ESG calls to action boost demand for legal expertise

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Law Firms Rush To Catch The Financial Industry’s Adoption Of Environmental, Social And Governance (ESG) Investments As They See The Potential Of Agreements And Regulations To Address Global Warming To Provide Billable Hours .

Almost every law firm in the world now has ESG or sustainability practices and the past year has seen unprecedented activity. From large M&A deals to employment contracts, the legal industry has recognized the need for ESG action.

At the Ashurst law firm, lawyers work with clients to incorporate a host of environmental clauses into contracts. In projects with construction clients, for example, an increasingly standard requirement for contractors includes the requirement for an Energy Performance Certificate (EPC) of at least an ‘A’ for buildings, for prove that they are energy efficient.

Other clauses require parties to meet certain carbon emissions targets, which, if not met, require remediation fees paid to a selected environmental charity, according to the company.

“Customers are increasingly focusing not only on their own net zero commitments, but also on how that interacts with customers and suppliers,” says Anna-Marie Slot, Global ESG and Sustainability Partner at Ashurst. “The work we do with clients – incorporating ESG clauses into their contracts so they can deliver on their net-zero promises – will only increase. “

Ashurst is one of dozens of law firms that have teamed up to create open source contract clauses offering climate solutions. The initiative, called the Chancery Lane Project, has developed contractual clauses that encourage suppliers to adopt environmental objectives to reduce a company’s indirect carbon emissions. It also offers generic “cooler” clauses to make it easier for lawyers to incorporate climate issues and net zero goals into a contract.

Social media has exposed companies to the public judgment of their ESG credentials, says Adrian Walker, partner at Hogan Lovells and head of the law firm’s ESG practice. This can damage the reputation of those whose actions do not keep their promises.

It is also increasingly recognized that companies that meet their ESG commitments tend to outperform their competitors. “We are witnessing a shift from ESG contractual provisions that require legal compliance to those that stimulate performance,” he notes.

Bank of America research shows that as stock markets fell around the Covid-19 epidemic, ESG investment strategies outperformed by 5 to 10 percentage points in the United States and Europe. Companies with lower ESG scores suffered larger declines in earnings per share.

Lawyers are also needed for corporate ESG disclosures, especially as regulators are looking for misleading claims or “greenwashing”. Failure presents significant risks, ranging from litigation to reputational damage, Walker says.

The European Commission is also rolling out a Taxonomy for Sustainable Finance next year – a labeling system to help guide investments in green projects by defining which activities align with EU environmental goals. “You first need to report how much of your activity relates to activities eligible for taxonomy and later what is aligned with taxonomy,” says Vanessa Havard-Williams, Global Environment Manager at Linklaters . “The detail is really delicate.”

ESG is also increasingly part of the due diligence process in mergers and acquisitions. Lawyers have seen “Weinstein clauses,” named after disgraced film producer Harvey Weinstein, that require target companies to disclose allegations of sexual misconduct among their senior executives, according to law firm Wachtell Lipton.

Whole countries can also be held to account. Law firm Hausfeld worked with the charity Save the Children to intervene in the first climate change case before the European Court of Human Rights. Following deadly forest fires in Portugal in 2017, young people in the region challenged that countries were not doing enough to tackle global warming.

ESG legal work has even extended to antitrust law. The office of the EU’s Digital and Competition Policy Officer, Margrethe Vestager, explored how competition rules could be changed to work with the EU’s green deal.

Dechert is currently working on ways to fine-tune antitrust provisions to help companies collaborate on climate change initiatives. “The need is clear to have explicit advice on what is allowed,” the company says.


Best practice case studies

Researched, compiled and classified by RSGi. “Winner” indicates that the organization has won an FT Innovative Lawyers 2021 award

Sustainability and ESG

Swedish climate activist Greta Thunberg protests outside Swedish Parliament Riksdagen in Stockholm

© AFP via Getty Images

WINNER: Hausfeld
The firm’s lawyers are leaders in global climate litigation and have drawn on Hausfeld’s expertise in children’s rights. The company filed a petition with the United Nations Committee on the Rights of the Child on behalf of Greta Thunberg, the environmental activist, and 15 other young people between the ages of eight and 17. This argued that the state’s failure to tackle climate change violated children’s human rights. . It also helped the charity Save the Children defend children’s rights in the first climate change case before the European Court of Human Rights.

Dechert
Since 2018, Dechert has been part of a lobby group calling for changes in competition law that will allow sustainability initiatives to move forward, such as ensuring that farm workers receive a living wage. This involved working with the Brussels-based Fair Trade Advocacy Office and talking to the European authorities. Dechert organized events, provided analysis, and introduced activists to government agencies. So far, the Dutch competition authority has issued new guidelines and the UK and Greece will soon follow suit.

Latham and Watkins
The company’s ESG working group worked with Anthesis, a global sustainability consultancy, on Risk Horizon, a due diligence tool that selects potential transactions for ESG risks. The tool is now used by other law firms. The lawyers also helped data provider Standard & Poor’s launch a climate index to benchmark equity securities against Paris climate agreement targets. The company is advising Microsoft on how to invest its $ 1 billion Climate Innovation Fund.

Ashurst
Anna-Marie Slot, the firm’s global sustainability partner, heads her 100-person ESG / sustainability group, which aims to integrate ESG principles into all of the firm’s activities. Ashurst’s work includes advising Tritax Big Box, a logistics real estate specialist, on the first green bond issued by a UK property investment company and working with Lundin Energy, a Swedish oil and gas group, on refinancing with a $ 5 billion ESG loan. . Ashurst has also launched ESG Ready, which provides the latest regulatory information.

Addleshaw goddard
The infrastructure and energy lawyers represented Southern Water, which supplies the south-east of England, in negotiations over an unusual collaboration with Portsmouth Water. Southern Water has funded the development of a new reservoir and secured access to new drinking water supplies to alleviate shortages in the southeast.

Herbert Smith Freehills
The firm is a founding member of the Net Zero Lawyers Alliance, a coalition primarily made up of law firms, which aims to help the legal sector achieve net zero carbon emissions by 2050. The firm’s own goal is to achieve net zero by 2030. HSF is developing software to monitor and manage its carbon emissions. The company also supports the Earthshot Prize, an awards program for initiatives that help the environment.

Integrities
The 12-partner firm has turned to focus on the “green transition” of its energy, mining and steel clients. It is working to revive the renewable energy market in Ukraine, including green hydrogen trading and energy storage, by taking on several projects through funding, licensing and regulatory approvals, as well as advice on business operations of renewable projects. The company is also advising the Ukrainian government on a tariff and reward structure to encourage the production of renewable energy.

© Ritzau Scanpix / AFP via Getty Images

Pinsent Masons
Lawyers have arranged the power purchase agreements for Tesco, which means the UK supermarket now uses 100% renewable energy in its stores and distribution centers. The contracts make it easier for renewable energy projects to obtain financing. The company is also supporting Tesco in its sustainability strategy, including installing solar panels and advising companies in its supply chain.

Linklaters
The firm has launched a program, ESG Accelerator, to familiarize its lawyers with ESG issues. This involved podcasts, training for clients and staff, and roundtables for senior executives at the London-based company. Due to Linklaters’ expertise in areas such as carbon offsetting, the firm has been named a sustainability specialist on the global panel of law firms of Nestlé, the agri-food company.

Researched, compiled and classified by RSGi. “Winner” indicates that the organization has won an FT Innovative Lawyers 2021 award


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