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How ESG Efforts Can Promote Environmental Justice

Jose Almanzar and Paula J Schauwecker


  • Examines how climate change will trigger more frequent and extreme weather events.
  • Looks at how the effects of climate change are likely to increase the impacts in communities of color and low-income communities.
  • Explores the great opportunity for investors and companies to help advance the goals of EJ with ESG-related issues on the rise.
How ESG Efforts Can Promote Environmental Justice
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On August 9, 2021, the United Nations Intergovernmental Panel on Climate Change (IPCC) published its most recent report on the global state of climate science. The comprehensive and starkly sobering new report tells policy makers, governments, and corporations, in no uncertain words, that we must all work with urgency to significantly lower global greenhouse gas emissions and ramp up our climate adaptation efforts.

Less than three weeks later, and on the 16th anniversary of Hurricane Katrina, Hurricane Ida made landfall in Port Fourchon, Louisiana. Liz Hampton & Marianna Parraga, Hurricane Ida Slams Critical U.S. Oil Port as It Makes Landfall, Reuters (Aug. 29, 2021). With sustained winds of 150 miles per hour, the Category 4 hurricane turned out to be the fifth-to-seventh-most destructive hurricane to strike the United States. A few days later, New York City felt Ida’s wrath. The storm dropped more rainfall in one hour than Chicago averages in an entire month. Videos posted on the news and social media showed cars being whisked away like scattered leaves across many city streets and intense flooding of several subway stations. In all, Ida caused $50 billion in damages across a large portion of the United States, much of that financial harm to be borne by insurers and companies. Rebecca Santana, Melinda Deslatte & Janet McConaughey, After Ida, Small Recovery Signs Amid Daunting Destruction, Associated Press (Sept. 1, 2021).

While it’s difficult to link specific extreme weather events to longer-term climate change, scientists are certain that “[h]uman influence on the climate system is now a fact.” Climate Change 2021, IPCC, Technical Summary at TS-8. A warming Earth, in turn, will trigger more frequent and extreme weather events. Climate Change Indicators: Weather and Climate, U.S Env’t Prot. Agency (last accessed Sept. 10, 2021). In addition to the flash flooding brought by Ida, the unprecedented heat waves that engulfed the Pacific Northwest in June 2021 (typically a 1-in-1,000-year event), the first-ever emergency water shortage declaration for the Colorado River, and other extreme weather events are a constant reminder: No region of the United States is immune from the effects of climate change. Rebecca Lindsey, Preliminary Analysis Concludes Pacific Northwest Heatwave Was a 1,000-Year Event . . . Hopefully, Nat’l Oceanic & Atmospheric Admin. (July 20, 2021); Abrahm Lustgarten, 40 Million People Rely on the Colorado River. It’s Drying Up Fast, N.Y. Times, Aug. 27, 2021.

And while no region is safe, certain communities will be impacted more severely than others. In early September 2021, the U.S. Environmental Protection Agency (EPA) concluded that people of color and low-income communities are the most vulnerable to the most severe impacts of climate change. U.S. Env’t Prot. Agency, Climate Change and Social Vulnerability in the United States: A Focus on Six Impacts (Sept. 2021). Among the report’s findings were that (1) Black and African American individuals are 40% more likely to currently live in areas with the highest projected increases in mortality rates due to climate-driven changes in extreme temperatures, (2) Black and African American individuals are 34% more likely to live in areas with the highest projected increases in childhood asthma diagnoses due to climate-driven changes in particulate air pollution, (3) Latinx individuals are 43% more likely to currently live in areas with the highest projected labor hour losses in weather-exposed industries due to climate-driven increases in high-temperature days, and (4) Latinx individuals are also 50% more likely to live in coastal areas with the highest projected increases in traffic delays from climate-driven changes in high tide flooding. Further, in detailing six specific impacts of climate change, including poor health outcomes, the EPA also found that Black and African American individuals are the only groups of people more likely to face higher risks to all six impacts identified in the report.

At the same time, destructive climate events are also hitting asset managers, insurers, bankers, and the physical infrastructure owned by companies, which are all vulnerable to climate change–related risks. See id. For this reason, climate change and its concomitant impacts are quickly becoming a key factor in how investors evaluate company strategy and performance. Investors are using the power of the collective vote to promote sustainability and racial justice. Ben Maiden, Investor Groups Probing Issuers on Racial Equity Messaging This Proxy Season, Corp. Sec’y (June 17, 2021). Sustainability and racial justice are at the heart of environmental justice (EJ).

The recent increase in shareholder advocacy, particularly in the area of environmental, social, and governance (ESG), is leading more companies to focus on ESG strategies. Indeed, ESG investments could—and likely will—become a $1 trillion category by 2030. See Interview with Armando Senra, BlackRock iShares, CNBC: ETF Edge (May 7, 2021). Increased investor attention to ESG should come as no surprise to corporate boards: Shareholders are seeing the fiscal and moral benefits of environmental sustainability, racial justice, and transparency in governance. This is evident by the substantial increase in the number of shareholder proxy proposals regarding environmental and social topics in 2021, which surpassed last year’s record by more than 50%. Institutional investors are also supporting this trend. 2021 Proxy Season Review, Harv. L. Sch. F. on Corp. Governance (Aug. 5, 2021).

With ESG-related investing on the rise, there is great opportunity for investors and companies to help advance the goals of EJ. Below we describe a few ways that board members, ESG investors, and in-house counsel can help their companies to do so.

One way to bring new ideas to the boardroom is to recruit board members and executive leadership from diverse backgrounds. Diversity of leadership necessarily invites a variety of viewpoints, opinions, and considerations. Part of this effort could include the recruitment of individuals with degrees from historically Black colleges and universities, often referred to as HBCUs, and minority serving institutions (MSIs are institutions of higher education that serve minority populations).

Another way to broaden the mindsets and experiences of board members and corporate staff is for them to make it a priority to learn long-standing EJ principles, such as the 17 “Principles of Environmental Justice” that were born out of the First National People of Color Environmental Leadership Summit in October 1991. Delegates to the First Nat’l People of Color Env’t Leadership Summit, The Principles of Environmental Justice (1991). While a company may not be able to adhere to all of these principles for every corporate decision, the act of exposing the board and executive teams to these principles could encourage positive change. With a diverse board and informed members and employees, the company will be more likely to incorporate EJ considerations into as many corporate decisions, programs, policies, and activities as possible.

An on-the-ground step that companies, corporate counsel, and boards can take is to learn where EJ communities are located in relation to their operations. Many times, corporate decision-makers are unaware that certain aspects of their operations are negatively impacting the health or environments of EJ communities. Therefore, companies should become accustomed to utilizing existing and free tools such as EPA’s EJSCREEN, California’s CalEnviroScreen, Washington State’s Environmental Health Disparities Map, and New York’s Map of Potential Environmental Justice Areas to identify EJ communities that may be impacted by their operations. Once those communities have been identified, companies should communicate early and often with EJ leaders. One of the biggest roadblocks to progress can be the lack of meaningful involvement of EJ communities in decisions and activities that could result in negative impacts. Companies should provide a space and forum for meaningful involvement by local leaders and EJ advocates to speak up about concerns of proposed actions. In this way, EJ community residents can have an opportunity to inform the company about decisions that may affect their environment and/or health, and the companies, in turn, can be better informed before taking action.

In sum, despite improvements in environmental protection over the past 50 years, many communities of color and low-income individuals continue to occupy unsafe and unhealthy physical spaces. The effects of climate change are likely to increase the impacts in these communities. Companies, shareholder activists, corporate counsel, and corporate boards can make substantial impacts on climate change and EJ and potentially lessen the impacts of climate change on these communities by applying EJ principles to corporate decision-making and following some or all of the steps above.