Bloomberg Law
May 18, 2023, 9:00 AM

ANALYSIS: Top Client ESG Concern Is Regulatory Compliance

Abigail Gampher
Abigail Gampher
Legal Analyst

The ESG regulatory outlook may be at its most uncertain point yet. And this tension—due to the SEC’s delayed climate rule, investor and regulatory ESG data demands, and an entire range of state legislative proposals on ESG investments—is keeping lawyers busy.

Bloomberg Law’s most recent State of Practice Survey reveals that clients have questions for their lawyers about ESG regulation and ESG-related risks to their reputation—and that ESG data may be a crucial part of the attorney-client dialogue.

Survey: Regulatory Uncertainty Abounds

Of the 802 attorney respondents to the survey, one-third reported that they worked on ESG issues.

Over half of these attorneys indicated that their clients were concerned with regulatory compliance—the top category for ESG impacts on practice. One explanation for this strong showing may be the significant state and federal regulatory compliance changes underway.

And this client concern cuts across practice areas, with at least one-third of attorneys in each of the 34 surveyed practices areas reporting that they have clients with concerns about ESG regulatory compliance.

The top five practice areas for attorneys reporting client concerns regarding ESG regulatory compliance were (excluding ESG and “other”):

  • Securities/Capital Markets (63%),
  • M&A (60%),
  • Private Equity (60%),
  • Energy (58%), and
  • Employee Benefits/Executive Compensation (58%).

ESG’s influence over these practice areas is likely to increase in the future as a result of ESG risks in due diligence, fossil fuel industry boycotts, and litigation over ESG considerations in ERISA investments.

Attorneys Leverage ESG Data

A crucial part of meeting client, investor, business partner, and board demands involves leveraging ESG data—and an impressive 70% of the surveyed attorneys who work on ESG issues reported citing ESG data on at least an annual basis.

Over half of the attorneys indicated that they used the data to help clients manage ESG risks generally.

Interestingly, 43% of attorneys said they use ESG data to help clients manage reputational risks associated with ESG. One type of ESG data—third-party ESG scores—may help explain why so many respondents selected this answer: low scores can put companies at very real reputational risk.

The SEC’s behemoth of a climate rule would require companies to collect and disclose substantial amounts of data, much of which many companies aren’t currently disclosing publicly. In the coming years, the 42% of attorneys that are referencing ESG data to prepare client disclosures is likely to substantially increase.

Bloomberg Law subscribers can find related content on our Surveys, Reports & Data Analysis page. Bloomberg Law subscribers can find a variety of Practical Guidance documents, workflow tools, and reference materials for corporate counsel on our Environmental, Social, & Governance (ESG) Practice Page.

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