Local Connections. Global Influence.

Mitigating ESG Risk

June 2021
ESG: Opportunity and Risk Managing and Addressing Litigation Risks
Environmental, social and governance (ESG) considerations are at the forefront for As well as improving your ESG credentials and disclosures, there are a number of
governments, for regulators, for consumers and for employees. Businesses cannot ignore potential litigation threats arising from the increased focus on ESG:
the growing momentum behind ESG factors and the drive to greater disclosure and
transparency.
Stakeholder Activism
But it is more than that. When it comes to developing, implementing and reporting on
strategy, businesses are beginning to see ESG factors as central to creating long-term Some stakeholder groups are using financial disclosure laws to pressure companies
value. ESG factors are proving themselves as material drivers of financial performance to increase the amount of information they disclose about their emission of
and business resilience. More transparency is leading to more profitable investing and greenhouse gases and their plans to minimise those emissions. Increased
better disclosure is seen as benefitting all stakeholders. This is highlighted by a recent engagement with stakeholder groups on issues of concern can decrease the risk of
global study by Fidelity showing that companies with better ESG ratings generated higher activism, adverse publicity and litigation.
returns than did their peers in 2020.
Pressure on businesses to improve their ESG transparency and disclosures is coming Liability for ESG Disclosures
from:
• Investors and lenders imposing ESG conditions on access to capital The rise of “greenwashing” is prominent, which relates to the practice of making an
• Statutory and regulatory obligations and the resulting regulatory scrutiny unsubstantiated or misleading claim about the environmental status of a business or
the environmental benefits of a product, service, technology or company practice.
• “Voluntary” industry group standards, charters and principles of best practice Incorrect or misleading statements about a company’s ESG performance can increase
• Consumer and market pressure the risk of litigation against a company and its directors. Putting in place an effective
audit and assurance regime around ESG disclosures can help mitigate this risk.
• Stakeholder activism
• Current and prospective employees Regulatory Enforcement
• Benchmarking against competitors
With increased law and regulation comes the increased risk of regulatory
• Increased audit and assurance requirements
enforcement if law and regulation is breached. Organisations need to have an
As businesses address greater corporate transparency alongside a strong corporate effective governance framework in place around ESG-related risks and issues
purpose that embeds sustainability and ESG initiatives into the business strategy and together with robust policies and procedures.
operating model, they need to consider the risks that come with that and how to manage
those risks. Claimants are increasingly looking to exploit corporates’ ESG policies, practices and
disclosures as part of their litigation strategies:
• By using environmental statutes against companies for their perceived
“contribution” to climate change
• Courts are accepting parent company liability and duty of care in claims arising from
allegations of the local activities of overseas subsidiaries, for example modern slavery
and workers’ rights violations
• NGOs, claimant law firms and litigation funders are increasingly using class actions to
seek judicial redress

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Getting It Right
ESG risk reviews should be undertaken periodically and at every stage of your business cycle.

Fundraising and Investing Policies and Disclosures

• Investor circulars and prospectuses • Corporate social • Financial statements and
Fundraising and Policies and responsibility disclosures
• Responsible investment policies
Investing Disclosures • Health and safety • Equal opportunities
• Ongoing ESG reporting and disclosure
to investors • Climate change • Board diversity
• Audit and assurance • Decarbonisation • Gender, CEO and ethnic
pay gap reporting
• Business and human rights
ESG Risk • Biodiversity loss
• Policies, practices and
Mergers and
Cycle Business statements with respect to • Water scarcity
Mergers and Acquisitions Acquisitions Collaborations
activities of subsidiaries
• Deforestation

• SPAs and ESG representations and warranties

• Targets’ policies, practices and key contracts for Business Collaborations
ESG litigation risk Recruitment
• Increased ESG-focused due diligence and Retention • Shareholder, joint venture and partnership agreements
• Investor requirements to be met • Management and outsourcing agreements
• Service and supply agreements
• Supply chain monitoring and assurance

Recruitment and Retention

• Communication and engagement with workforce

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ESG Risk Checklist
We have developed a quick checklist to help you to evaluate and assess ESG risk factors that affect your business.

ESG Risk Assessment Yes/No

Have you scoped your ESG-related policies and mandatory ESG compliance obligations?

Do your existing policies meet your ESG objectives and obligations?

Do you need to develop, redesign or overhaul your ESG policies?

Have your policies been reviewed to ensure they appropriately mitigate ESG litigation risk?

Have you undertaken a high-level flag ESG litigation risk review?

Where ESG litigation risk is identified, have you taken appropriate actions to mitigate this?

Have you designed and implemented a roadmap to meet your ESG risks?

Have you stress tested your ESG policies?

Have you benchmarked your ESG risks against current best market practices and your competitors?

Have you mitigated your ESG litigation risk by drafting and implementing appropriately worded policies, practices and other ESG documentation?

Have you identified and prioritised the mitigation of ESG risk associated with the key stakeholders and third parties for your business?

Do you have an effective monitoring system to identify future ESG risks?

Do you have a process for identifying the common “themes” that emerge concerning the nature and scope of ESG risks for different classes of stakeholder?

Do you have a system to effectively monitor and mitigate ongoing current ESG risks?

Do ESG risks feature in your audit and assurance plan?

Do ESG risks get considered by the board or executive/senior management team?

Have you identified someone at board level responsible for ESG?

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How We Can Help
We adopt a holistic approach to ESG risk, drawing on experts from our global corporate, environmental, compliance, public policy,
employment, dispute resolution and litigation teams to effectively manage risk, reputation and meet regulatory requirements.
• We help you demonstrate accountability and transparency. From the governance • We are experienced in handling high-profile injunction proceedings to remove
reviews that provide independent assurance for investors to strategic guidance protestors and activists from large and often sensitive sites. Our team is able to
on purpose and business integrity processes, our services enable corporates to act swiftly in dealing with urgent instructions to pursue appropriate injunctive relief, with
demonstrate accountability and transparency in their relations with investors and a strong track record in obtaining interim and final injunctions to protect valuable assets.
shareholders.
• We are experienced in the wide range of possible solutions available for
• We develop robust compliance frameworks, assisting in creating comprehensive decarbonising businesses and can assist clients, both legally and commercially, to
compliance programmes and/or enhancing a company’s existing programme to meet these challenging objectives. We understand the new financial risks, as well as
effectively manage risk and cover compliance with legal and regulatory requirements. material financial, legal, strategic and regulatory risks, and can advise on appropriate
In addition, we offer a holistic assessment of business integrity that takes into account steps to mitigate them.
reputational and commercial factors.
• We can help to mitigate against modern slavery and anti-bribery and corruption
• We scope your ESG-related policies and mandatory ESG compliance practices. We have a deep understanding of the national and international standards,
obligations. These are benchmarked against competitor, industry and market protocols and policy agendas to support productivity and help you to consider the impact
practices. We will design and implement a road map to meet these obligations on employment, direct and indirect, in your investment decisions. We can also support
in a manner that mitigates your ESG litigation risk by drafting and implementing you to put in place adequate procedures to ensure that suppliers, and the persons who
appropriately worded policies, practices and other ESG-related documentation, while perform services for them, do not engage in bribery or corrupt practices.
providing ongoing monitoring and benchmarking against future developments.
• We can ensure compliance and mitigate risk in your supply chain, through
• We are experts in environmental advisory and regulatory work, advising on actual commercial and supply chain arrangements, ensuring product stewardship across the
and threatened enforcement action and civil claims. With one of the most respected entire life cycle of production, use and recycling of products. We can support businesses
and most experienced practices globally, we help to ensure that our clients make sound to develop policies and practices used to promote economic inclusion when selecting
environmental decisions and have a solid risk management strategy in place. As carbon suppliers, support the implementation of a supplier diversity programme and policies,
disclosures become mainstream and we move to nature disclosures, our teams can and help to identify risks in your supply chain (safety, productivity, etc.) that you can
advise on environmental regulation and environmental litigation trends, minimising mitigate through education and skills development.
corporate risk.
• We can identify human rights risks to your businesses, with support to put policies
• Our cross-jurisdictional reputation management team has been involved in place to respect human rights that address modern slavery, human trafficking and
in a number of high-profile cases and can assist clients with reputation/brand child labour. We help to assess human rights risks in relation to your supply chain and
management issues, defamation claims and managing disgruntled or vexatious third integrate human rights considerations into your supplier and third-party due diligence
parties. In addition, we can support you on any reputational risks across social media to practices. We can provide support around general supplier diversity issues.
protect your business.
• We can help embed the green agenda into your policies, practices and employee
• Our dispute resolution teams are experienced in handling complex and public benefits. We advise employers across the range of human resource issues, from the
litigation in the ESG arena. We can design and implement a litigation strategy policies, procedures and training that support best practice (on D&I, mental health
to respond to ESG disputes that arise, whether from shareholders, NGOs or other and wellbeing, work-life balance, pay and reward mechanisms, etc.) to representing
stakeholders. We can also support you in developing a PR strategy to mitigate the your interests and on remedial measures when things go wrong (investigations,
reputational risk from public proceedings. disciplinaries, employment litigation, performance management, etc.

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Contacts
We offer practical solutions and systems
Louise Barber Jonathan Chibafa
that our clients can readily implement and Partner, Manchester Director, London
monitor. T +44 161 830 5258 T +44 20 7655 1622
E [Link]@[Link] E [Link]@[Link]
Members of our team have experience working at senior
levels of government, at national regulatory authorities, as Jason Blakey Anita Lloyd
senior private sector executives and as general counsel. Partner, Leeds Director, Birmingham
T +44 113 284 7641 T +44 121 222 3504
We can work with you to risk review your sustainability and
E [Link]@[Link] E [Link]@[Link]
ESG litigation risks and recommend mitigation strategies
that operate within your existing governance and risk
Peter Crossley
management framework.
Partner, London
For businesses looking to design, develop or overhaul their T +44 20 7655 1299
policies and practices in relation to sustainability and ESG, E [Link]@[Link]
we can:
Hannah Kendrick
Partner, Leeds More than 1,500 lawyers Practising in more
Scope your ESG-related policies and mandatory ESG T +44 113 284 7620 across four continents than 140 jurisdictions
compliance obligations. E [Link]@[Link]

Matthew Kirk
Benchmark these against competitor, industry and International Affairs Advisor, London
market practices. T +44 207 655 1389
E [Link]@[Link]
Top 20 global legal practice More than 40
Design and implement a roadmap to meet your Caroline Noblet
based on number of lawyers languages spoken
objectives in a manner that mitigates your ESG risk. Partner, London
T +44 20 7655 1473
E [Link]@[Link]
Provide ongoing monitoring and benchmarking against
future developments. Clifford Sims
Partner, London
T +44 20 7655 1193
To keep up to date with the latest insights, blogs, podcasts
E [Link]@[Link]
and events please visit our ESG hub.

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