ESG: emerging regulatory risks in the US and Europe

A webinar presented by the IBA Business Human Rights Committee

Featuring keynote by Melissa Hodgman: Acting Director, Division of Enforcement, US Securities & Exchange Commission, Washington, DC.

Environmental, social and governance (ESG) matters are regularly cited by general counsel as one of the two or three issues of greatest concern to them. ESG matters are also at the top of the global agenda, with a focus not only on the climate crisis and broader environmental issues, but also social and governance issues, including diversity and inclusion, and accountability.

In the US, the Securities and Exchange Commission (SEC) has been increasingly active in the ESG space. To protect the investing public from material gaps or misstatements in issuers’ disclosures, in 2021, the SEC announced the creation of a Climate and ESG Task Force. Thus far, the SEC has brought ESG-related disclosure actions against several high-profile public companies. Some of the penalties associated with non-compliance include fines and regulatory probes. Similarly, the UK sees regulation of the financial sector as essential to a more sustainable, long-term future. Last year, the UK’s financial regulatory body, the Financial Conduct Authority (FCA), charged its first Director of ESG with a mandate to embed ESG considerations across its functions. The FCA itself is tasked with advancing the UK government’s commitment to a net-zero economy by 2050.

European regulators have been even more active in the ESG space than their US and UK counterparts. EU rules require corporate sustainability reporting by all large companies and all listed companies (except listed micro-enterprises), requiring them to disclose information on ESG-related risks and opportunities. On 5 January 2023, the EU’s Corporate Sustainability Reporting Directive (CSRD) entered into force. This new directive strengthens existing reporting rules. With the advent of the CSRD, approximately 50,000 companies will be required to report on sustainability matters for the 2024 financial year. Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS). The CSRD requires that EU Member States put into place effective systems of investigations and sanctions aimed at detecting, correcting and deterring inadequate execution of ESG rules and reporting requirements.

Please join us on 28 June for a discussion of this new regulatory landscape, and of what lawyers need to know to effectively navigate ESG-related regulatory risks.