ESG Overview - What is ESG?


  • Environmental, social, and governance factors help investors measure the sustainability and social impact of a business
  • ESG is being used as a measure to predict a company's future financial performance
    • "Doing good while doing well": a higher ESG score has been linked to profitability
  • Asset managers are increasingly focused on ESG, which has become an important factor in their investment decisions
  • Companies are increasingly providing disclosure of ESG metrics

ESG Overview - Breaking Down ESG


  • What impact (positive or negative) does the Company have on the environment?
  • Considerations include environmental risks and opportunities, reducing the Company's and its partners' carbon footprint, greenhouse gas emissions and clean energy


  • What impact does the Company have on the company's stakeholders and society generally?
  • Considerations include labor relations, human rights, safety, product integrity and employee morale & turnover

Corporate Governance:

  • How is the company run?
  • Considerations include diversity, board independence, executive compensation, and policies for reporting & disclosing information

Who is Driving the Emphasis on ESG?

  • Large investors, such as BlackRock and State Street
  • Directors – want their companies to be identified as leaders in this area
  • Business customers (particularly in Europe) increasingly link purchasing decisions to ESG matters
  • Business customers (particularly in Europe) increasingly link purchasing decisions to ESG matters
  • " Employees – in technology and other areas, employees are feeling increasingly empowered to insist that their companies pursue and achieve ESG; this, in turn, becomes an employee retention and attraction matter
  • Government regulators – both in the EU and the SEC in the United States

Notable Aspects of the Current ESG Landscape

  • Companies find themselves forced to expend dedicated resources to address a proliferation of ESG assessments, issued by organizations such as SASB, GRI and TCFD
    • Driven by customer requirements and public perception goals
  • Companies are increasingly including ESG factors in their executive compensation programs to incentivize the achievement of ESG goals and manage ESG risks
    • Compensation Committees wanting to drive ESG-centric behavior
  • Companies continue to issue green bonds and other sustainable finance bonds ($417.8 billion issued in first half of 2022 according to Climate Bonds Initiative)
    • There is a growing desire for these types of investments among individuals and some institutional investors

Notable Aspects of the Current ESG Landscape (cont.)

  • The amount of ESG-related litigation has increased and continues to grow
    • In particular, there has been a rise in the number of suits "alleging greenwashing" – where plaintiffs allege that companies have made misrepresentations about their environmental practices, achievements and commitments
  • ESG-driven activist campaigns
    • Climate-focused activist shareholder won three seats on ExxonMobil's board in a proxy fight using ESG themes to argue for needed changes in board composition (2021)
    • More traditional activists have been raising ESG issues as a platform to gain support for campaigns

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