Environmental, Social and Governance (ESG)

Global

Businesses face a number of challenges in the current climate. While financial, regulatory, employment and pensions matters may be a priority for now, Environmental, Social and Governance (ESG) issues remain high on board agendas. Discussions are increasing around green growth and how businesses can respond to new opportunities as our environment and society evolves. Doing good is being equated more and more with doing well, making it essential for businesses to understand where ESG risks and rewards may lie.

What is ESG?

ESG covers a range of topics that combine to measure how ethically a company behaves:

  • Environment: climate change, biodiversity, waste, water and resource use, pollution
  • Social: human rights, labour practices, health & safety, community, staff diversity
  • Governance: corporate governance, company ethics, regulatory compliance, executive pay, board diversity, lobbying, approach to taxation

Why ESG is important

While the companies that choose to work with you may take into account your business' ESG performance, there are increasingly other factors to consider.

The rise in benchmarks and indices that track a company's performance on ESG metrics means that the publication of 'warm and fuzzy' sounding pronouncements is no longer enough. ESG has moved from the domain of a PR and Communications team to become a board-level concern. ESG issues present a series of governance risks in relation to reputation, regulating compliance, investment and sales.

However, alongside managing such risks and requirements, there are many opportunities around sustainability and ESG. Those that are forward thinking in this area are likely to thrive in the 'new normal'.

ESG in business

ESG risks are increasingly becoming a focus for shareholders, with investment decisions built on data and planning that considers long-term risk assessments and strategies. Institutional investors are likely to ask questions about a range of different areas that can destroy or create value for businesses, from how well they can defend themselves against cyber security attacks to whether senior leadership has diverse backgrounds.

Companies that can demonstrate that they are managing these risks and meeting these standards are better equipped to sustain their operational and financial performance, and ultimately their value for socially responsible investments.

How can we help?

While ESG factors can often be associated with sustainability or Corporate Social Responsibility (CSR), the bottom line is that they are a reflection on how a business or institution manages risk, as well as how they contribute to society. Whatever your current position, there are opportunities now to 'reset' and consider how your business can be better aligned to sustainability goals.

Gowling WLG's specialist team is fully engaged in developments around ESG. Comprising of lawyers working across practice areas, the team provides a wide spectrum of advice helping clients to understand their responsibilities and identify where risks and opportunities may lie.

Our areas of expertise include:

Meet the team

Our team brings together specialists from the main practice areas that support ESG matters. If you are in need of advice and guidance regarding ESG issues, contact a member of the team today.

Canada

ESG advisory services

Adding to the list of challenges businesses face, Environmental, Social and Governance (ESG) issues are rapidly becoming priorities. Discussions abound on how businesses can plan for, and comply with, increasing market demands for enhanced environmental activism, a stronger commitment to sustainability, an active role in addressing social issues and an overall improvement as to how businesses govern their entire supply chain.  It is essential that businesses understand ESG risks and opportunities.

ESG Factors for businesses

ESG factors have evolved over the past few years and have now become a critical focus for businesses, investors, NGO's, governments, stakeholders, financial services, lenders, insurers and consumers. Expectations of businesses in this dynamic landscape have never been higher. The effects and impacts is in their brand, strategy, reporting, human capital management, operations, risk management and long term value.

Under the E, there are a number of critical factors including climate change, carbon footprint, circular economy, biodiversity and water use; under the S, there are employee health and safety, social justice, systemic racism, diversity and inclusion, and human rights (as well as human rights abuses such as modern slavery) factors; under the G, factors include corporate purpose, board and C-suite gender diversity and pay equity as well as shareholder activism. Businesses are doing a deep dive into how these issues present risks and require careful management and oversight as well as opportunities to be explored and activated.

In addition to the internal structure and reporting issues and requirements, there are stronger external pressures. Proponents of responsible investing, impact investing and sustainable investing are continually pressing for better and more standardized reporting of Canadian ESG issues. Simultaneously, governments around the globe are continuing the transcendence of "hard" law over "soft" law and originating new and more complex regulatory and compliance programs which create additional risks and obligations for businesses.

Class actions and single plaintiff litigation have opened the door for more far-reaching and impactful jurisprudence that stresses risk management efforts.

The adoption and application of international standards, principles, guidelines and goals, which may impact strategies and operations across a business and in a multiplicity of jurisdictions, have many businesses working diligently in unfamiliar territory.

We can help

Our ESG advisory team provides a wide spectrum of advice helping clients to understand their responsibilities and identify where risks and opportunities may lie.

Our ESG advisory services include Governance, Risk Management, and Due Diligence advice; Investment & Financing options, and Compliance & Reporting in connection with the following:

Our ESG advisory services

Contact our Canadian team

Elizabeth (Beth) Burton

Partner, Financial Services Practice Group Leader (Calgary)

Stephen Pike

Partner

Lorne Rollheiser

Partner, Head of Oil & Gas