Earlier this year, Paul, Weiss’s ESG and Law Institute signed on its second academic partner, Howard University School of Law. Dave Curran, executive director of the Institute, recently sat down with Howard University School of Law Dean Danielle Holley-Walker and Paul, Weiss partner Secretary Jeh Johnson to discuss the partnership’s impact.

The ESG and Law Institute is hosting an off-the-record, senior-level roundtable conversation on the European Commission’s Sustainable Finance Disclosure Regulation (SFDR), moderated by Dave Curran, ESG and Law Institute executive director and co-chair of the Paul, Weiss ESG Advisory Practice.

The discussion, “Upcoming Collision: SFDR and Human Capital Data,” will explore what the SFDR’s upcoming implementation means for fund managers, the current state of data assurance, better practices for portfolio data collection, and the relationship between the SFDR and the Corporate Sustainability Reporting Directive (CSRD).

Speakers will include Robert Esposito, senior ESG counsel at Apollo; Karen Karniol-Tambour, co-chief investment officer for Sustainable Investing at Bridgewater Associates; Rob Zochowski, program director, Impact Investing & Sustainability Special Projects at Harvard Business School; and Marie Freier, global head of Cross Asset ESG Research at Barclays.

The virtual roundtable will take place on May 17 at 10 a.m. ET.

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Dave Curran, ESG and Law Institute executive director and co-chair of the Paul, Weiss ESG Advisory Practice, and Paul, Weiss Chairman Brad Karp discuss how lawyers can help companies reexamine their ESG priorities and navigate the new world order in light of Russia’s invasion of Ukraine in their expert opinion column “Russia-Ukraine War Triggers New ESG Considerations,” published on May 9 in Corporate Counsel.

The authors discuss the techniques lawyers can leverage, such as scenario planning, pressure-testing data and revisiting company ESG priorities, which can help companies respond nimbly and strategically. Lawyers should be “on the lookout for geopolitical or other clues that the ground will shift once again and update scenario plans frequently,” the authors write. “As the Russian invasion has shown, the lens of scrutiny has gotten sharper. There will be no grace period. And the consequences of a mistake in this environment are incalculable.”

» read the article

Following its launch on September 29, the Paul, Weiss ESG and Law Institute, a first-of-its-kind research initiative led by Dave Curran, ESG and Law Institute executive director and co-chair of the Paul, Weiss ESG Advisory Practice, garnered significant attention from national media outlets. The Institute is a forum of businesses and academic institutions dedicated to the independent study of issues relating to the intersection of ESG, business and the law.

Dave was quoted extensively in a Reuters article, “ESG is ‘mission critical.’ Can Paul Weiss Get Law Schools on Board?” In the article, published on October 6, Dave discussed how students and professors associated with UC Berkeley School of Law’s Business in Society Institute, the ESG and Law Institute’s inaugural academic partner, will work with Paul, Weiss attorneys to conduct research, convene roundtables and assemble thought leaders in the ESG arena.

“We want the legal industry to recognize that it’s mission critical for lawyers to deeply understand ESG and how it intersects with the law,” Dave said. “We need students to be thinking about it. This is the fastest growing specialty that no one knows about.”

An article published in ALM’s The Recorder on October 5, “Paul Weiss, UC Berkeley Team Up to Close Knowledge Gap in ‘Existential’ ESG Questions,” discussed how the Institute will help organizations address ESG gray areas, such as how to navigate diversity, equity and inclusion, particularly when boards are making public statements in support of such initiatives, and how to address social and environmental risks that require collaboration among competitors.

“Lawyers need to be involved because they have the cross-enterprise ability to weave parts of a larger organization together and create policies and procedures for tracking, measuring and monitoring these obligations that companies have been making ad hoc,” Dave said.

Amelia Miazad, faculty director and senior research fellow at Berkeley Law’s Business in Society Institute, says the partnership “will enrich our research with what is happening on the ground… [and] allow us to have deeper insights into where tensions and business practice lie.” Dave and Amelia are hopeful the partnership will cause a shift in the way ESG matters are studied, addressed and confronted.

Under the partnership, the firm will provide two $25,000 fellowships to Berkeley Law students for research, programs and events. The firm is actively looking for additional partners.

Paul, Weiss’s ESG and Law Institute, in partnership with the FiscalNote Executive Institute, will co-host a series of continuing legal education courses focused on top issues in digital transformation and environmental, social and governance (ESG).

Dave Curran, ESG and Law Institute executive director and co-chair of the Paul, Weiss ESG Advisory Practice, will instruct the first of three courses alongside Kate O’Leary, global executive litigation counsel for General Electric and member of the ESG and Law Institute’s board of advisors. The course, “ESG & Law 101,” will explore the ways in which ESG intersects with law, business and government affairs, among other topics. Sessions on “Overcoming Resistance to Innovation Within the Legal Department” and “Ethical Use of AI and the Emerging Legal Landscape” will round out the series.

Dave’s session will take place on May 5 at 10 a.m. ET. The second and third sessions will take place on July 14 and September 22, respectively.

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New York and Washington, D.C., January 13, 2022 – Paul, Weiss, Rifkind, Wharton & Garrison LLP’s ESG and Law Institute, a forum of businesses and academic institutions dedicated to the independent study of issues relating to the intersection of ESG (environmental, social and governance), business and the law, today announced that it has signed on its second academic partner, Howard University School of Law.

“We couldn’t be more thrilled to partner with Howard Law, one of the nation’s finest law schools and one that shares our mission to advocate for and defend the rights of all, to create a new hub for ESG legal research and thought leadership,” said Jeh Charles Johnson, a senior partner at Paul, Weiss and former Secretary of Homeland Security. “We look forward to leveraging Howard Law’s leading academic expertise to expand the study of the real-world challenges of tackling diversity, equity and inclusion.”

“Howard Law is honored to partner with Paul, Weiss’s ESG and Law Institute,” said Howard University School of Law Dean Danielle Holley-Walker. “ESG is a cutting-edge practice area that puts the work of diversity, equity and inclusion into practice. We look forward to doing critical legal research in the ESG area and introducing our students to this area of practice.”

Howard Law is the second academic institution to partner with the ESG and Law Institute since it was founded in September. The Institute aims to meet an urgent need for independent, solutions-oriented research and analysis by boards, executives and institutional investors on the intersection of ESG with legal risk.

“Companies are grappling with how to address the environmental, social and governance issues that are most important to their stakeholders, and Howard Law has been actively engaged on some of the most pressing social issues of our time,” said David Curran, ESG and Law Institute executive director and co-chair of the Sustainability & ESG Advisory Practice at Paul, Weiss. “We are excited to combine our networks and resources to create action-oriented intelligence that lawyers, boards and company leaders can leverage to address their ESG and diversity, equity and inclusion challenges.”

As a part of the partnership, the ESG and Law Institute will also provide two scholarships to select Howard Law students to conduct research and analysis on legal ESG topics.

The Institute’s latest partnership with Howard Law comes 22 months after Paul, Weiss launched a first-of-its-kind Sustainability & ESG Advisory Practice to help clients navigate the legal, business and political ramifications of developing and implementing ESG initiatives, and four months after the practice launched the Institute via an inaugural partnership with UC Berkeley School of Law. Paul, Weiss’s Sustainability & ESG Advisory Practice maintains an active leadership role within the Institute, partnering with business and professional associations, ESG experts and other academic institutions to organize roundtable discussions, conduct research and identify emerging issues in the field.

“We are proud to support scholarships that will enable Howard Law students to conduct cutting-edge research on the intersection of ESG and the law, and we are excited to collaborate with Howard Law on game-changing thought leadership on ESG and diversity, equity and inclusion,” said Paul, Weiss chairman Brad S. Karp.

Sign up to receive regular updates on the ESG and Law Institute’s website and follow the Institute on LinkedIn for updates on upcoming events and to learn more about how to collaborate with the Institute’s stakeholders.

About Paul, Weiss

Paul, Weiss (paulweiss.com) is a firm of more than 1,000 lawyers with diverse backgrounds, personalities, ideas and interests who provide innovative and effective solutions to our clients’ most complex legal and business challenges. We take great pride in representing the world’s leading companies in their critical legal matters and most significant business transactions, as well as individuals and organizations in need of pro bono assistance.

Dave Curran, ESG and Law Institute executive director and co-chair of the Paul, Weiss ESG Advisory Practice, discussed corporate governance and other ESG topics in a recent Reuters article.

The article, “General counsels & ESG: Range of skills needed to help corporate leaders navigate challenging terrain,” discusses the crucial role chief legal officers play in the context of an evolving ESG landscape.

In particular, Dave noted that an effective governance framework is paramount. While many lawyers have traditionally focused on litigation and dealmaking, “the middle, between transactions and litigation, is where all the action is,” Dave noted. “And the middle is the thing that the companies’ in-house counsel are concerned about.”

» read the article

Dave Curran, ESG and Law Institute executive director and co-chair of the Paul, Weiss ESG Advisory Practice, has been recognized by the National Association of Corporate Directors (NACD) as an honoree of the 2022 NACD Directorship 100, an annual recognition of the leading corporate directors and corporate governance experts who significantly impact boardroom practices and performance.

For more than 40 years, NACD has been on the leading edge of corporate governance, setting standards of excellence that have elevated board performance.

» read the press release

» view the 2022 NACD Directorship 100™ honorees

Dave Curran, ESG and Law Institute executive director and co-chair of the Paul, Weiss ESG Advisory Practice, was featured in an interview in NACD Private Company Directorship Newsletter.

In the article, “From Ribbon Cutting to Ritual: ESG on the Board Agenda,” Dave discusses how boards can truly “ritualize,” or integrate, ESG objectives into their businesses; how technology intersects with ESG; and the role of the general counsel in helping a private company board oversee ESG, among other topics.

“Instead of making it a ribbon-cutting experience, like when a circus comes to town, [ESG goals] should be an important business objective for the company,” Dave says. As we do with other important business objectives, “we document them, we budget for them, we put great talent on them. Then we track, measure, and monitor progress,” he adds.

» read the article

2021 ESG Developments

In the aftermath of the initial effects of the Coronavirus pandemic, many wondered if the key ESG issues brought to light in 2020 would be pushed aside in the new year. Instead, as we expected, ESG issues assumed greater prominence and consideration by regulators, employees, customers and other stakeholders in 2021. Organizations increasingly incorporated ESG factors into their general operations and governance. Some companies have chosen to focus on ESG because of investor or board pressure, others to protect themselves from the scrutiny of regulators, shareholder and activist investors, and others in preparation for increased government regulation. 2021 saw unprecedented records of investments in ESG, reported disclosures by major organizations, and filings of shareholder proposals. Rulemaking and reporting standardization was also a major focus throughout the year, as regulators increasingly made ESG considerations part of their agendas. Other prominent trends included:

  • Compliance – As interest in ESG has ramped up over the past year, compliance has been top of mind for investors, regulators and other stakeholders. They desire to see that companies are not just talking the talk, but are also walking the walk and meeting their ESG objectives. Regulators are looking for gaps between what companies claim in their filings and what their actual practices are. Many organizations have come under fire during the last year for accusations of misrepresenting or exaggerating the sustainable nature of their products or investments. In 2021, US and global regulators launched greenwashing investigations into a number of major organizations, a trend expected to continue in the new year.[1] In this era of heightened scrutiny, good compliance is key to long-term success.
  • Diversity, Equity and Inclusion (DEI) – Following the racial justice movement sparked in the summer of 2020, DEI continued to be a priority for organizations and regulators over the past year. The SEC has indicated that DEI rulemaking is a priority for the administration and in August approved Nasdaq’s board diversity rules. Focus on DEI at the corporate level continues to be primarily on Board and C-Suite level diversity; though certainly not to the exclusion of the broader employee pool.
  • Shareholder Activism – Shareholder groups are increasingly pressuring companies to further ESG objectives. This proxy season saw record-breaking support for shareholder proposals relating to environmental and social matters, with 34 proposals receiving majority shareholder support, up from the previous record of 21 supported proposals in 2020.[2] In November, Microsoft shareholders approved a shareholder proposal with 78% approval which asked for sexual harassment claims to be transparently addressed through independent investigations and reporting.[3]

ESG by the Numbers

Regulatory Developments

While ESG disclosures in the US are currently largely voluntary, globally, new regulations increasingly take ESG concerns into account, particularly in Europe and the UK. In recent months, the domestic and international regulatory environment seems to be shifting, moving ESG disclosures from a voluntary business initiative to a mandatory legal one in some jurisdictions. We anticipate that regulators will continue to sharpen their focus on ESG in the coming months and years.

US Executive, Regulatory and Legislative Developments

Following President Biden’s inauguration in January 2021, there has been significant movement by the US on key ESG issues and regulation, in particular around disclosure of ESG risks. Focus has primarily been on the “E” of ESG, including climate change and carbon emissions, mobilizing a government-wide effort across multiple branches of government and federal agencies – spearheaded by the SEC – to accelerate US commitments and initiatives on sustainability.

The Executive Branch

  • On January 28, the Biden Administration paused a rule proposed in the final days of the Trump Administration that would have required banks to provide quantitative measurements to support decisions not to lend to industries like oil and gas or firearms, allowing the next Comptroller of the Currency to review it.[4]
  • On May 20, President Biden issued an Executive Order on Climate-Related Financial Risk, calling on the federal government to take concrete steps to mitigate physical and transitional risks of climate change, including a review of climate-related disclosures (see our client alert here).
  • On November 2, the US announced new methane regulations from the Environmental Protection Agency and Pipeline and Hazardous Materials Safety Administration as part of the Global Methane Pledge initiative launched at the UN Climate Change Conference (COP 26) in Glasgow.[5]
  • On December 8, President Biden issued an Executive Order on Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, directing the US government to achieve net-zero carbon emissions by 2050 through billions of dollars of spending on a combination of electric vehicles, clean power and upgraded buildings.[6]

US Securities and Exchange Commission (SEC)

  • On March 4, the SEC announced the creation of a Climate and ESG Task Force in its Division of Enforcement focused on “identifying any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules” and which represents a Division-wide effort to develop initiatives to proactively identify ESG-related misconduct (see our client alert here).
  • On March 15, the SEC requested public input on climate change disclosure rulemaking.[7] The comment period closed on June 14, 2021 (see our client alert here).
  • On April 9, the SEC’s Division of Examinations published a Risk Alert highlighting observations of deficiencies and internal control weaknesses from recent examinations of investment advisers offering products, including private funds, whose investment strategies incorporate ESG factors (see our client alert here).
  • On June 11, the SEC’s Office of Information and Regulatory Affairs released their Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions and indicated that rulemaking on “disclosure relating to climate risk, human capital, including workforce diversity and corporate board diversity, and cybersecurity risk” is a priority for the agency.[8]
  • On August 6, the SEC approved Nasdaq’s board diversity requirements, which will apply to all Nasdaq‑listed companies, including non‑US issuers, smaller‑reporting companies and controlled companies (see our client alert here).
  • On September 22, the SEC’s Division of Corporation Finance issued a sample comment letter reflecting comments on climate disclosure that the Staff may issue when reviewing companies’ public filings. The issuance of these comments reflects the SEC’s increased scrutiny of climate disclosures, and follows the call by then Acting Chair Allison Herren Lee in February 2021 for the staff of the Division of Corporation Finance to “enhance its focus on climate-related disclosure in public company filings.” (see our client alert here).
  • On November 3, the SEC Division of Corporate Finance issued a staff guidance letter that will make it more difficult for issuers to exclude shareholder proposals that raise issues with significant social and environmental impact (see our client alert here).

Commodity Futures Trading Commission (CFTC)

  • On March 17, the CFTC announced the establishment of a Climate Risk Unit to address climate-related risk and transition to low-carbon economy (see our client alert here).

US Department of Labor (DOL)

  • On October 14, the DOL published proposed amendments to its “investment duties” regulation rule that would clarify that ESG factors may be appropriate considerations for ERISA Plan fiduciaries when making investment or proxy voting decisions on behalf of ERISA Plans (see our client alert here).

US Congress

  • On June 16, the US House of Representatives passed H.R. 1187, the Corporate Governance Improvement and Investor Protection Act. If passed into law, this would require public companies to provide more comprehensive ESG disclosures in financial statements (e.g., metrics tied to greenhouse gas emissions, fossil-fuel-related assets and other risks posed by the changing climate and compensation information regarding executive officers and employees) and require the SEC to report on shareholder collective action and small business ESG compliance.[9] The bill was received in the Senate and referred to the Committee on Banking, Housing and Urban Affairs.

Global, Intergovernmental and Standards Developments

Globally, there has been significant movement around ESG regulation and disclosure requirements. We highlight below some key decisions from the last year:

  • On July 29, the EU announced a proposal that would regulate the green bond industry. This proposal is the first of its kind and would create standardization in terms of what qualifies as a green asset and how those assets can be packaged.[10]
  • Announced by July 27, Sustainable Finance Disclosure Regulation (SFDR), Corporate Sustainability Reporting Directive (CSRD), and green taxonomy regulations in the EU have made it clearer what ESG metrics companies will have to report on, and greatly expanded ESG requirements as a part of company annual reports.
  • From October 31 to November 12, COP 26 led to major announcements and declarations from numerous countries including:[11]
    • A renewed deforestation pledge with 109 signatory nations, including the US;
    • An announcement from the UK that major public companies will be required to make ESG disclosures in line with the TCFD framework;
    • A pledge from 46 nations to decarbonize by 2030 (2040 for smaller economies); and
    • A pledge from 103 nations to reduce methane emissions by 30% from 2020 levels by 2030, including the US.
  • On November 3, the International Financial Reporting Standards (IFRS) Foundation announced the International Sustainability Standards Board (ISSB), in consolidation with the Climate Disclosure Standards Board (CDSB) and Value Reporting Foundation (VRF), and publication of prototype disclosure requirements. The announcement came during the COP 26 conference, and is intended to make ESG reporting more uniform across industries.[12]
  • Starting January 1, 2022, Singapore will require a series of ESG disclosure proposals for issuers, including plans for mandatory climate and board diversity reporting. Mandatory climate reporting will be based on Task Force on Climate-Related Financial Disclosures (TCFD), on a “comply or explain” basis beginning in 2022. The diversity proposals include requiring each issuer to disclose a board diversity policy along with targets, accompanying plans and a timeline, as well as a description of how the combination of skills, talents, experience and diversity of directors in the board serves the issuer’s needs and plans. [13]

The Need for ESG Education

Lawyers play a key role in helping organizations to match their practice with purpose. As organizations increasingly consider ESG factors, it is critical that their in-house counsel understand, and have outside counsel well versed in, the relevant regulatory and reputational risk associated with developing and implementing sustainability and ESG initiatives. The practice of ESG is mostly not codified law and does not have legal precedent, requiring lawyers to adapt new ways of practicing in order to meet these new challenges. In order to appropriately advise organizations and protect them from downside risk, the legal community should continue to adapt, develop the necessary expertise and make ESG education a priority. Learning the language of ESG, including the myriad standards, frameworks, rating agencies and key performance indicators, opens the door for legal counsel to bridge the gap between the traditional practice of law and the current needs of modern business. Because increased interest in ESG at the corporate level has resulted in increased scrutiny by investors and regulators, oversight may no longer be able to be relegated entirely to IR, communications and non-legal teams. Lawyers may consider taking an active role on these issues and applying the same rigor that they do to other disclosure and compliance issues to ESG.

Looking Ahead

While most media focus centers on the “E” pillar of ESG, we anticipate that 2022 will see an increase in attention to vulnerabilities in the social and governance pillars. Areas General Counsel and other executives may want to focus on include:

  • Internal Education and Compliance Stakeholders are increasingly going after corporate claims that they, or their investment products, are positive from a DEI or human rights standpoint and the challenges will focus on what boards and management are doing to govern the myriad claims they make. Demands will continue to increase for more transparency in the governance of these claims and what companies do to address gaps or problems. Adversaries are leveraging sophisticated quantitative and qualitative data and technology tools to challenge corporations and claims of greenwashing are expected to be on the rise.
  • DEI and Human Rights Audits Third-party audits of key “S” issues such as human rights, racial equity, supply chain and compliance are expected to be more common in 2022 as well, as stakeholders increase pressure on organizations to undertake these assessments.
  • Board Oversight Board education and oversight will continue to be a major theme for companies in 2022. Getting the board up to speed on ESG issues and clearly communicating ESG goals, targets and other plans can help align management’s ESG goals with shareholder and wider-market expectations.
  • SEC Developments – The SEC is expected to issue guidance around ESG disclosures including climate, human capital management and cybersecurity early this year, and companies will need to work quickly to understand how these new regulations impact their operations and reporting requirements.

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[1]        Bloomberg, “Regulators Intensify ESG Scrutiny as Greenwashing Explodes” (September 1, 2021), available here.

[2]        Bloomberg Green, “The World’s Biggest Investors Get Louder About ESG” (June 9, 2021), available here.

[3]        Business Wire, “Investors Cast Majority Vote Pressing for Sexual Harassment Accountability at Microsoft Annual Meeting” (November 30, 2021), available here.

[4]        Office of the Comptroller of the Currency, News Release, “OCC Puts Hold on Fair Access Rule” (January 28, 2021), available here.

[5]        The White House, “Joint US-EU Press Release on the Global Methane Pledge” (September 18, 2021), available here.

[6]        The White House, “Executive Order on Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability” (December 8, 2021), available here.

[7]        US Securities and Exchange Commission, Statement, “Public Input Welcomed on Climate Change Disclosures” (March 15, 2021), available here.

[8]        US Securities and Exchange Commission, Statement, “SEC Announces Annual Regulatory Agenda” (June 11, 2021), available here.

[9]        Congress.Gov, “H.R.1187 – Corporate Governance Improvement and Investor Protection Act” (June 8, 2021), available here.

[10]       SP Global, News Release “Proposed EU standard seeks to bring clarity to ballooning green bond market” (July 29, 2021), available here.

[11]       United Nations, News Release, “Outcomes of the Glasgow Climate Change Conference” (November 12, 2021), available here.

[12]       IFRS, News Release, “IFRS Foundation announces International Sustainability Standards Board, consolidation with CDSB and VRF, and publication of prototype disclosure requirements” (November 3, 2021), available here.

[13]       Singapore Exchange, News Release, “SGX mandates climate and board diversity disclosures” (December 15, 2021), available here.