In-house Insights: ESG

Louise Leaver, Harriet Murray Jones, Daniel Purcell and Andrew Spicer hosted the fifth of Bevan Brittan’s series of 'In-house Insights' webinars, providing an update on ESG and how in-house teams can be effective influencers in ESG Strategy, as well as looking ahead to the key issues in 2024 for corporate and financial compliance in ESG.

Watch the webinar here.

Key Takeaways

What does ESG mean?

• ESG is an acronym of environmental, social and governance and is intended to be a way of measuring an organisations impact on the environment, society and how transparent and accountable its governance is.
• Currently there is not a consistent approach to the definition of ESG and different regulators may impose different sector specific requirements.

The Legal Requirements

• Currently there are very few legal requirements to have an ESG strategy, to report ESG statistics or to meet ESG targets.
• The UK Government has committed to attaining net zero by 2050 and reporting obligations are anticipated to grow as statutory requirements become mandatory for a wider number of entities.
• There are a few reporting requirements which apply to larger companies as well as accounting standards and FCA rules in relation to financial services and products.
• Listed entities, companies with listed bonds, banking companies, insurance companies and “high turnover companies” are required to include a “non-financial and sustainability information statement” and “climate-related financial disclosures” in their strategic reports.
• The proposed EU Corporate Sustainability Reporting Directive will see reporting on various sustainability related matters come into force for UK companies with a high net turnover in the EU and that fulfil the relevant criteria.
• The IFRS Sustainability Disclosure Standards are non-mandatory requirements for reporting on sustainability and climate- related risks and opportunities in relation to governance, strategy, risk management, metrics and targets. The standards are likely to become mandatory through the UK Sustainability Disclosure Standards.

Why is ESG Important?

• ESG is becoming increasingly important to investors and a key factor in their decision making.
• Stakeholders are becoming more aware of and interested in ESG credentials including potential recruits, current employees and end users of services.
• There are increasing obligations in tendering processes on organisations and supply chains to meet certain ESG requirements.
• Sustainability linked loans and bonds are driving requirements on organisations to meet certain ESG objectives by incentivising borrowers to achieve sustainable performance objectives.
• Larger organisations are placing greater obligations on entities within their supply chain to start reporting and detailing their ESG activities.
• Directors must comply with their duties under the Companies Act by having regard to the impact of the company's operations on the community and environment.

Developing an ESG Strategy

• Organisations should consider:
  • what targets they wish to set
  • how data is to be coordinated, gathered, reviewed and presented (consider use of sustainability committees)
  • reaching out to similar organisations and consultants to discuss their approach
  • discussing ESG requirements with funders and investors
  • involving the workforce ongoing ESG discourse
  • the tensions that may arise between organisational and commercial ESG objectives.
• There is already some guidance and standards to support entities, including Sustainability Reporting Standard for Social Housing and New Social Care Sustainability Alliance.
• Using tools such as the Chancery Lane Project can assist in drafting sustainably by providing climate clauses and glossary terms.
• The Loan Market Association provides guidance on green loan principles, social principles and sustainability linked-loan principles.

To see Bevan Brittan’s Climate Reduction Plan as part of its own ESG Strategy click here.

If you would like to discuss any of the topics covered in our webinar in more detail, or have a specific query for us, please do get in touch with Louise, Harriet, Daniel, or Andrew.

Watch the webinar here