The Akin 2023 ESG Survey: Highlights, Trends and Developments

In this latest episode of the firm’s Accelerate ESG series, Akin environmental, social & governance, or ESG, group co-leaders Amy Kennedy and Stacey Mitchell discuss the firm’s recently issued 2023 ESG Survey of noteworthy trends and developments in that field, as well as the ESG environment on both sides of the Atlantic.

Topics include:

• The growing politicization of ESG.
• Challenges facing DEI efforts.
• The difference between greenwashing and green-hushing.
• ESG and tax considerations.

Search for “ESG” at akingump.com to learn more.

Subscribe to OnAir with Akin via iTunes, SoundCloud, YouTube, Spotify and Google Podcasts.

Accelerate ESG is presented by Akin. It cannot be copied or rebroadcasted without consent. The information provided is intended for a general audience. It is not legal advice or a substitute for the advice of competent counsel. Prior results do not guarantee a similar outcome. The content reflects the personal views and opinions of the participants. No attorney-client relationship is being created by this podcast, and all rights are reserved.

Episode Transcript

Jose Garriga: Hello, and welcome to Accelerate ESG, Akin's podcast series dedicated to all things environmental, social and governance-related. I'm your host, Jose Garriga.

Recently, Akin released our 2023 ESG Survey, an online collection of articles selected by our lawyers that focus on what they believe are the key ESG issues for the year. It covers topics such as boardroom diversification, greenwashing and pushback against ESG.

We have with us today two of the authors behind this survey: Amy Kennedy, a corporate partner in the firm's London office, and Stacey Mitchell, an environment and natural resources partner in our Washington, D.C. office. They also co-lead the firm's ESG group, and, so, are the perfect guests to survey the ESG landscape and offer their perspectives on that view and on the ESG Survey.

Amy, Stacey, welcome to the show. The survey covers a range of topics that are front of mind for stakeholders in the ESG space, so, for our listeners who may not have yet had the chance to review this great survey, Amy, could you give us a preview of the content?

Amy Kennedy: Sure. Thank you, Jose. As we put pen to paper, we really focused on ESG developments that were front of mind during 2022, and also which we expect will continue to be noteworthy over the course of this year of 2023 and beyond. It was quite a range of topics, including ongoing efforts to diversify our boardrooms and C-suites, including some of the challenges as well associated with those efforts, certainly not one-sided. We looked at the evolving landscape around greenwashing and green-hushing as well, what our colleagues heard when they attended COP27, and a high-level preview as well of the issues that we expect to be front and center at COP28 later this year. It's all moving very quickly.

Connected to all of the above, the increasing politicization of ESG issues, particularly in the United States. Signing off a different topic, financing the global energy transition, rather high-profile discussion points of both 2022 and 2023, the evolving role of ESG and the shareholder activist toolbox, a survey of issues in the complex world of ESG ratings, which we see appear in both finance and the regulatory space, and now even more broadly as ESG regulatory comes to front of mind. And then, more generally, the growing importance of ESG in relation to corporate tax planning and compliance, and that's something we certainly saw resonate through 2022. So, a real broad range of topics and, hopefully, of interest to a wide number of our clients and friends.

Stacey Mitchell: Amy, that is a great summary. What we tried to do, Jose, is, as Amy just said, cast a really broad net in relation to these topics and the questions and issues we've confronted as we're advising our clients on the many complex issues raised by ESG. As you know, Akin prides itself on partnering with our clients to identify, address, implement customized solutions to issues, and the survey really underscores the firm's ESG capabilities and its approach to addressing those complexities on a holistic basis. I will also say, on a lighter note, we were super pleased with the visual presentation by our vendor Rostrum out of the U.K., who put the survey out and really brought a visual up here that makes the content pop. It also makes it really easily accessible so that if you're interested in one topic and not the other, really easy to get around.

Jose Garriga: Thank you, Stacey. I'd have to agree. It's a beautiful-looking document, and well worth listeners' time to read and admire. So, as Amy noted, one of the articles focuses on the growing politicization of ESG, especially in the U.S. Did you all worry about wading into that thicket?

Amy Kennedy: It's certainly challenging. We thought about it long and hard, but I think, as one reads that article, it fairly presents the issues, including some of the challenges that stakeholders need to wrestle with relative to ESG, and how ESG factors including strategic goal setting, and the fact that, despite pushback, capital continues to flow into ESG-rated products, services, and, generally speaking, the conclusion is inflow is not expected to abate for at least the foreseeable future. So I think the importance of the article for us, apart from the striking a balanced presentation of the issues, is really to demonstrate that we and our ESG practitioners are mindful of the issues, and that we're prepared to assist our clients as they navigate these increasingly choppy waters. So from that perspective, it really just raises an important issue that we should all be considering and addressing openly.

Stacey Mitchell: Amy, I think that's right. And just to underscore, we certainly gave it a lot of time, but ultimately, really concluded, we would have been remiss, Jose, had we not waded into the topic. As we put in the article itself, we expect the pushback against ESG to continue over the course of '23, and that, actually, the efforts will ramp up fairly significantly as we head, in the U.S., into the 2024 presidential election season. Our clients are confronting this sort of push-pull of operating in states with opposing perspectives on ESG, as well as responding to letters that have been issued to them either by state treasurers or states' attorneys general. So, broaching the great debate, if you will, was a critical topic here because it's a critical issue in risk management for our clients.

Jose Garriga: Thank you, Stacey. I just saw an article yesterday that talked about legislation at the state level against ESG, so this is super timely. Another article does a nice job capturing some of the challenges facing diversity, equity and inclusion, or DEI, efforts. Stacey, going back to you, could you spend a moment touching on those?

Stacey Mitchell: Absolutely. We're all aware of the ongoing efforts on the private and public entities to enhance diversity, equity and inclusion. As the article makes clear, these efforts take various forms, either through DEI-specific programming, investments or through multi-year measurable goals. The article also makes it clear that these efforts have not been embraced by all stakeholders and reviews some of the ways in which those efforts have been challenged, whether it's through litigation or legislation. What we tried to do, again, is offer a balanced picture for readers to understand that, while laudable, these efforts do face some legal risks, and that companies need to be mindful of the risks as they develop and implement DEI programs and goals.

Amy Kennedy: I think the article, Stacey, as well, does a nice job of differentiating what's going on with DEI in the U.S. relative to the U.K. and the EU, which generally is a thing that we try to address, only that comparison between U.S. and U.K., EU through a number of the articles to give a balanced, global, real-world view, given that's what ESG is. But I think, back to the DEI, it seems fairly clear that challenges to the DEI in the U.S. is part of a potentially part of a broader pushback on the ESG that we were just discussing, while in Europe and the U.K. you're simply not seeing that same degree of controversy.

So, potentially back to Jose's question, maybe there's some form of linkage there. But also I think this is partially explained away by the law in the area being somewhat more advanced or settled in the EU and the U.K., and also in those jurisdictions, having so much, there's a focus on social mobility has been a consistent theme as it has been on race and gender over recent years. The article, I think, as well, does a decent job of pointing out that companies in the U.K. and the EU still have work to do as well for our own accounts. So we're certainly not there, but we may just be slightly further along.

Jose Garriga: Thank you, Amy. Stacey, let me go back to you. A couple terms that we've heard used now so far in this episode—greenwashing and green-hushing—they seem to be in the news every day, certainly on regulators' minds, but could you please remind our listeners what these terms mean, and also where you think companies might be able to spend some time guarding against the risks associated with them?

Stacey Mitchell: Happy to do so, Jose. Greenwashing is the act of providing stakeholders, whether it's investors or consumers, with misleading or false information about whether a product was produced using sustainable practices or is itself sustainable. Greenwashing can also be deployed by companies in order to mask how certain business operations or practices may, in fact, adversely affect the environment. And the term can importantly apply equally to financial products or services where the product is marketed as being environmentally friendly, or its returns are linked to the achievement of certain sustainable metrics. Green-hushing occurs when a company actually opts to stay quiet, or to be less vocal or transparent, regarding its environmental—in particular, climate—or other ESG goals and strategies. Green-hushing is sort of a response, if you will, but it tends to occur when a company does not want to take the risk of being exposed to negative publicity if they fail to achieve a publicly disclosed goal or target, or if they don't want to risk greenwashing claims if it turns out the results are less than promised or even suggested, or as some one entity or person interpreted their statements.

There are many practical steps that companies can take to avoid or mitigate these risks. For instance, companies should evaluate their existing disclosures relating to ESG and sustainability and diligence whether those disclosures can be substantiated. When looking at the statements themselves, one has to consider whether a more aspirational and a less concrete statement may be advisable relative to referencing concrete statements or metrics. Companies should also review existing disclosures and policies and practices to identify any gaps or areas for improvement, particularly if a company is making voluntary disclosures that are aligned with a number of the third-party disclosure frameworks, whether it be a task force on climate-related financial disclosures, TCFD [Task Force on Climate-Related Financial Disclosures] or SASB [Sustainability Accounting Standards Board] or GRI [Global Reporting Initiative]. We should also consider whether disclosures should be accompanied with any appropriate disclaimers or caveats. And on that point, that is something that we certainly see a lot of, and I certainly highly recommend considering not whether but where those caveats are appropriate.

And a board of directors should carefully consider how to discharge its duty of oversight relative to ESG and related issues, and we've really seen this across the board, whether they are vesting an existing board committee with oversight responsibilities for ESG, or in some, and I think more limited, instances creating a standalone committee for that purpose. And there are a lot of issues embedded in that company really needs to think through. And finally, businesses should regularly review regulatory guidance and developments and, as always, consult with relevant professionals and attorneys to remain on side relative to those issues.

Jose Garriga: Thank you, Stacey. That's great information for our listeners. So Amy, just to wrap up our conversation today, what can you tell listeners about the decision to include the article covering the evolving role of ESG in corporate tax matters and compliance? I mean, they're not quite apples and oranges, but those two issues don't necessarily seem like an intuitive pairing.

Amy Kennedy: It's funny you say that because I had a very similar reaction, but it's certainly a topic we saw come through 2022 and into 2023, so right on point. But I think, when we take a step back, pairing the two does absolutely make perfect sense. And as our colleague writes in the piece, tax considerations actually permeate all ESG considerations. Taxation has an obvious social group implication that is commonly used to incent companies and individuals to engage, or not engage, in certain behaviors. And, so, apart from the inherently social aspect of taxation, tax incentives have played and are expected to play a significant role in the reduction, per se, of GHG [greenhouse gas] emissions and achieving net zero goals. So, tax really is central to many of our incentives or ESG touch point initiatives. I think if you look around the corner for that, and one could easily as there foresee, I think ESG played an increasingly important role in corporate tax and compliance matters; these companies will be expected to incorporate ESG considerations potentially to longer-term tax planning, how they interact with the communities in relations to taxes paid, and also having that alongside the increasing or the growing requests for ESG-related disclosures. So I think that's where you start to see tax muscle in and become integral to some of those already-existing tenets that we see prevalent today.

Jose Garriga: Thank you, Amy. Listeners, you've been listening to Akin partners and ESG group co-leaders Amy Kennedy and Stacey Mitchell. Thank you both for making the time to walk us through this fascinating topic and survey.

And thank you, listeners, as always, for your time and attention. Please make sure to subscribe to Accelerate ESG wherever you listen to podcasts. We're on, among others, iTunes, YouTube and Spotify.

To learn more about Akin and the firm's work in, and thinking on, ESG matters, search for “ESG” on akingump.com; take a moment to read Amy and Stacey's bios on the site; visit our Speaking Sustainability blog for insights and analysis on all matters ESG-related, and finally and most importantly, visit our LinkedIn page or akingump.com to read the ESG Survey itself.

Until next time.