Beyond the public-spirited reasons for a company to act as a caring global citizen, the good that a business does is increasingly seen as a necessary ingredient for its long-term growth and sustainability. A company's bottom line will undoubtedly be dependent on the trust of its customers, suppliers, lenders and neighbors in the company’s social responsibility as it is on the hard work and talents of its employees.
To this end, investors are now actively measuring a company’s business plan for how it addresses issues such as:
- Climate change, including climate-related threats to investments (e.g., extreme climate events and resource scarcity) as well as opportunities arising from alternative energy sources and sustainable technologies
- Global human rights, including labor conditions along a company’s supply chain
- Gender pay gap and diversity in the workplace
- Political contributions
Collectively, these considerations—and more—constitute a set of activities that fall under the moniker “Environmental, Social and Governance” (ESG), whose implementation and use has grown considerably in recent years. By one measurement, two-thirds of all institutional investors are making use of ESG screening policies.
Many institutions struggle with understanding the scope and corresponding strategies—legal and otherwise—of ESG. Mayer Brown has been helping clients address ESG since the concept’s formal inception, and together with the firm’s own commitment, we are well-equipped to help our clients take the steps to be more attractive to investors looking for socially responsible enterprises. We have a unified team of legal experts from across a wide range of disciplines who provide integrated advice across the range of ESG risk factors and opportunities, including on both existing and emerging reporting obligations as well as on the scope of fiduciary duties on investors.
Our lawyers help clients develop and incorporate their ESG management systems as integral parts of their overall investment strategies to meet standards required by investors’ standards, advising on corporate governance requirements for listed companies, as well as incorporating ESG issues into our legal due diligence reports where appropriate.
We advise clients on operational considerations for all three ESG criteria. Mayer Brown tracks and advises various financial services institutions, such as asset managers, insurance companies and banks, on ESG factors impacting financial services regulations such as the proposed amendments to MiFID II, AIFMD, the UCITS Directive, the Insurance Distribution Directive; and the proposed Investment Firms Directive and the Investment Firms Regulation.
On average, investors have noted that ESG investments had 2 percent higher returns than the rest of their portfolio. We have advised both financial institutions and borrowers on ESG issues, including on putting in place ESG management systems, preparing ESG action plans, advising on related corporate governance requirements under the London Stock Exchange and performing environmental due diligence on transactions. We have routinely advised borrowers on the IFC's Equator Principles and on the requirements of the Asia Development Bank and other development finance institutions.
In addition, our lawyers’ experience in the alternative energy space includes structuring and executing green bond offerings on behalf of issuers to finance renewable energy projects and even advising on the carbon credit system under the Kyoto Protocol.
We have also advised several international non-government agencies and government development agencies with respect to their accreditation master agreements with the United Nations Green Climate Fund.
Mayer Brown advises on the implications of trade and sustainable development-related provisions in free trade agreements (FTAs), such as those between the European Union and third countries. Increasingly, these agreements contain provisions to protect the environment in the signatory countries. The Japan-EU Economic Partnership Agreement, for example, is the first FTA to include an explicit reference to the Paris Agreement.
We also provide trade-related advice to companies in the renewable energy sector—for example, helping them advocate reduced customs duty rates for environmentally friendly products such as wind turbines.
We help our real estate clients minimize any environmental liability risk related to the buying, selling or leasing of real estate assets. Mayer Brown advises on hundreds of real estate deals annually, performing environmental due diligence on domestic and international transactions—including mergers, acquisitions, loans, leases, build-to-suits and financings—that raise environmental concerns.
We work with environmental consultants and our clients’ internal environmental professionals to identify and quantify the potential environmental liabilities and then to structure and document the transactions in a way that protects our clients.
In the example of, say, the acquisition of a brownfield project site, our lawyers help evaluate the nature and extent of any possible contamination, estimate the cost of remediation and define the potential return if remediated. If the project proceeds, we coordinate with landlords, tenants, developers, environmental consultants, lenders, insurance providers, regulatory agencies and other legal counsel to create a legal strategy that provides the greatest return and protection.
Mayer Brown is experienced in all aspects of environmental regulatory challenges, compliance, permitting and enforcement counseling. Our lawyers regularly work with clients to obtain and revise US environmental permits and to comply with the Clean Air Act (including Title V permits), the Clean Water Act, the Resource Conservation and Recovery Act (RCRA), the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Toxic Substances Control Act and other US environmental statutes.
Restructuring, Bankruptcy & Insolvency
Mayer Brown provides restructuring/bankruptcy support to lenders whose borrowers are affected by environmental issues. We also provide M&A support to purchasers of distressed assets that may be negatively impacted by climate change.
After gaining a solid understanding of and a respect for the client’s mission, Mayer Brown helps social enterprises develop into more commercial and complex organizations that are attractive to investors while remaining true to their core values.
Employment & Benefits
We advise on worker health and safety issues and employee 401(k) investment in socially responsible funds.
According to a recent report by HSBC on ESG policy, financial return is the top driver—cited by 48.4 percent of investors—for incorporating ESG into decision-making.1 Social impact financing continues to grow very quickly, and as it does, this type of funding begins to resemble traditional commercial venture capital and private equity sources while still retaining its respect for the “multiple bottom line.” Along with CGAP (Consultative Group to Assist the Poor), Mayer Brown has helped develop the leading forms used to structure and document private equity investments in microfinance organizations. We have also advised on some of the most successful private equity investments in microfinance and have structured and documented some of the largest and most sophisticated structured debt vehicles for these organizations.
In addition to direct social impact financing, securitization and structured-vehicle financing will continue to offer the social finance industry a promising source of funding. As one of the world’s leading securitization firms—having securitized virtually every type of asset—we are uniquely positioned to provide cutting-edge advice to all participants in this market.
Mayer Brown advises on FTA provisions aimed at strengthening labor rights, such as the standards laid down in the ILO Conventions.
Mayer Brown advises banks on their obligations under the US Community Reinvestment Act, which requires them to dedicate certain resources to servicing LMI customers.
Our lawyers counsel companies on directors’ duties required under various listing rules, as well as the development of open forums for shareholders to discuss ESG values—the social aspects of their corporate governance, such as diversity in boards.
Additionally, we advise publicly traded companies on their day-to-day corporate governance matters, which include the draft, review and update of policies and forms (including compliance, ethics, negotiable securities and related parties transactions policies, code of conduct, Form 20-F and related forms in several jurisdictions); liaison with the competent securities commission (including with administrative proceedings and general consultations on corporate law matters); and assistance with filing documents before the competent securities commission and with other information required by the corporate law.
International Finance Corporation: Beyond the Balance Sheet: IFC Disclosure and Transparency Toolkit
Investor Responsibility Research Institute: State of Sustainability and Integrated Reporting 2018
Global Reporting Initiative: About GRI
Governance & Accountability Institute, Inc.: FLASH REPORT: 86% of S&P 500 Index® Companies Publish Sustainability/Responsibility Reports in 2018
Harvard Business School: Corporate Sustainability: First Evidence on Materiality
McKinsey & Company: More than values: The value-based sustainability reporting that investors want
NASDAQ: ESG Reporting Guide
Natixis Investment Managers: Looking for the Best of Both Worlds
Sustainability Accounting Standards Board: Standards Overview
Task Force on Climate-Related Financial Disclosures
The Association for Private Capital Investment in Latin America: Environmental, Social, and Corporate Governance (ESG) Disclosure Framework for Private Equity
The Principles for Responsible Investment: What are the Principles for Responsible Investment?
The Principles for Responsible Investment: The PRI in numbers – Annual Report 2018
The Principles for Responsible Investment: About the PRI
Thomson Reuters: Villains or visionaries? Hedge funds short companies they say 'greenwash'
UN Sustainable Development Goals