ESG liability for companies and directors: a shifting landscape | Reuters

Since the United Nations Global Compact in 2004 first coined the phrase, “environmental, social, and governance” — or “ESG” — has changed the way we think about investing. ESG-related investments have grown 42 percent from 2018 to 2020, and, as of late 2021, “one of every three dollars of assets under management is invested in ESG strategies,” according to Nasdaq.com.

Yet, as investments and interest in ESG grow, so too do regulations related to ESG disclosures and shareholder interest in pursuing ESG-related lawsuits. This shift may well create increased liability on both an individual and company level.

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In the event that the SEC passes its proposed rules in relation to ESG disclosure, directors and entities alike will have one more reason to approach ESG-related issues with care. But even now, parties are facing an uptick in SEC enforcement investigations and actions, new policies in California, international disclosure rules, whistleblower claims, and shareholder actions. This is all framed by heightened focus on ESG concerns more broadly. Companies and their directors should exercise caution when evaluating their ESG disclosures and ESG-related conduct.

Source: ESG liability for companies and directors: a shifting landscape | Reuters