doing,” he says. If different jurisdictions have
different legislation, it will make it extremely difficult for companies to operate effectively unless they have a coherent policy. For example, the United States is less educated on ESG regulations than the EU, but the latter has made is clear than any company wishing to operate or trade within its borders will also have to comply with its new disclosure obligations. “For large businesses with
cross-border operations this might not be a problem, but it might mean applying a highest common denominator approach,” he says. “Aside from that, having a global standard to which companies have to comply when it comes to ESG will ultimately make regulations more effective and easier to enforce.”
Sustainability is a broad concept,
and it is important for businesses, especially those with a global remit, to remember that. “Sustainability is not just
“ SUSTAINABILITY IS NOT JUST CONFINED TO ENVIRONMENTAL ISSUES, IT ENCOMPASSES A PLETHORA OF OTHERS, INCLUDING THE GENDER PAY GAP, REMUNERATION, ANTI-BRIBERY AND CORRUPTION AND DIVERSITY AND INCLUSION”
ARUN SRIVASTAVA AT PAUL HASTINGS
confined to environmental issues, it encompasses a plethora of others, including the gender pay gap, remuneration, anti-bribery and corruption, and diversity and inclusion,” he explains.
ESG – WHAT IS DRIVING THE CHANGE? Celene Lee, Principal and Senior Investment Consultant at Buck in the UK, the human resources consulting agency, says there are three key components which are coming together. “Firstly, regulatory drivers,
starting with banks, insurers and institutional investors such as pension schemes, who are required to take sustainability into account when it comes to risk assessment,” she says. “Naturally these are large asset owners and therefore drive changes in the behaviours in the companies they invest in and therefore impact on sustainable investing.” The media is another key component, taking the message and communicating change to a much larger audience, as well as acting as a forum for ideas and momentum building.
“Finally, the ultimate enabler of
sustainable investing – improved and widely-adopted technology – which provides sustainability
20
metrics to companies and consumers that allow them to make better business and buying decisions in real time in some cases,” she says. There is real momentum behind
responsible investment. Regardless of whether it is motivated by ‘good intentions’ or the need to comply with regulation, high levels of demand mean that institutional investors continue to put pressure on asset managers to up their game on sustainable investing. “ESG is not just about ‘doing
good’ in a vacuum, it has to be put into the context of the real world,” she says. “Ultimately the future for ESG relies on capital flows: the hope is that companies that engage in sustainable businesses will find it cheaper and easier to raise capital. Making people aware of this real- world success is essential if ESG is to maintain its momentum and continue to stay relevant. Ultimately, businesses are there
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