In this month’s ESG Market Alert, we cover:
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Our inaugural ESG Game Changers Summit;
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The ESA’s consultation on standardised Simple, Transparent and Standardised (“STS”) related environmental disclosures for green securitisations; and
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What’s new in market practice: increasing regulatory focus on greenwashing.
ESG Game Changers Summit: Corporate purpose and the enfranchisement of indirect investors
We recently hosted our inaugural ESG Game Changers Summit at our London office. The event brought together an impressive line-up of speakers to define a path forward that recognises the challenges and opportunities presented by the ESG agenda for the business community. High-profile guests from business, the investor community and government came together to discuss critical topics with a packed audience of clients and other stakeholders, focusing on good corporate governance, the role of finance in driving change and ESG stakeholder engagement.
While it was agreed that each business, industry and region will have nuances to consider when applying best practice, there was a general consensus among those attending the event on actionable steps businesses should be considering – in particular the need to rethink the role of each business’ purpose within society. Discussions throughout the day reflected on how businesses must reimagine their purpose so that they can become net positive contributors to society, which is all the more important given that younger generations are increasingly driven by ethics in making investment and career decisions.
The concept of enfranchising indirect investors was discussed during the ESG Stakeholder Engagement Panel, highlighting that the majority of people are invested in the companies that shape the world we live in through their pension funds but don't exercise any influence over them. Typical investors therefore feel disconnected from the economy and that they have no say over how these companies are run. The panel discussed the need for society to evolve so that indirect investors' influence on ESG matters is brought to the forefront, with businesses and institutional investors increasingly looking to engage with individual savers and pensioners to decentralise shareholder voting rights.
Further information on the ESG Game Changers Summit can be found below:
A step forward for green securitisations with standardised STS-related environmental disclosures
The European Supervisory Authorities ("ESAs") published a joint consultation paper on 2 May 2022 seeking input on draft regulatory technical standards (the "Draft RTS"). The Draft RTS specifies the content, methodologies and presentation of disclosures pursuant to Articles 22(4) and 26d(4) of Regulation (EU) 2017/2401. This includes information in relation to the adverse impacts, on the climate and other ESG indicators, of the assets financed by the underlying exposures of Simple, Transparent and Standardised Securitisations ("STS securitisations"). Please see the relevant announcement here.
The proposed Draft RTS applies only to non-ABCP traditional STS securitisations and on-balance-sheet securitisations where the underlying exposures are residential loans or auto loans and leases and aims to:
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facilitate disclosure by the originators of the principal adverse impacts of assets financed by STS securitisations on ESG-related factors;
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supplement the single rulebook under the Securitisation Regulation as amended by the Capital Markets Recovery Package and provide an alternative for originators of STS securitisations in relation to disclosure of adverse impacts on sustainability factors; and
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draw upon the ESAs’ work in respect of sustainability-related disclosures in the financial services under the Sustainable Finance Disclosure Regulation.
The draft RTS will be finalised and submitted to the European Commission following the conclusion of the consultation period. Further details can be found here.
What’s new in market practice: Increasing regulatory focus on greenwashing
Regulators worldwide are continuing to focus on companies’ and financial firms’ “green” claims. The UK FCA has issued publications and letters which emphasise that firms need to justify and evidence their products’ ESG credentials, the SEC has brought enforcement action in respect of ESG disclosures, and BaFin has commenced investigations in Germany for potential breaches of ESG requirements within its jurisdiction. These recent developments have demonstrated that regulators are actively pursuing cases where they think that firms may have published misleading disclosures.
ESG Counsel™
The Hogan Lovells ESG team is here to help, including on all the issues raised in this snapshot. Hogan Lovells is one of the leading ESG firms in the world, delivering uniquely tailored cross-practice and -geographic holistic advice as ESG Counsel to clients globally. Our holistic and solutions-driven approach to managing ESG issues draws on the full scope of our global practice and sector capabilities (including our leading global corporate, environmental, governmental relations and regulatory, employment, and dispute resolution teams) to drive sustainable value and maximize positive impact for clients. Please contact us to discuss next steps or for our latest ESG-related materials, including our ESG Academy.
How we can help
Our knowledge of ESG matters, coupled with our sector-focused expertise and experience can help businesses navigate this complex area. In particular, we can help by:
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bringing clarity to the complex and fast developing legal and regulatory background driving ESG considerations and helping your business shape its response to those requirements, opportunities and risks;
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engaging effectively with policy-makers and regulators that will shape the environment in which your business operates;
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undertaking a sustainability and business integrity ‘healthcheck’ to identify and establish corporate purpose and clear ESG initiatives/targets;
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evaluating supply chains and procurement processes to ensure that they appropriately deal with ESG considerations;
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ensuring that governance structures are “fit for purpose” and drive appropriate behaviours within your organisation;
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evaluating best practice with regards to talent management, diversity and inclusion, employee engagement, corporate purpose, culture, reward and remuneration and tax practices; and
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in cases of crisis, assisting in responding to and dealing with that crisis.
Our recent ESG public markets experience
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Advising SABMiller plc on governance transitions and reforms.
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Advising a number of companies and stakeholders on ESG-related activist and stakeholder engagement.
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Advising ITV on ongoing corporate governance matters.
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Advising Shaftesbury on numerous corporate governance matters.
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Advising an international ride-sharing company on its governance arrangements in the UK in the context of an ongoing license appeal.
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Advising Brookfield on the environmental aspects of its acquisition of Greenergy, including its interest that owns Thames Oilport and Thames Enterprise Park.
Authored by Nicola Evans, Patrick Sarch, Julian Craughan, Arwen Handley, Russell Clay, Madalena Marques, Nancy Ricardo, and Imogen Thwaites.
