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ESG Legislation, Regulation, and Legal Implications

In: SUSTAINABLE INVESTING Problems and Solutions

Author

Listed:
  • Emma Elizabeth Antin Daschbach
  • Cynthia Hanawalt
Abstract
There are reams of legislative and regulatory frameworks in the United States (U.S.), Europe, and elsewhere addressing matters of environmental and social concern. But, in referring to Environmental, Social, and Governance (ESG) legal frameworks, the narrower sets require (or at least encourage) in-scope companies to either (i) make some disclosure about how those companies are addressing environmental or social issues or (ii) address how in-scope companies do that, including, for example, what terminology they use to signal where those companies stand on environmental or social issues. This chapter covers some of the most prominent examples of both sets of legal frameworks with discrete attention to those relevant to the financial sector. This chapter also covers some of the key tests on those frameworks and ESG more generally, including legislation aimed at prohibiting the use of ESG factors in the U.S.There are reams of legislative and regulatory frameworks in the United States (U.S.), Europe, and elsewhere addressing matters of environmental and social concern. In fact, the challenge might be in identifying a legal regime that does not address one or both in some measure. But, in referring to Environmental, Social, and Governance (ESG) legal frameworks, the narrower sets do one of two things: The first set requires (or at least encourages) in-scope companies to make some disclosure about how those companies are addressing environmental or social issues. The second set addresses how in-scope companies do that, including, for example, what terminology they use to signal where those companies stand on environmental or social issues.This section covers some of the most prominent examples of both sets of frameworks with discrete attention to those relevant to the financial sector. This includes frameworks already in place and others still pending as of the publication of this section. It bears emphasizing that there are a multitude of ESG frameworks beyond those noted here — frameworks in place, pending in other jurisdictions, and extending beyond those having singular relevance to the financial sector.Overall, the body of ESG frameworks is evolving so quickly that any research should assume the information provided here is but a starting point for understanding those in place and what they require of companies generally or the financial sector especially. Note further that in an increasingly global market, frameworks can have extra-jurisdictional impact. In some instances, frameworks may require (either expressly or as a practical matter) that companies reach into their value and supply chains for disclosure data. They may also establish (again, either expressly or as a practical matter) an effective bar to market access in any given jurisdiction for any company that does not comply. Given that, it is advisable to consider frameworks beyond the bounds of a company’s home jurisdiction.

Suggested Citation

  • Emma Elizabeth Antin Daschbach & Cynthia Hanawalt, 2024. "ESG Legislation, Regulation, and Legal Implications," World Scientific Book Chapters, in: Anatoly B Schmidt (ed.), SUSTAINABLE INVESTING Problems and Solutions, chapter 2, pages 29-60, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811297786_0002
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