EXPLORING ESG DISPUTES
The Paris Agreement on Climate Change, adopted in 2015, gave impetus to environmental and human rights protection and intensified the discussion on corporate social responsibility to achieve this goal. To that end, environmental, social and governance (ESG) has become a key agenda item for companies, their investors and other stakeholders. It will continue to drive strategic thinking, particularly as the regulatory and legislative landscape in this area continues to evolve.
But this intensifying focus in recent years has also ushered a notable increase in disputes with ESG components. Almost a third of senior legal and risk leaders in large organisations around the globe expect disputes to increase in 2024, with almost three-quarters anticipating greater risk from ESG-related issues, according to Baker McKenzie’s Global Disputes Forecast 2024 report.
Thirty percent of survey respondents believe the number of disputes will be higher in 2024, with 73 percent expecting ESG disputes to present the biggest litigation risk to their organisation in the year ahead – making it the biggest risk overall (up from the second biggest risk in 2023). Fewer than a fifth of respondents believe disputes will decrease over the next 12 months; just over half expect the number of disputes to stay the same.
Many ESG concerns are being fuelled by risks around climate litigation, with claimants turning their attention to broader environmental abuses beyond carbon emissions, such as biodiversity loss. “Discussions around climate and ESG issues have been going on for several years already but have ramped up significantly in the past year with the adoption of ESG regulations by the European Union (EU) that are unprecedented in their scope and requirements, as well as the promulgation of climate disclosure rules by the US Securities and Exchange Commission (SEC), California and the UK,” says Jennifer Lim, an independent advocate at Duxton Hill Chambers. “Such regulations transform ESG from the voluntary domain to the mandatory and strengthen ESG compliance requirements.
Oct-Dec 2024 issue
Richard Summerfield