A new book on environmental, social, governance (ESG) is required reading for all environmental, energy, and resource lawyers. It provides a useful overview to assist lawyers in addressing fundamental questions of corporate governance and corporate policies in a fast-paced regulatory world.
At the outset, the authors note that the ESG movement is “here to stay.” The authors observe that the actual meaning of the phrase “Environmental, Social, and Governance" is elusive, but suggest that it can involve recognition that a corporate entity has many responsibilities in addition to the traditional duties to shareholders and return on investment. The consideration of environmental, social, and governance values is not just some liberal, “woke” notion. To take two examples: Elon Musk’s social policy (if it is indeed a formal policy) for Twitter (now X) purports to place great value on free speech, even speech covering polarizing topics, which has precipitated the departure of many revenue-producing commercial advertisers. Closer to the environmental, energy, and resources core, Koch Industries, which has significant fossil-fuel interests, continues to employ the press, political campaign contributions, and offensive litigation in an effort to combat what some might deem to be an overemphasis on social and environmental issues by the government. Even so, it is noteworthy that the company has a webpage on governance that includes the statement: “Practicing stewardship and acting with integrity are how we support our employees, protect our environment and invest in our communities–today and into the future.” So, even two corporate entities now identified as having conservative billionaire owners invoke ESG-like policies to justify their positions.
But soft, in what form, and within what legal constraints, will ESG remain? What does ESG cover, and does it include other politically charged concepts such as diversity, equity, and Inclusion, or the much-debated application of environmental justice initiatives? Do these values clash with fundamental corporate notions of maximizing shareholder returns or threaten yet more corporate touting of “values” that are inherently difficult if not impossible to quantify in an annual report?
The authors of Environmental, Social, Governance: The Professional’s Guide to the Law and Practice of ESG, attempt to address these questions. They are 45 lawyers with experience ranging from financial service transactions, political and legislative work, SEC enforcement counseling, and environmental law issues. Most are current or former members of the Arnold & Porter law firm. The authors’ underlying premise is that when the ESG “rubber meets the road,” it is the lawyer as counselor on whose shoulders much of the hard work will fall. The lead authors and editors note that attorneys will need to advise corporate entities (or stakeholders interested in their businesses) on a wide variety of topics such as board diversity, pension fund investment guidelines, and net-zero commitments in the pressurized context created by a “Balkanized political landscape.”
The authors conclude their introductory remarks with a critical observation about the “catch-me-if-you-can” nature of ESG: “Knowing how fast-paced the ESG world is today, our aim is to provide practitioners with a multifaceted set of navigational tools designed to be helpful in charting a course through these interesting, challenging, and ever-changing waters.”
To give but one illustration of how fast the ESG world is moving, within two weeks of this book’s publication, California passed a new statute commonly known as the Climate Corporate Data Accountability Act. That law will require corporations that have over $1 billion in total annual revenues and that do business in California to report on various types of greenhouse gas emissions starting as early as 2026. California coupled that disclosure of emissions with a separate statute that mandates corporate disclosures of financial risks resulting from climate change factors. These types of mandatory disclosures affect many large corporations, and attorneys advising such companies are already issuing advisory alerts on the new requirements.
Neither this book nor any other update can effectively capture all the fast-moving aspects of statutes and regulations that impact ESG and corporate disclosures. Rather, this book is an invaluable resource for highlighting some current concerns and allowing the attorney to consider her or his responsibilities to the corporate client. For example, the authors suggest that directors (and their lawyers) take a close look at existing Directors & Officers liability insurance coverages for disclosures that may not be literally required by a specific regulation but are deemed appropriate by a particular board. In a separate chapter, the authors address the multiple and overlapping federal and international regulations dealing with climate-related disclosures.
In a dynamic and multifaceted world, this new book is a necessary starting point examining a myriad of legal and policy issues useful for every attorney. This new ESG book is available to order through the ABA.
