Concern for environmental and social issues has reached an inflection point. While traditional governance issues that have been a staple of investor advocacy and discussion (the “G” of ESG) continue to be important, environmental and social issues (the “E” and the “S” of “ESG”) have now taken center stage. Our multidisciplinary team of lawyers advises companies at various stages of maturity to respond to this changing corporate landscape. Our lawyers assist clients in a variety of industries across multiple ESG impact areas, including the creation and execution of a sustainable ESG strategy, SEC reporting, regulatory compliance, and disputes and crisis management.
In times of crisis, companies and their stakeholders, including investors, communities and employees, are faced with fast-changing information and difficult decisions. These decisions can be supported by sophisticated planning and experienced and strategic advice. Our lawyers have the skills and judgement necessary to work with clients to manage through and overcome these unique challenges. From shareholder activism to succession planning to changes in regulation and legislation, we recognize that organizations are in constant flux as they weather any crisis. To that end, our advice is informed by our clients’ immediate needs and long-term business goals, with an eye toward minimizing adverse financial or reputational risks.
Stakeholders increasingly expect companies to, and reward those that, fully integrate ESG opportunities and risks into the long-term business strategy of the company. One of the most difficult threshold challenges for companies seeking to establish a comprehensive ESG strategy is setting the scope of engagement and oversight. Determining the company’s ESG priorities is critically important so that the company can set expectations, establish appropriate goals, plan and implement actions to achieve these goals, measure success over time and where appropriate, publicly report on progress. In order to develop a meaningful ESG strategy, boards and management must analyze which ESG issues are important to the success of the company’s long-term business strategy and how to manage the significant risks facing the company in pursuing that strategy. Our lawyers provide strategic advice in developing ESG best practices and policies, implementing compliance and reporting programs and advising the board and executive team on the regulatory landscape and litigation risks.
Regulatory frameworks and reporting standards around ESG disclosure are rapidly evolving as stakeholders and regulators desire information about how a company is addressing ESG factors and creating sustainable business operations. Creating a coherent message to stakeholders through a company’s ESG disclosures, reports and communications is critical in meeting regulatory requirements and facilitating stakeholder engagement. Whether a company has a robust ESG reporting program with clear metrics to evaluate performance or is in the beginning stages of assessing the impact of sustainability factors on the business, we provide strategic advice on designing and implementing disclosure programs in an ESG landscape that continues to evolve.
The corporate governance debate among companies, institutional investors and advocacy groups has taken a shift over the past few proxy seasons. Discussions have moved beyond disclosures in the proxy statement and shareholder proposals to other topics, chief among them being diversity, at the board level and beyond.
The debate is no longer limited to whether diversity is good and how it can strengthen decision-making. It is now focused on how companies are supporting the development of diverse board talent, how are they changing their recruitment practices and when there will be meaningful change in board and management composition. We recognize that change comes inherent with challenges and work with clients to perform a complete evaluation—assessing both internal and external forces—with the goal of helping them to craft the culture they want to disseminate and model from the top.
The U.S. economy has transitioned from one based on industrial production and tangible assets to one based on intangible assets and human services, and the current disclosure rules—based on the antiquated view that human capital is a cost rather than a driver of financial performance—are not yet aligned with this change. Since, in the view of the IAC, human capital is the “primary source of value” of many of the most dynamic U.S. companies, it encouraged the SEC to engage with investors, issuers and the academic community in an effort to improve and augment existing human capital management disclosure. These forces, along with employee encouragement, are causing a noticeable shift in approach to this area of company risk and return. In approaching human capital management (and related disclosure), we work to understand the lens through which our clients look at human capital and help construct an aligned human capital management strategy.
Cybersecurity remains a key focus for boards of public companies. Ransomware attacks, the theft of personally identifiable information and “zero-day” vulnerability exploits continue to fill the headlines, and directors of public companies in all industries should take it as a reminder of their important oversight role in the management of risk and the need to assess both management’s ability to properly manage cybersecurity matters and their own capabilities to serve in a meaningful oversight role. Our cross-disciplinary and responsive team takes a practical approach when assessing the changing cybersecurity and data protection landscape and works with clients to help them understand their risk profile, assess management’s handling of cybersecurity threats and learn about emerging trends and best practices.
The focus on climate change and environmental sustainability only continues to grow. Resulting from legislative and social pressures on a global scale, companies need to enhance corporate disclosure to stakeholders on the effects of climate change on their operating and financial results. Further, companies are looking to manage environmental risks within the context of their businesses, and have sought ways to act in an environmentally conscious manner. Whether a company has long-standing environmentally focused policies or is new to thinking about how its business strategies and sustainability intersect, we can provide sophisticated advice to support these initiatives.
Whether it be investing in the mature green bond market, participating in an emerging green and ESG loan market, or committing publicly to combat climate change, nimble companies are learning to navigate the new world of impact investing and fiduciary and other investor interest in ESG investment opportunities and funds. Shearman & Sterling is at the forefront of these product developments, including advising on the first sovereign green bond in Latin America and constructing the first-of-its-kind Women’s Livelihood Bond. We stay on top of regulatory changes and market trends to keep our clients on the cutting edge.
Our award-winning litigators have acted as counsel in court cases and international arbitrations involving a variety of environmental issues, such as disputes relating to representations and warranties concerning decontamination of industrial sites and administrative proceedings relating to environmental quality permits. Our expertise also includes both advisory and advocacy work on all aspects of international law and international regulatory frameworks. We regularly advise multinational companies on risk management, compliance and corporate governance in relation to matters arising under international law, such as sustainable development, international environmental law, and human rights. We are routinely relied upon by clients for dispute resolution planning and prevention in these areas.
With decades of experience and a reputation for toughness and integrity, we guide clients through investigations relating to compliance with a variety of U.S. and international regulatory standards. We also regularly conduct internal investigations involving anti-corruption matters. Our attorneys include former federal prosecutors and U.S. and European regulators, and we have excellent working relationships with government agencies and regulatory bodies around the world.
Shearman & Sterling LLP