Lawyer Monthly - August 2021 Edition

ESG has emerged as a top priority for governments, corporations, banks, funds and multilaterals. Why is that? A range of factors, including: accelerating regulation in the EU and the anticipated disclosure requirements in the US; escalating shareholder activism; growing climate-related litigation (including the recent Shell decision in the Netherlands); increasing public commitments by corporations, financial institutions and governments to reduce carbon emissions; intensifying focus on supply chain sustainability and human rights, and surging media focus on all of the above. These developments are causing major market changes that will produce winners and losers. Those that anticipate and adapt will thrive. Those that cannot will have a difficult time. How are your clients managing these developments? Some are managing this brilliantly. They WWW.LAWYER-MONTHLY.COM | AUG 2021 72 THOUGHT LEADER KEN RIVLIN ESG: The Challenges and Opportunities Climate change and other global issues have grown increasingly important to investors and organisations around the world. Ken Rivlin, head of Allen & Overy’s International Environmental Law Group, explores the rise of ESG as a business priority and how firms can best adapt. staffed up, fully assessed their operations (including supply chains) and developed a workable approach for collecting ESG- related data. They have also begun developing strategies to adapt to evolving demands on their business, mitigate climate and ESG-related risk and exploit opportunities as they arise. Others are struggling due to, among other things, inadequate staffing, limited support from senior management, a muddled mandate –and limited oversight– from their boards, and a tendency to react to headlines and “hot” trends rather than proceeding in a measured way based on a coherent strategy. March of this year saw the SEC seeking public comment on the development of a new framework for climate and ESG disclosures. How significant is this development for corporations in the US? The public comments ranged widely. Some called for increased disclosure requirements backed by rigorous enforcement, while others argued for maintaining the status quo. SEC Chairman Gensler has since directed SEC staff to develop climate and ESG disclosure recommendations by fall 2021, building on other recent SEC steps in this area such as creating a Climate and ESG Task Force within the Division of Enforcement. For issuers, these changes mean heightened focus on existing disclosure based on existing rules (including increased enforcement risk) and the increased likelihood that tougher disclosure rules will come into force over the next 2-3 years. The ability to tell the right story on ESG will increasingly impact corporations’ ability to access capital.