ESG Committee

Upcoming Event

Key EU Developments for Asset Managers

Registration Page: https://nysba.org/events/key-eu-developments-for-asset-managers/
Date: March 28, 2024 | 4:30 p.m. – 6:30 p.m.

Our next event will focus on critical and timely ESG developments in Europe. The presentation will be by two of the ESG committee members representing two key jurisdictions for European funds: Ireland and Luxembourg. David Walsh (Dillon Eustace) will give us an overview of developments through the lens of the Irish regulator and Antoine Peter (Arendt), the view from Luxembourg. Both will also address general noteworthy EU developments. In particular, we will address the following:

ESG Asset Management Regulatory Exams. We often think of the EU as leading regulation and the SEC as leading regulatory enforcement. The SEC has run (and continues to run) ESG-focused inspections and examinations and brought high-profile ESG enforcement actions. Europe is picking up speed, notably following the announcement of the ESMA Common Supervisory Action (CSA) which is being rolled out across jurisdictions in the EU.  We witness a rapid change of the regulatory scene with both the Irish and Luxembourg regulators launching similar (and very granular) ESG exams and data collections. We will address key areas of regulatory focus.

SFDR Brussels update. The EU has received feedback by various participants around the broader SFDR Level 1 revisions. We will discuss the key trends of the feedback received and the EU Commission’s reaction thus far. This will be an up-to-date overview of the SFDR consultation process in Brussels. The new version of the SFDR RTS (SFDR Level 2 developments) will also be discussed as well as recent developments related to the EU taxonomy.

The upcoming Funds Name Rule. It has become a major source of concern for US managers managing global strategies. The EU Fund Name is similar to a certain extent to the US Name Fund Rule (both require 80% alignment of portfolio holdings) but the two rules diverge in many significant ways which we will explore in our meeting. Caught between these two different regimes, US managers are assessing their options.

In addition, we will discuss how rising anti ESG sentiment in the US is impacting the European landscape and also how certain European countries are taking diverging paths on certain green initiatives when their own self interests are at risk.

Our meeting will be held in person on March 28 from 4.30 to 6.30 pm at the Luxembourg House (17 Bleekman Street–Midtown East, New York, NY). The Luxembourg House is a beautiful historic mansion overlooking the East River).

Come join us for a lively discussion and pre-dinner drinks and snacks.

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The mission of the ESG Committee will be to:

• Actively monitor developments in the area;
• Provide a forum for discussion among practitioners both in-house and law firm and help them benchmark their ESG practices against peers;
• Organize CLE programs;
• Link members of the legal profession to academia and not-for-profits active in sustainability;
• Inform members of publicly available educational resources such as courses in ESG matters offered by UN institutions;
• Engage the student body in law schools around the state and New York city; and
• Educate and engage the student body and faculty in New York State’s law schools as to ESG practices and developments

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ESG refers to a set of “E”nvironmental, “S”ocial and “G”overnance standards that are used to assess risks, enhance investment returns and/or to promote environmental or societal goals. ESG factors are increasingly incorporated into investment and credit analysis. Companies are evaluated for their sustainable practices by investors and rating agencies. Social issues such as racial justice, diversity and inclusion, data privacy and the like are increasingly important from business and legal perspectives.  Robust Governance is critical to ensuring that E and S commitments and obligations are documented so that they can be tracked, measured monitored and reported on.

Companies are also motivated to improve their ESG profile in response to the demands or preferences of the customers and clients, and the desire to improve their ability to recruit and retain the best employees.  Corporate leaders are increasingly vocal in promoting ESG values and companies are linking ESG to pay and performance. Companies are adopting new policies promoting diversity and inclusion, and states are adopting new entity forms designed to enhance the ability of governing bodies to account for ESG in decision-making (such as public benefit corporations).

ESG investment vehicles have grown exponentially, and 2020 has seen record inflows into ESG funds formed to allocate capital to sustainable businesses. Green bonds issued to finance environmentally friendly projects, credits for sustainable projects, green loans, active ownership through proxy voting are notable ESG trends.

Legal and regulatory oversight of ESG initiatives and commitments has been de-centralized and ad hoc, and varies from country to country and region to region.  International ESG frameworks focus on a wide range of quantitative sustainability standards as well as disclosure requirements designed to allow investors to assess the ESG impact of their investments.

In-house legal teams and their business counterparts have been wrestling with a myriad of ESG-related challenges for many years.  Lawyers are increasingly tasked with ensuring that their organizations are adhering to ESG obligations alongside legal and regulatory developments, industry standards and industry best practices.  Law firms are developing specialized practices focused on the sometimes existential legal and reputational risks associated with ESG as they assist their clients in navigating this complex space.