How are ESG criteria regulated: a European overview

Our lawyers took part in the preparation of an international legal overview on the ESG criteria in business and investment. 

Environmental Social and Governance (or "ESG" for short) is a broad and refers to three key factors when measuring the sustainability and ethical impact of a business or company investment. The most socially aware investors monitor companies using ESG criteria to screen investments.

Environmental criteria look at a company's contribution to environmental challenges (e.g. waste, pollution, greenhouse gas emissions, deforestation, and climate change) and its performance in this regard. Social criteria look at how companies treat people, for example in terms of human capital management, diversity, and equal opportunities, working conditions, health and safety, and product misspelling. Finally, governance criteria look at the manner in which companies are governed, for example in terms of executive’s remuneration, tax strategy, and practices, bribery and corruption, diversity, and board structure.

At the core of ESG investing is the fundamental idea that businesses are more likely to succeed and deliver robust returns if they create value for all their stakeholders – employees, customers, suppliers, and society at large (including the environment) rather than benefiting only the company owners. Consequently, the ESG criteria examine how companies serve society and how they affect their current and future performance. The ESG analysis goes beyond what the company's current position. Considering future trends is of critical importance and should intrinsically include disruptive changes that may have a significant impact on the future profitability of a business or on its very existence.

The new edition of European Corporate Insights Magazine (Andersen Global) has an overview of the specific ESG guidelines in different European jurisdictions, any ESG benchmark companies have to adapt to if they want to attract investors, and any impact ESG criteria has on investment decisions and transaction structuring. The Magazine also has two pieces of opinion and a dedicated section with the most relevant Corporate and M&A news in our practice group in Europe.

You can download the magazine here