so I will take a few minutes to go through its rationale. Amendment No. 1 includes the proposal to replace the term "company" with "business" throughout the Bill. The term "company", as explicitly provided for by section 37 of the National Treasury Management (Amendment) Act 2014, refers to one particular type of business entity, but there are other types of business arrangement or entity that are excluded from this definition, for example, partnerships.
In response to concerns raised ahead of and during scrutiny stage about the breadth and definitions of the original Bill, a number of amendments have been made to the definition of "fossil fuel" and "fossil fuel company". These definitions and their implications for the scope of the Bill should be viewed together. The inclusion of "intended for use in the production of energy by combustion" is one of the changes proposed to ensure that companies whose operations involve fossil fuels for non-combustion purposes clearly fall outside the scope of the Bill. Furthermore, the definition of "fossil fuel business" makes it clear that domestic or commercial combustion of fossil fuels falls outside the scope of the Bill except where commercial activities also include exploration, extraction or refining. The proposed definition of "fossil fuel" covers a closed, comprehensive list, including coal, oil, natural gas and peat.
The proposed subsection (1)(a) introduces a definition for "fossil fuel business" that has been drafted in co-operation with the Department of Finance, taking into account the committee's discussion and recommendations on scrutiny stage. The Bill as originally drafted included a definition of "fossil fuel business" as a company whose business either wholly or partly engaged in exploration, extraction, refining, processing or delivery of fossil fuels. Further to the committee's discussion, I had developed a proposal to replace "partly" with "mainly" and to include a reference to "for the purpose of combustion for energy" in order to tighten the definition to address the concerns raised about the potential administrative burden and unintended consequences of the original broad definition.
I also proposed the removal of the word "processing" which I recognise could be open to wide interpretation. I was also open to agreeing a threshold to define the word "mainly", this being a suggestion put forward on the scrutiny stage by the Department. Together, these proposals represented a significant tightening of the definition from the outset of engagement. The threshold of 15% relevant turnover for a holding undertaking in the proposed section 49A1(b) is a proposal from the Department that I was happy to accept.
In subsequent engagement with the Department and the Ireland Strategic Investment Fund, ISIF, it was highlighted that the administrative burden of screening for companies involved in exploration, extraction, refining and delivery would be high and have potential unintended consequences, capturing, for example, many small and medium enterprises, SMEs, which are not the target of this Bill. I have thus accepted significant further tightening of the Bill, restricting the company activities falling under the Bill to "exploration, extraction and refinement". This is also reflected in the Government's amendments.
With regard to subsection (2), in light of the significant tightening of the definition of "fossil fuel company" in the original Bill, changing the wording from "exploration, extraction, refining, processing or delivery of fossil fuels" to "exploration, extraction and refining", this provision allows the Minister to expand this definition as she or he sees fit. This is part of ensuring that this legislation can remain relevant as the transition advances. While this legislation can be the first of its kind in the world, in ten or even five years the definition of "fossil fuel company" as currently drafted could be outdated. To ensure continued momentum, the Minister could have the capacity to expand, and not contract, the definition as he or she considers appropriate.
With regard to subsection (3), the divestment provisions have been amended to make explicitly clear that the fund will not be expected to break contractual obligations or incur costs as a result of breaking contracts. This formulation highlights these such costs as distinct from normal transaction costs occurring with normal investment cycles.
The indirect provision is worded differently in recognition of the different role and control of ISIF in managing its indirect investments. It establishes the obligation to pursue fossil fuel-free indirect investment within the scope of the now significantly tightened definition of "fossil fuel business" under the Bill. It recognises the need to exercise due diligence at the outset of each indirect investment.
With regard to subsection (5), in response to the recommendation in the pre-legislative scrutiny report that the Bill not limit the ability of ISIF to support the transition, my first amendment proposals included two flexibility provisions. The first provision would allow ISIF to invest in companies captured by the Bill where this is explicitly to support them to transition away from being a fossil fuel business. The second was a broader provision allowing for investment in fossil fuel companies to continue where this was contributing to the national transition objective, the national climate change policy and the State's climate change obligations.
Based on discussions with the legal division of the Department, it was accepted that one provision should go forward that provided the broader flexibility for ISIF to invest where it contributes to the national transition objective etc. While we think it would have been a strength of the Bill to have a provision explicitly state that fossil fuel companies seeking to transition away from fossil fuels would be eligible for investment, it was accepted that, given the broader flexibility provided by the second provision, which allows for investment where the end date is unknown, as with gas, it could result in a superfluous provision. This compromise, to have one broad flexibility provision, is reflected in subsection (5)(b).
To ensure the flexibility provision does not render the divestment provisions meaningless, I had included a provision that would oblige the Minister for Communications, Climate Action and Environment to confirm the extent to which the investment contributes to the national transition objective, the national climate policy and the State's climate change obligations, publishing an assessment to this end three months before the investment decision. Further to consultation with the Department, it has been understood that this would compromise the governance arrangements of the ISIF and its relationship to public expenditure. On this basis, I have put forward a similar provision requiring that an assessment be conducted and be made publicly available, but with a focus on ISIF only, excluding political involvement entirely. It requires ISIF to conduct an assessment of the extent to which the investment would contribute to the delivery of the national transition objective, the State's climate change targets and the Government policy on climate change. Where relevant assessment has been conducted by the Department, ISIF may have regard to this.
ISIF already conducts ex ante environmental, social and governance, ESG, assessments, including on carbon intensity where relevant, for its investments, so the basis for such assessments exists. With the commitment in the programme for Government for a national dialogue on climate action and the commitment that preceded this in the 2015 energy White Paper for an energy forum to enable citizens to engage in debates on the State's energy future, making this information publicly available in advance of decisions being taken is considered a reasonable objective. In view of potential commercial sensitivity issues and data protection requirements, publication could be limited to relevant details, with any sensitive information redacted. That is just an explanation