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IFLR Corporate Sustainability Summit 2021

The inaugural event was held virtually on the 29th and 30th September, examining the legal risk in the rise of ESG issues, here we examine the key moments

The inaugural event was held virtually on the 29th and 30th September, bringing together in-house counsel from across a range of industries to discuss current sustainability regulatory requirements and risks from a strictly legal perspective. 

Here, IFLR's EMEA reporter Lucy Frost gives a run down of what happened over the two days. 

Day One 

The IFLR Corporate Sustainability Summit 2021 kicked off with a focus on the ‘E’ of ESG, as panellists discussed new regulations coming into place, how much they’ll affect the industry, risks in the supply chain and the outlook, in the US.

The Policy: Assessing the current regulatory landscape

Our first panel discussed coming EU regulations in the EU and the impact each will have there and further afield.

Diana Ribeiro Duarte, senior lawyer at Morais Leitao, spoke to María Pérez Fontán, head of legal at CaixaBank Asset Management; João Tiago Silveira, partner at Morais Leitao; Ben Pott, head of public policy and government affairs at BNY Mellon; and Paul Alexander, principal counsel at the European Bank for Reconstruction and Development (EBRD), about how companies can handle the fast-paced regulatory changes that are on the horizon. 

A need for greater clarity and standardisation in laws to help companies adhere to regulation and avoid greenwashing was one of the key themes of the conversation. Regarding the new EU Taxonomy, Pérez Fontán spoke about the need for the definitions to be aligned, not just within the EU but further afield and across other EU policies too.

For Silveira, one of the most important things to be aware of is that many EU companies will have to change reporting practices for the new Non-Financial Reporting Directive (NFRD) and Sustainable Finance Disclosures Regulation (SFRD) regulations, even if they are already adhering to their home country’s current regulations.

As Alexander reminded the audience, the fast pace of regulation may be a challenge, but it is also quite necessary. For those that want to hit net-zero by 2050, it is important not to spend three years discussing the minutiae of each regulation. 

In terms of working out where to start with the changing regulation, Potts suggested firms look first at their home jurisdiction, then at the jurisdiction of their clients and then at the product that you are offering. Once that is clear firms can work out which regulations you to comply with. 

The Response: Navigating the practical implications and requirements of sustainability regulations

Our second panel followed up on the issues discussed in the first and looked at how the new regulation compares to the current landscape in Europe.

John Crabb, managing editor at IFLR, spoke to Iliana Byanova, chief legal, risk and compliance officer at Sopharma Trading; Kriti Avasthi, general counsel at Emerging Markets Investment Management Ltd; Marta Mikliszanka, head of public affairs and sustainability at Allegro.pl; and Jan Buechsenstein, co-general counsel and head of compliance and risk at Raisin DS.

With panellists speaking from Bulgaria, Poland, Germany and the UK, it became immediately clear that the current landscape is not the same in every jurisdiction. 

In the UK, as Avasthi suggested, while regulations may be new, the need to disclose and report was not due to increasing pressure from investors over the past few years. Whereas in Poland, Mikliszanka spoke of a much slower take-up in enthusiasm for reporting as well as demand. In Bulgaria, Byanova spoke of a country behind in its ESG compliance, down in part to a lack of trained legal representatives and consultants. 

On the take-up of this new regulation, Buechsenstein discussed the importance of engagement between companies and regulators. This ensures that regulations are the right fit for each jurisdiction and that companies understand the need to comply.

The theme of the day – a need for standardisation – reared its head again as Avasthi spoke on the difficulty that the UK and other markets have in understanding to what extent they may need to adhere to EU regulation such as the SFDR, and the need for clarity in cross border taxonomies. 

Analysing ESG risks in supply chains

The third panel of the day discussed how ESG risks in supply chains are affecting four companies in very different sectors: luxury goods, beverages, cannabis, and maritime industries.

Clare Wardle, general counsel and company secretary at Coca-Cola, spoke to Ece Gürsoy, chief legal officer at Global Ports Holdings; Pamela Epstein, general counsel and chief licensing and regulatory officer at Eden Enterprises; and Sally Taylor, general counsel at Asprey.

The panel made it clear that each sector has its own issues when tackling ESG.

For Asprey, sustainability policies were nothing new, and Taylor added that, in the luxury goods market, strict supply chain oversight and longevity of the product are already well established. On the other hand, Gürsoy spoke about the difficulties of working across a wide range of regulatory jurisdictions with ports in many locations globally. For Epstein and Eden Enterprises, the problem looks very different: bringing an industry which traditionally operated off-books due to legality issues to keeping up with the more transparent reporting policies expected now.

Wardle questioned the panel on enforcement, pointing out from her own experience that you can can have the best policy in the world but if people don’t comply with that it’s not going to get you anywhere.

For Asprey’s short supply chain, enforcement was less complicated, but still required strict oversight from crocodile farm to artisan. 

Sustainability as a global issue: the US perspective

In the last session of day one, we moved out of Europe and across the pond to the US. 

Jason Haper, partner at Cadwalader, spoke to Nili Gilbert, chair of the Investment committee at the David Rockefeller Fund; Ellen Holloman, litigation partner  at Cadwalader, and Steve Mickelsen, head of legal USA for Statkraft, about what companies are doing for ESG in a landscape where regulation is lagging behind.

Gilbert opened the discussion by explaining the need for a co-ordinated effort on a global scale, not just in Europe or the US, explaining that while the effort needed to be global, it didn’t necessarily have to be the same everywhere. Given that no one knows what the correct way to reach net-zero is, maybe having countries try a range of pathways is a good idea, she continued. 

Despite the lack of regulation, many companies are taking it upon themselves to take big ESG steps voluntarily. Mickelsen referred to the landmark contracts set up by Salesforce, which included clauses stating that if a supplier doesn’t take steps to reach net-zero, they’ll have breach the contract. 

The panel expected more voluntary steps like this to be made in the US. Ellen Holloman referred to the increasing pressure from investors and investors activism leading to big changes, giving the example of the successful campaign for a change of leadership in ExxonMobile.

While the landscape in the US is still very much just a few companies taking large steps rather than the wider brush stroke of regulation, Mickelsen’s advice was for people to take action now. Regulation will come in at some point and you can either be prepared for it or caught out by it.

Day Two

On the second day of the summit, discussions moved to the ‘S’ and ‘G’ of ESG as panellists considered governance and social policies in their companies, as well as considering what might lie ahead in terms of ESG risks and regulation.

Promoting ‘good’ governance

In the first session of day two, our panel questioned who should be leading the charge to ESG within a company. Chuck Canfield, principal corporate governance officer at IFC, led the conversation with Vesselina Haralampieve, senior counsel at EBRD; Kelsey Emms, head of legal at Tethys Oil AB; and Jennifer Schwalbenberg, head of corporate responsibility at DDCAP Group.

The panel put forward a strong case for the need to not just have one person leading the charge as a chief sustainability officer, but for responsibility to be integrated at every level of the company.

Schwalbenberg and Harampieve spoke about the experience they’ve had with ESG policies in their companies. Both stressed the need for an integrated approach which can adapt to the ever-changing landscape.

Schwalbenberg also spoke about the change in investor expectations at her company, saying that they were no longer looking for squeaky clean reports, but ones that were transparent and showed what was going on and how the company was tackling it.

Emmis spoke about navigating ESG in the carbon-intensive oil and gas industry in the current climate. She spoke of a strong shift in the investor base from Swedish investors to US pension holders, and the need for the company to work out its next moves, as regulation would increase on the transitioning sector. 

Putting the spotlight on the ‘social’ in ESG

In the second panel of the day, the spotlight moved to the ‘S’ of ESG and the wide net of issues it covers from pay equity to diversity and inclusion initiatives.

Michelle Corneby, director at Cayley Coughtrie, spoke to Silvio Cavallo, general counsel at Pillarstone; Gary Davison, group legal director and company secretary at Tyrens UK; Helena Thernstrom, head of legal at NatWest Group; and Alessia Sharma, legal director at Workday.

The panel started by re-affirming the case for good ‘social’ strategies. Something which is now not a ‘nice-to-have’ but business critical due to its impact on a company’s reputation, changing attitudes among investors and the increased productivity that comes from a looked after workforce. 

The key challenge for all panellists was the lack of framework or guidelines on what good social looks like and what is required. This encourages companies to look at what their competitors are doing and industry standards, which could get in the way of them being the first to take a big voluntary step forward, Silvio Cavallo said. 

Because of the lack of framework, Thernstrom advised companies look to the wide range of diversity, pay gap and other metrics available to see where the company is doing better or worse than the average. 

For companies looking to implement different people policies, Sharma suggested that the most important thing to do is understand the ‘why’ first. For example, if you want to get employees back in the office, ask yourself why. Is it because having an in-person culture is better for productivity or because you need to keep a closer eye on what employees are doing, she asked. If it’s the latter, there’s probably a deeper problem behind that.

Future outlook: What will the landscape look like over the next 5 years?

The final panel of the summit discussed the future of corporate sustainability. James Alexander, chief executive at UKSIF, spoke to Maya Mehta, UK head of the sustainable finance legal practice at BNP Paribas; Michael Damnitz, general counsel at juwi AG; Jacob Michaelsen, head of sustainable finance advisory at Nordea; and Sheila Ritson-Bennett, senior counsel for sustainability at BMO Financial Group.

Mehta expects an increase in regulations around taxonomy. The EU Taxonomy regulation and the FCA letter to funds clamping down on ‘greenwashing’ are examples of how this has already started. A key part of this to be aware of, she added, is the fragmentation and divergence in different jurisdictions. 

For Ritson-Bennett, the next five years is likely to hold the transition from voluntary to mandatory regulations. Based in Toronto, she’s noticed the gap between the level of disclosure recommended and the level actually disclosed. Companies should bridge this gap as much as possible to reduce any transition risks when regulations are mandatory.

According the Damnitz, the future bring greater emphasis on human rights and a clamping down on modern slavery in supply chains and around the world. 

Michaelsen argued that the financial sector is not necessarily as underprepared as one might think, due to the presence of green bonds and other sustainable products. The infrastructure to shift the industry into transition mode already exists and the next five years will be all about effectively using it.

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