ESG Evolves: What You Need To Know Now

ESG (environmental, social, governance) issues are making headlines these days — from climate change reports to labor strikes, from the war in Ukraine to high-profile shareholder activism. For attorneys advising public companies, there’s never been a better time to get up to speed on the latest developments in ESG and the risks and opportunities facing their clients.

“ESG issues have become urgent matters for corporations, boards, and investors, especially some major institutional investors that are pressing for changes in the way companies do business,” says Jonathan E. Richman, Co-Chair of Practising Law Institute’s upcoming program ESG 2022: What It Means for Boards, Management, and Counsel.

The day-long program, also co-chaired by Ashley Walter, a leader on ESG issues at Orrick, brings together an array of ESG experts from law firms, companies, academia, and government, and features a fireside chat with Satyam Khanna, former SEC Senior Policy Advisor for Climate and ESG.

Richman, a securities-litigation partner at Proskauer, notes a few trends that have emerged as leading ESG issues since PLI last presented the program in 2021. Both investors and the public at large are increasingly focused on diversity, equity, and inclusion (DEI) and its intersection with human capital management (HCM). A panel will address these issues, including accounting for DEI and HCM in ESG reporting, current regulatory requirements, metrics, and more.

Climate change continues to heat up the ESG landscape as well. Richman adds: “The Biden administration has heightened the focus on climate change, and the SEC has issued extensive proposed regulations, which have already ignited controversy.” Recently, the administration also restored key environmental regulations on infrastructure projects, such as oil and gas pipelines, under the National Environmental Policy Act (NEPA). A panel in the program will address climate as an ESG driver.

“Practitioners need to be aware of these and other ESG issues when they counsel their clients on governance, workforce and board composition, disclosures, supply-chain relations, and other matters,” Richman says — and the program aims to prepare them, taking a comprehensive approach to the topic.

Here are other steps you can take to build your ESG expertise:

Dive into the SEC’s Proposed Rules. Issued in March 2022, these hotly anticipated rules on The Enhancement and Standardization of Climate-Related Disclosures for Investors would require public companies to adhere to climate change disclosure and reporting requirements, including information about company climate change policies and certain greenhouse gas emissions. While the SEC states that these disclosures are similar to those that many companies already provide based on existing frameworks, the proposals are significant to anyone dealing with SEC reporting.

By setting forth specific requirements, the SEC has “put a stake in the ground” regarding what it considers significant information for investors, said George M. Wilson, Director of the SEC Institute and a speaker at the recent PLI One-Hour Briefing Climate Change – The SEC’s Proposed New Disclosures, now available on-demand. Much debate is expected in the coming months — but companies would be wise to begin preparing for more extensive and complex disclosure requirements likely to be enacted from this proposal. And even if the regulation is not ultimately adopted in its current form, the issues it raises are likely to continue percolating among institutional investors in the United States and abroad.

Hear from the SEC. Prior to the proposed rule publication, PLI’s inSecurities podcast featured hosts Chris Ekimoff and Kurt Wolfe in conversation with SEC Commissioner Allison Herren Lee, who shared her perspectives on how the agency might update the ESG disclosure regime to meet the needs and demands of investors.

Look Outside the United States. International standard-setting organizations continue to set the pace in developing ESG guidelines. For a closer look at ESG from an EU and UK perspective, see “The ESG Agenda: Disclosure, Reporting Obligations, and Managing Litigation Risk,” a segment from PLI’s 21st Annual Institute on Securities Regulation in Europe.

For more on the direction of international standards, check out the recently released proposals from the International Sustainability Standards Board (ISSB) on general sustainability-related and specific climate-related disclosure requirements. The ISSB is seeking feedback on these drafts, which aim to create a “comprehensive global baseline of sustainability disclosures,” through the end of July 2022.

Learn About ESG and Environmental Enforcement. As part of a Studio Briefings series on International Corporate Practice, Carole Basri, author of the PLI Press treatise International Corporate Practice: A Practitioner’s Guide to Global Success, spoke with Eric Rothenberg, head of O’Melveny’s Environmental Practice, about a range of environmental compliance issues, including ESG and enforcement trends.

For additional programs related to ESG, visit PLI’s website.

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Practising Law Institute is a nonprofit learning organization dedicated to keeping attorneys and other professionals at the forefront of knowledge and expertise. PLI is chartered by the Regents of the University of the State of New York and was founded in 1933 by Harold P. Seligson. The organization provides the highest quality, accredited, continuing legal and professional education programs in a variety of formats which are delivered by more than 4,000 volunteer faculty including prominent lawyers, judges, investment bankers, accountants, corporate counsel, and U.S. and international government regulators. PLI publishes a comprehensive library of Treatises, Course Handbooks, Answer Books and Journals also available through the PLI PLUS online platform. The essence of PLI’s mission is its commitment to the pro bono community. View PLI’s upcoming programs here.