Environmental, Social & Governance Law 2021

A practical cross-border insight into ESG law

First Edition

Featuring contributions from:

BAHR Freehills LLP Schellenberg Wittmer Ltd Bowmans Herzog Fox & Neeman Stikeman Elliott LLP Brown Rudnick LLP LLP SustainAdvisory Galicia Abogados, S.C. Mannheimer Swartling LLP Grimaldi Studio Legale Advokatbyrå Wachtell, Lipton, Rosen & Katz Haynes and Boone, LLP Maples Group Wolf Theiss Herbert Smith Freehills Nagashima Ohno & Tsunematsu Table of Contents

Expert Chapters

Moving Forward With ESG: Considerations for Boards and Management 1 David M. Silk & Carmen X. W. Lu, Wachtell, Lipton, Rosen & Katz

Incorporating Sustainability into Debt and Equity Financing 7 Emma Russell, Emily Fuller & Deborah Low, Haynes and Boone, LLP

ESG and UK Pension Schemes: Challenges and Opportunities 12 Andy Lewis & Jonathan Gilmour, Travers Smith LLP

ESG and Litigation: The Outlook for Shareholders and Listed Companies 16 Ravi Nayer, Razzaq Ahmed & Tom McDonnell, Brown Rudnick LLP

ESG and Corporate Strategy: A Cross-Sectoral View 28 Rebecca Perlman, Silke Goldberg & Iria Calviño, Herbert Smith Freehills LLP

Q&A Chapters

Australia Mexico 34 Herbert Smith Freehills: Heidi Asten, Timothy Stutt 85 Galicia Abogados, S.C.: Mariana Herrero, Maurice & Jacqueline Wootton Berkman, Carlos Escoto & Lorena Kiehnle Barocio

Norway Austria 92 43 Wolf Theiss: Sarah Wared, Florian Kusznier & BAHR: Svein Gerhard Simonnæs, Asle Aarbakke & Claus Schneider Lene E. Nygård

Poland Canada 97 48 Stikeman Elliott LLP: Vanessa Coiteux, Ramandeep Wolf Theiss: Marcin Rudnik & Joanna Gąsowski K. Grewal & Catherine Grygar South Africa 104 Bowmans: Ezra Davids & Ryan Kitcat Ireland 57 Maples Group: Peter Stapleton, Ronan Cremin & Sweden Jennifer Dobbyn 112 Mannheimer Swartling Advokatbyrå: Patrik Marcelius, Cecilia Björkwall & Joel Palm Israel 63 Herzog Fox & Neeman: Janet Levy Pahima, Switzerland Liat Maidler & Daniel Kaczelnik 119 Schellenberg Wittmer Ltd: Christoph Vonlanthen, Lorenzo Olgiati, Fabio Elsener & Giulia Marchettini Italy 71 Grimaldi Studio Legale: Riccardo Sallustio SustainAdvisory: Francesca Fraulo 126 Macfarlanes LLP: Tom Rose & Olivia Seeley

Japan USA 79 Nagashima Ohno & Tsunematsu: Kiyoshi Honda 136 Wachtell, Lipton, Rosen & Katz: David M. Silk & Carmen X. W. Lu 28 Chapter 5

ESG and Corporate Strategy: A Cross-Sectoral View Rebecca Perlman

Silke Goldberg

Herbert Smith Freehills LLP Iria Calviño

ESG and Corporate Purpose has not only been driven by regulation but also by the growing recognition (by long-term investors, in particular) that value can In 1999, former United Nations (UN) Secretary-General Kofi be assessed with reference to a company’s broader stakeholder Annan threw down the gauntlet at the feet of the global busi- groups, as well as its shareholders. As a result, a number of ness world and called on it “to embrace, support and enact a set of core businesses have voluntarily made ambitious commitments to the values in the areas of human rights, labour standards, and environmental ESG agenda. In 2019, 181 of America’s top business and finan- practices”, proposing that the business world and the UN jointly cial leaders signed the Business Roundtable’s Statement on the initiate a “global compact of shared values and principles, which will give a Purpose of a Corporation,4 publicly committing to lead their compa- human face to the global market ”. Kofi Annan’s speech and invita- nies for the benefit of all stakeholders, including customers, tion resonated with business leaders worldwide and in July 2000, employees, suppliers, communities and shareholders. The the UN Global Compact was launched. This global movement, following year, the World Economic Forum (WEF) released which began as a small initiative involving just 44 companies, the new Davos Manifesto – The Universal Purpose of a Company in now has over 12,000 signatories and is the world’s largest initia- the Fourth Industrial Revolution5 – stating that companies should tive to advance corporate sustainability.1 pay their fair share of taxes, show zero tolerance for corruption, Since its earliest iterations in the form of the Equator uphold human rights throughout their global supply chains, and Principles – a set of risk management guidelines launched in for a competitive level playing field. 2003 to help financiers assess the environmental and social risks Companies are facing significant and growing pressure involved in projects in emerging markets to which they lend from investors, consumers, employees, activists, regulators and – the emerging environmental, social and governance (ESG) society to take strong positions on ESG issues and to be trans- framework has expanded rapidly. In 2004, the UN Global parent on their progress. As noted in the WEF’s recent white Compact published its report Who Cares Wins,2 which first coined paper, “Embracing the New Age of Materiality: Harnessing the Pace of the term “ESG”, making the case that embedding ESG factors Change in ESG”, the majority of Millennials (67% according to into capital markets makes good business sense, leads to more the Boston Consulting Group (BCG)) expect employers to have sustainable markets and delivers better outcomes for societies. purpose and want their jobs to have societal impact. Given that In 2011, the UN continued to advance the ESG agenda, estab- Millennials and Generation Z employees make up 59% of the lishing its Guiding Principles on Business and Human Rights.3 workforce in 2020, this is a call that businesses are unlikely to In the regulatory arena, ESG has grown to encompass a broad ignore. The same white paper stated that, according to BCG, range of “soft” and “hard” laws and regulatory requirements 72% of European consumers prefer to buy products with envi- that create a framework for businesses, investors and lenders to ronmentally friendly packaging and that, globally, 46% of better meet expectations regarding the incorporation of mate- consumers are willing to forgo preferred brand names in favour rial ESG considerations into their decision-making processes. of eco-friendly products. Some 38% of global consumers also In the last few years, ESG factors have risen to the forefront of indicate the willingness to pay a premium for eco-friendly and business and investor mindset. This shift is largely due to (i) sustainable materials. growing demands from consumers, voters, activists and inves- Shareholder activism in relation to ESG matters also continues tors in relation to corporate transparency, and (ii) increasing to rise. The raft of shareholder resolutions in recent UK company regulatory and litigation risks associated with ESG, as soft law annual general meetings (AGMs) have covered ESG matters measures continue to be transposed into hard laws with “teeth”. across the board. In addition to broader corporate governance issues, particular concerns have included executive remuneration and pensions, board diversity and gender equality, and human Key drivers: Why does ESG matter for business? rights issues in supply chains. As some of the world’s largest asset managers, including BlackRock and Vanguard, step up their Businesses are increasingly cognisant of their duties to the activism in relation to climate change, the pressure for greater communities within which they operate. This shift in focus corporate transparency and disclosure is mounting.

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ESG investing has seen a meteoric rise, as asset owners and ESG factors into investment decisions suggest that ESG perfor- asset managers seek to reduce investment risk and maximise mance will play a growing role in the cost of, and access to, capital. risk-adjusted returns.6 One of the challenges that the growing This can already be seen amongst lenders, with demonstrably interest in sustainable investment products has underscored is “green” borrowers facing lower financing costs than “brown” the importance of ensuring that businesses and asset managers borrowers, and with a growing number of lenders incorporating produce clear and comparable ESG disclosures. The difficulty ESG metrics in their credit analysis and borrower evaluation. lies in the absence of a global, standardised ESG reporting framework; however, there are moves in that direction. New approach to due diligence

Regulation Traditionally, buyers have focused primarily on a target’s histor- ical financial and operational performance and compliance, Businesses operating within (or with links to) developed econ- being more sceptical of medium- to longer- term projections. omies have been regulated for many years in areas such as anti- Non-financial issues used to be considered on the basis of the bribery and corruption, anti-money laundering, health and target’s current compliance with law and regulation as they safety, environmental concerns and employment matters. These stood at the time of the review. obligations are increasingly accompanied by disclosure and Due diligence for ESG issues requires a much broader ana- reporting requirements aimed at driving greater transparency, lysis of potential risk exposures for the target company, having which in turn is leading to increased levels of activism and litiga- regard to sector, products and jurisdiction. Now, more than ever tion risk as it becomes easier to scrutinise corporate behaviour. before, buyers need to examine carefully whether a target will Europe remains the leader in this respect, with over 65% of be compliant in the foreseeable future in order to minimise the all ESG regulation emerging from the region. This includes risk of assuming or acquiring regulatory or litigious risk further the package of regulations flowing from the European Green down the road. They also need to look beyond the company or Deal and the EU Sustainable Finance Action Plan. For instance, assets being bought and consider the wider business, including the EU’s Non-Financial Reporting Directive (NFRD), together the target’s supply chains and the ESG stance of the govern- with its Taxonomy Regulation and Disclosure Regulation,7 ments of the countries in which the business operates. are increasing the focus on corporates, asset owners and asset Thorough ESG due diligence can help participants in an managers providing certain forms of ESG disclosures relating M&A process to identify assets and liabilities that could be to the nature of their activities. These measures will have major problematical and may even need to be carved out. By taking implications for investors and corporates across the globe. a more forward-looking approach, they can reduce the risk of In this context, it is critical that executives and board acquiring assets or businesses that become stranded owing to members understand how corporate purpose and ESG princi- ESG-related changes in regulation, public opinion or consumer ples can be effectively integrated into the strategies and enter- demand. It is important for buyers to consider these issues early prise risk management efforts of the companies they serve. on in the due diligence process, even if only to exclude them on This includes the incorporation of ESG considerations into key the basis of immateriality in due course. strategic decisions, such as those relating to M&A activity and Such an approach can also help buyers identify potential diffi- supplier selection. culties that may arise from the integration of the target into their company. For example, if there are significant gaps in the way ESG and M&A the buyer and the target approach ESG issues, then integration could be more costly and challenging, reducing the overall prof- ESG issues are increasingly viewed as both a driver and a risk itability of the deal. In which case, buyers may look to reduce factor for M&A. As such, consideration is now being given to the price or decide not to go ahead with the deal at all. ESG factors at all stages of the M&A process: in the analysis underpinning investment proposals; during due diligence; and in planning post-transaction integration. Anticipating risks

As ESG regimes continue to gain momentum, certain types of Investment proposals assets and activities may become partially or entirely stranded due to their incompatibility with the growing ESG global In response to a 2019 survey conducted by IHS Markit and agenda. Moreover, a target’s poor ESG performance may 8 Mergermarket, 53% of respondents noted that they had walked mean an increased risk of legal liability or a reduction in the away from a deal due to a negative assessment of ESG consider- value of a business. Acquirers risk inheriting legal liability for ations relating to a target company. A significant number of the past offences in the target (including liability for compensation risks that fall within ESG have in fact affected M&A for some or criminal liability). For example, non-compliance with anti- time; however, what has changed is the stage of the process at bribery and corruption rules could lead to substantial fines, the which potential bidders are looking into these issues and the loss of major contracts and significant reputational damage. rigour with which they are doing so. Would-be acquirers now Additionally, in the context of global trends towards anti- regularly consider ESG issues from the outset of the target iden- bribery regulation, which place the onus on companies to take tification stage. As part of this, they are looking further forward positive steps to prevent bribery within their businesses or face than ever before, to where the market and the law appear to be significant financial sanctions for breaching those requirements, heading and how that might affect financing costs, reputation understanding the internal anti-bribery processes of potential and their ability to sell the asset in due course. targets is an important tool for understanding the scope for, and Respondents to the aforementioned IHS Markit and level of risk in relation to, potential future regulatory action. Mergermarket survey unanimously chose business risks as a ESG factors can also offer opportunities for acquirers to major driver for taking ESG considerations into account in the realise upside, particularly for those looking to develop or M&A process; 83% cited investor pressure. The incorporation of supplement their own capabilities. For instance, players with

Environmental, Social & Governance Law 2021 30 ESG and Corporate Strategy: A Cross-Sectoral View

poorer ESG performance are increasingly seeking out targets Contractual protections with higher ESG standards in order to improve operational effi- ciency, enhance their reputation, access particular technologies or integrate more sustainable processes or products. Improved Where material ESG risks have been identified as part of the ESG performance, including regarding matters such as health due diligence process, buyers will likely seek contractual protec- and safety, can also help to lower insurance premiums and other tion. A number of the issues falling under the ESG banner costs relating to the productivity and retention of staff. would typically be covered by a standard, comprehensive set of warranties (e.g. those relating to compliance with reporting and disclosure regimes, such as carbon emissions or modern slavery Identifying material risks reporting, and compliance with anti-bribery and corruption, health and safety, and environmental legislation). Such issues A number of ESG risks, such as those relating to data privacy, may, to some extent, also be covered by a general warranty anti-bribery and corruption, climate change, diversity and relating to the target’s legal compliance. labour issues, already form part of traditional due diligence. Acquirers may also seek more specific ESG-focused warran- Assessing which additional ESG matters are material to the ties, including those relating to the target’s compliance with financial condition or operating performance of a target is there- applicable ESG standards where relevant. A growing number fore an easier task for industries that are already deeply familiar of acquirers are seeking to include “Weinstein clauses”, which with managing and reporting on ESG issues. In the extractives require a target to disclose any allegations of sexual harassment sector, for instance, good performance on ESG factors, such as or misconduct before the closing of the deal, as well as addi- the way in which mining companies interact with the commu- tional warranties relating to health and safety, environmental nities in which they operate and the measures they can take to and social issues or incidents. mitigate the environmental impact of their operations, has been The challenge with such provisions is that, to the extent that a part of sound stewardship and asset management for decades. the relevant issues go beyond strict legal compliance, it can be In other industries, however, there is a less well-developed difficult to demonstrate a breach and the losses flowing from understanding of what constitutes a material ESG issue and there such a breach. It can also be difficult to obtain warranty and are a number of frameworks to assist acquirers in their assess- indemnity insurance for such warranties, given that an under- ment. These include the Sustainability Accounting Standards writer will generally require a specific trigger event and defin- Board framework, which takes a sectoral approach, and others able losses as part of the claim process. It is not surprising there- such as the Global Reporting Initiative, which approaches mate- fore that, having identified wider ESG risks as part of their due riality on the basis of the impact of the target’s business on its diligence, acquirers will often opt to factor such issues into the key stakeholders. There is, however, no common language price rather than seek warranties. That said, it could still be around ESG, which remains a challenge, and buyers lack the worthwhile for an acquirer to seek broader-based ESG warran- benchmarks they need to meaningfully compare a target’s ESG ties for disclosure purposes. metrics to the broader market. In addition, growing concern regarding climate change, and Post-transaction integration the inevitable shift towards a lower carbon future, has resulted in a clear trend for increased scrutiny of the long-term sustain- ability of significant carbon-emitting assets and, conversely, Where the acquirer and the target have significant differences the opportunities presented by new technologies and renew- in their approaches to ESG, the buyer should give due consider- able energy businesses, which may be beneficiaries of the global ation to potential integration challenges and the costs involved decarbonisation movement. The effects of the COVID-19 in managing such challenges, so that these can be factored and pandemic on commodity prices in particular has caused some to priced into the deal. The wider the ESG performance gap describe the pandemic as a pivot point for the energy transition, between the target and the buyer, the more difficult it will likely further magnifying the focus on decarbonisation. be to realise synergies from an acquisition. A survey carried out The challenge of scoping ESG due diligence is further by Sustainalytics in 201710 found that deals in which an acquirer complicated by the need to assess risks in a target’s supply and a target had similar ESG scores ended up outperforming chains, which may not involve any legal liabilities for an acquirer deals that involved companies with disparate approaches to ESG but could present significant reputational issues. Just one recent by an average of 21% on a five-year cumulative return basis. example is the suspension of Tesco’s relationship with one of its Integration challenges aside, ESG issues will need to form Christmas card suppliers, following widespread media coverage part of post-transaction asset management and compliance long of allegations relating to the supplier’s use of forced prison after the M&A deal has closed. Businesses will need to monitor labour in its manufacturing processes. the “soft” law and “hard” legal and regulatory landscape and Berlin-based credit rating agency, Scope,9 has stated that keep an eye on where the markets and the law are going. supply chains typically account for 40% of ESG impacts, rising to around 60% when considering environmental alone. Food Responsible exits sector supply chains were found to have an average of 78% ESG impact as a proportion of a company’s overall impact. Supply chain transparency and anti-modern slavery legislation in the In the current climate, many businesses will be looking at asset UK, France, , Brazil and California has increased disposals, as boards make invidious decisions under unprece- the importance of understanding and risk-mapping the supply dented financial and operational constraints. Sellers have tradi- chains of potential targets, including with respect to geog- tionally been focused on achieving a clean exit, but are increas- raphy, sector and labour, outsourcing and recruitment prac- ingly focusing on the need to consider ESG matters on a disposal tices. As more countries enact anti-modern slavery legislation, due to ESG policies and the potential for post-transaction issues and with human rights due diligence regulation proposed for to impact the seller’s reputation. the European Union, the focus on supply chain transparency is Sellers who have embraced ESG are no longer focused solely widely expected to continue to increase. We explore such issues on price and a clean break; they also wish to assure them- further in the section on supply chains below. selves that the asset will continue to be managed responsibly

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post-completion. This is manifesting itself in increased due dili- Operational risk gence by sellers, even on cash buyers, and sometimes in enhanced post-completion undertakings being sought from buyers. Many products depend on parts and materials from around the This has been a common approach in the extractives sector world. The physical effects of climate change present a risk to for some time. For instance, where a seller wants assurance that the supply of such materials and parts, and could therefore have a buyer will operate an asset responsibly in line with standards a significant impact on the production and transportation of adopted by the seller, we have seen specific undertakings sought a wide range of goods. The McKinsey Global Institute cites from buyers committing them to run the asset in accordance three key operational risks relating to weather events:13 phys- with best practices from an ESG perspective. This approach is ical damage to assets; reduced sales due to disruption to produc- increasingly common in other sectors, particularly with regard tion or transportation; and the costs of rebuilding or restarting to the environmental and social areas of ESG. The Unilever production once the event has passed. The Institute also notes sale of its global spreads business to KKR in 2017 is a good that when supply chains are better prepared for extreme weather example from the consumer sector. As part of that transac- events, the negative impact on revenues is reduced. tion, KKR committed to upholding Unilever’s environmental policies, including a commitment to sourcing 100% sustainable palm oil by 2019. Regulatory risk

ESG and Supply Chains In March 2020, the UK Global Resource Initiative taskforce Transparency and disclosure in relation to issues across each published a report as part of its mission to “ensure that the aspect of the “E”, the “S” and the “G” will be key to ensuring UK’s global commodity supply chain footprint on land, natural compliance with the growing set of regulatory obligations. resources and ecosystems is sustainable, avoids deforestation and other environmental degradation and supports jobs, liveli- As noted above, investors and customers are also increasingly 14 basing their decisions in whole or in part on ESG credentials. hoods and investment in resilient and sustainable food system”. As many business models involve complex supply chains that In August 2020, the UK government announced it will intro- duce a new law that is aimed at protecting rainforests and clamping are difficult to trace, investors, governments, regulators and 15 industry bodies have imposed (or are considering imposing) down on illegal deforestation, which would introduce manda- reporting and disclosure obligations to try to address this. tory supply chain due diligence obligations in relation to “forest The WEF’s draft consultation11 on a reporting framework risk” commodities. The proposed law is intended to replace the for sustainable value creation proposes a range of ESG metrics EU Timber Regulation, which will cease to apply after the end of and disclosures that apply to business operations and supply the post-Brexit transition period on 1 January 2021. chains. A proposed metric for nature loss suggests that organ- isations should report and estimate: (i) the land use in their Human rights supply chains; (ii) the number of the International Union for Conservation of Nature (IUCN) Red List species present in In 2019, the UK government published its Transparency in the areas used or affected; and (iii) the amount of fresh water Supply Chains Consultation Paper, which proposes amend- consumed in water-stressed areas as part of their supply chains. ments to the Modern Slavery Act 2015 (MSA) in response The WEF also suggest that organisations should report on: (i) to the Transparency in Supply Chains consultation, and in the risk of child and forced labour in supply chains; (ii) the total particular the requirement for certain organisations to produce recordable injury rate and absentee rate in supply chains; and a slavery and human trafficking statement. The proposed meas- (iii) current wages for contractors and suppliers compared to the ures include mandating that modern slavery statements cover living wage. The intention is to encourage consistent reporting. certain areas that, under the current legislation, remain volun- Once these metrics have been finalised, companies are encour- tary. These areas include disclosure relating to: an organisation’s aged to begin reporting as soon as possible through a comply or structure, business and supply chains; the parts of the business explain approach. and supply chains where there is a risk of slavery and human trafficking taking place, and the steps the company has taken to Reputational risk assess and manage that risk; and the company’s effectiveness in ensuring that slavery and human trafficking are not taking place For manufacturers, supply chains can constitute a large part of in its business or supply chains, and introducing civil penalties their carbon footprint and some organisations have recently for non-compliance. The UK government is also considering committed to addressing this. In June 2020, Apple announced the development of the Single Enforcement Body for employ- its plan12 to become carbon neutral across its entire business, ment rights. manufacturing supply chain and product life cycle by 2030. In The European Parliament Committee on Legal Affairs has its 2020 Environmental Progress Report, Apple states it will published a draft report that includes a draft text of the EU’s help its supply chain lower its energy use, and move its entire proposed directive to introduce mandatory human rights due supply chain to renewable energy. diligence legislation. The draft directive draws heavily on the Increasingly, consumers wish to purchase goods and services UN Guiding Principles on Business and Human Rights, and is that are environmentally sustainable and socially impactful. intended to also cover environmental and governance issues. The As disclosure obligations relating to supply chain practices recommendations in the draft report include ensuring that under- continue to proliferate, consumers and investors will be able takings operating in the internal market respect human rights, the to make use of the resultant body of information when exer- environment and good corporate governance. Undertakings to cising their purchasing power and making investment decisions. which the directive applies can be held accountable for breaches Organisations that have already implemented ESG training, that occur anywhere in the value chain. Under the proposed policies and management throughout their supply chains are directive, businesses must, in their operations and business rela- likely to be in a better position to capitalise on the change in tionships, carry out due diligence with respect to human rights, consumer and investor focus. and environmental and governance risks. For supply chains,

Environmental, Social & Governance Law 2021 32 ESG and Corporate Strategy: A Cross-Sectoral View

organisations will need to regularly verify the compliance of Endnotes subcontractors and suppliers with relevant contractual provisions or codes of conduct. Each organisation’s due diligence strategy 1. Figures as at November 2020. must be made public and communicated to its employees and 2. Who Cares Wins, “Connecting Financial Markets to a business partners. Member States should designate a compe- Changing World”. Recommendations to better integrate tent authority to be responsible for supervision of best practice environmental, social and governance issues in financial ana- and to ensure compliance through investigations. Member States lysis, asset management and securities brokerage. Available should also introduce penalties for non-compliance, and repeated at https://www.unepfi.org/fileadmin/events/2004/stocks/ non-compliance will result in a criminal offence if committed who_cares_wins_global_compact_2004.pdf. 3. Available at https://www.unglobalcompact.org/library/2. intentionally or with serious negligence. 4. Available at https://opportunity.businessroundtable.org/ In addition, in Germany, a potential new supply chain law is ourcommitment/. currently being debated. This legislation would make organisa- 5. Available at https://www.weforum.org/agenda/2019/12/ tions responsible for upholding fair wages and working condi- davos-manifesto-2020-the-universal-purpose-of-a-comp- tions, as well as human rights more generally, throughout their any-in-the-fourth-industrial-revolution/. global supply chains. It is likely that this development will also 6. According to BlackRock, companies with higher ESG influence the future Europe-wide framework. ratings performed better than other companies during the upheaval in the first quarter of 2020, and that investments Conclusion: ESG, the Impact of COVID-19 and with strong sustainability profiles are “better positioned Shifting Trends to weather adverse conditions” in the recovery phase and beyond: https://www.blackrock.com/institutions/en-gb/ While the COVID-19 crisis has undoubtedly emphasised the compliance/terms-and-conditions?targetUrl=%2Finstitut critical importance of balance sheet resilience, it has also made ions%2Fen-gb%2Four-clients%2Fdefined-contribution% businesses and investors more aware of the risks posed by “black 2Fesg-amid-covid-and-beyond. swan” events and the need for robust practices in relation to 7. Regulation (EU) 2019/2088. material ESG matters. 8. ESG on the Rise: Making an impact in M&A, IHS Markit and In particular, the pandemic has served to draw social factors Mergermarket, 2019. Available at https://www.merger- out from the shadow of the environmental and governance issues market.com/info/info/esg-rise-making-impact-ma. that dominated boardroom agendas before the outbreak. This 9. Available at https://scoperatings.com/#!search/research/ detail/165182EN. includes a renewed focus on occupational health and safety, social 10. Available at https://www.sustainalytics.com/esg-research/ safety nets, worker protection, responsible purchasing practices issue-spotlights/esg-compatibility-success-factor-mergers and supply chain issues, as well as diversity and digital rights, -acquisitions/. including privacy. Importantly, this shift in focus has not come 11. Available at http://www3.weforum.org/docs/WEF_IBC_ at the cost of environmental matters, with 79% of respondents ESG_Metrics_Discussion_Paper.pdf. to a recent UNPRI (UN Principles for Responsible Investment) 12. Available at https://www.apple.com/uk/newsroom/2020/ survey stating that they see the COVID-19 recovery phase as a 07/apple-commits-to-be-100-percent-carbon-neutral- critical opportunity for governments to step up their ambitions for-its-supply-chain-and-products-by-2030/#:~:text= towards net zero and alignment with the Paris Agreement. The%20Montague%20wind%20farm%20in,product%20 Many investors and executives argue that now is the time to life%20cycle%20by%202030. “build back better” and create a more sustainable corporate 13. Available at https://www.mckinsey.com/business-func- world. This is manifesting in calls for, and commitments made tions/sustainability/our-insights/could-climate-become- by, governments to link bailout support and stimulus packages the-weak-link-in-your-supply-chain. to ESG standards. 14. Global Resource Initiative: Final Recommendations It is impossible to predict the ultimate outcomes of the crisis. Report, available at https://partnershipsforforests.com/ Nevertheless, it is clear that the intense public scrutiny of corpo- gri-final-recommendations-report/#:~:text=The%20Glo rate conduct and governance during the pandemic has prompted bal%20Resource%20Initiative%20(GRI,resilient%20and %20sustainable%20food%20systems. a wholesale shift in expectations regarding the role of business 15. UK to introduce deforestation due diligence law, HSF in society. In doing so, COVID-19 has accelerated the ESG article available at https://www.herbertsmithfreehills.com agenda, with implications for companies, investors and lenders /latest-thinking/uk-to-introduce-deforestation-due-dili- across the globe. gence-law.

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Rebecca Perlman is a corporate lawyer at global Herbert Smith Freehills (HSF), where she specialises in ESG, sustainable invest- ment, impact finance and charity law advisory. Rebecca heads up HSF’s global impact investment and social finance practice, and is a member of the firm’s ESG, sustainability and respon- sible business leadership team. In addition, she oversees HSF’s pro bono practice across 12 offices in the UK, US and EMEA. Rebecca has worked on secondment with the Government of Sierra Leone as legal adviser in the Office of the President in 2014, where she advised on the country’s response to the commercial impact of the Ebola crisis. She has also previously worked on secondment with the National Council for Civil Liberties. She is a trustee of the Big Issue Invest Trust and Chair of the UN Refugee Agency’s UK charity.

Herbert Smith Freehills LLP Tel: +44 20 7374 8000 Exchange House Email: [email protected] Primrose Street URL: www.herbertsmithfreehills.com EC2A 2EG United Kingdom

Silke Goldberg has over 20 years’ experience working in the energy sector. She advises clients in relation to energy, climate change and sustainability issues internationally. Silke is admitted to practise in England, Ireland, Germany and France and is a member of the Dutch Energy Law Association, NeVER. She regularly publishes on issues of energy law. Silke is a professor with the Energy Law Institute at Queen Mary University of London, where she teaches energy regulation.

Herbert Smith Freehills LLP Tel: +44 20 7374 8000 Exchange House Email: [email protected] Primrose Street URL: www.herbertsmithfreehills.com London EC2A 2EG United Kingdom

Iria Calviño is the partner responsible for public law, regulatory and environment matters in the Madrid office. She has a wide-ranging prac- tice of providing legal advice to major corporations, global investment banks, equity sponsors, public entities and the public administration in relation to general public law and the environment (including climate change and renewable energy), infrastructure and regulated sectors, as well as related litigation. She is also head of diversity and pro bono for the HSF Madrid office. In addition, she is the co-leader of the sustain- ability hub of the Executives and Board Members Association (EJECON).

Herbert Smith Freehills LLP Tel: +34 91 423 422 C/ Velázquez 63 Email: [email protected] 28001 Madrid URL: www.herbertsmithfreehills.com Spain

Herbert Smith Freehills is one of the world’s leading professional services businesses, bringing together the best people across our 26 offices to meet our clients’ legal needs. This includes helping our clients navigate the increasingly complex global landscape relating to environmental, social and governance (ESG) issues. We take a holistic approach to ESG considerations, combining in-depth knowledge of global political trends and the myriad of international and national laws, with wide-ranging sector expertise. Our experience spans a variety of areas, including business and human rights, climate change-related litigation, green and sustainable finance, impact investment, corporate governance, reporting and disclosures, the development of ESG-related legislation, ESG due diligence and the M&A process, and ESG issues relating to funds and asset management. www.herbertsmithfreehills.com

Environmental, Social & Governance Law 2021 Other titles in the ICLG series

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