ESG & Sustainability

Presented earlier on in the European Commission’s new mandate, the “European Green Deal” has been the foundation of its values-driven approach to sustainable corporate governance, achieving climate neutrality by 2050, and transitioning towards a more sustainable economic model.

In the context of the EU’s policy, the integration and adopting of Environmental Social and Governance (“ESG”) considerations is understood as sustainable finance, that is, a process of taking due account of ESG considerations when making investment decisions in an effort to support economic growth. Interest on the part of investors and other corporate stakeholders in ESG matters has surged in recent years, and the current economic, public health and social justice crises have only intensified this focus.

Environmental considerations range from reducing pressures on the environment; to addressing greenhouse gas emissions and tackling pollution and minimising waste and improving efficiency in the use of natural resources. All this whilst increasing awareness of, and transparency on, the risk that may have an impact on the sustainability of the financial system and at the same time providing a range of business and investment opportunities.

In turn, Social considerations could refer to issues of inequality, inclusiveness, labour relations, investment in human capital and communities, as well as human rights issues.

Thirdly, Governance refers to transparency in management structures and decision making, Board diversity, employee relations, executive remuneration and shareholder rights. Governance is also ultimately the fundamental overarching tool to ensuring the implementation of social and environmental considerations in the decision-making process of the relevant institutions.

Not all Boards are yet fully conscious of the need to extend their governance parameters beyond the more “traditional” aspects of governance and to consider ESG oversight. Independently of whether companies are subject to ESG related regulations or otherwise, there is an expectation on the part of investors and regulators for Boards to address ESG impacts and to incorporate this broader perspective into their strategy and decisions. In practice, therefore Boards should expand their governance remit and start to delve into the various ESG aspects relevant to their entities.

In support of this shift, the EU is creating a framework consisting of, inter alia: the Taxonomy Regulation; the Sustainable Financial Disclosures Regulation (the “SFDR”); the Low Carbon Benchmark Regulation (the “Benchmark Regulation”); the Commission proposal for the European Green Bond Standard; and the recent proposal for a Corporate Sustainability Reporting Directive (the “CSRD”) each of which aimed at enforcing and facilitating the integration of ESG considerations into strategies and increasing disclosures and transparency for the benefit of investors, society and our environment.

Below is a collection of our insights on ESG and similarly related matters to act as practical guidance for institutions, businesses, entrepreneurs and whoever may be interested in ESG and what it means for them in the context of the current crisis and beyond.

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