Environmental, Social and Governance: issues for businesses

As expectations of consumers and regulators change, financial institutions are also rethinking their investment practices and developing more ESG-focused strategies, with a rise in the likes of sustainable funds, green loans, and impact investing.

Sustainable investing looks beyond financial metrics and incorporates environmental, social and governance factors into decision-making.  ESG metrics have made investments increasingly quantifiable, making it easier for investors to evaluate their investment objectives. However we recognise investors still face challenges such as “greenwashing” and the lack of universal standards for ESG ratings.

We advise private companies and their shareholders, asset managers, institutional investors, and other stakeholders on sustainable and responsible investment issues.

Good governance is key to doing good business. A company’s governance provides the framework for delivering its objectives. Whilst poor governance will damage the business, good governance is a tool for effective decision-making that enables the ‘E’ and ‘S’ of ESG.

A sustainable business strategy means considering not just corporate but also wider stakeholder governance. This can include the importance of diversity and inclusion, health and safety and other labour standards, not just in the workforce but across supply chains.

Companies are also questioning how they can best act as stewards of the physical environment, assessing their impact on resources, pollution, waste and emissions both directly through the operations they control and indirectly through purchased energy and supply chains.

We advise on a variety of governance matters including directors’ duties, board and committee governance, group and subsidiary governance, B Corp certification, and disclosure obligations. Effective shareholder engagement is crucial and we advise on AGMs, reporting obligations, general meetings, and shareholder resolutions. We also work closely with employers to promote inclusive workplaces.

With the rise in social media and around-the-clock news, companies are under constant scrutiny by investors, consumers, and other stakeholders. A positive reputation means developing an outward-facing business strategy that seeks to positively impact wider society, and communicating that authentically.

We advise businesses on issues affecting their reputation, drawing when needed upon our close network of communications experts, digital intelligence and investigations firms, cyber and physical security advisers, and specialist barristers.

In mergers and acquisitions, ESG is increasingly an essential consideration for targets and acquirers alike. When valuing a business and assessing risk, acquirers and investors will look at ESG factors, not just traditional metrics.

For transaction due diligence, factors such as board reporting, data security, supply chain integrity, anti-corruption, energy consumption and diversity will form part of the evaluation of a company’s performance. ESG is also impacting the approach to warranties and other protections in the key transaction agreements.

Our transaction focus is predominantly on private company mergers, acquisitions and investments. We are particularly expert in complex, mid-market deals involving private capital. We assist our corporate clients throughout the transaction lifecycle.