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TheCorporateCounsel

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A basis for research and practical guidance focusing on federal securities laws, compliance & corporate governance.

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An educational service that provides practical guidance on legal issues involving public and private mergers & acquisitions, joint ventures, private equity – and much more.

CompensationStandards

CompensationStandards.com

The “one stop” resource for information about responsible executive compensation practices & disclosure.

Section16.net

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Widely recognized as the premier online research platform providing practical guidance on issues involving Section 16 of the Securities Exchange Act of 1934 and all of its related rules.

PracticalESG

PracticalESG.com

Keeping you in-the-know on environmental, social and governance developments

Earlier this week, Leslie Norton of Morningstar responded to the anti-ESG trend with her “Top 10” list of why ESG isn’t going away. Norton acknowledged that some criticisms are valid – such as those concerning greenwashing and gaming ESG ratings. But she continues:

“… as ESG analysis and sustainable investing evolve, the field must address each [criticism]. The position of many Republicans on ESG presents a new type of challenge that has moved from stump speeches during an election year to anti-ESG exchange-traded funds and will require continued engagement from everyone.”

Here is Norton’s Top 10:

  1. ESG Offers a Fuller View of Risk
  2. Identifying the Risks Leads to Opportunities
  3. Rise of Stakeholder Capitalism Is Good for Companies
  4. Regulations Are Leading to Improvements
  5. Sustainable Investing Is Growing …
  6. … Particularly Among Women and Young Investors
  7. Performance Is on Par
  8. More Shareholders Are Voting
  9. Countering the Broad Consensus on ESG Would Be Difficult
  10. ESG May Be Better for Investor Outcomes

In my view, number 3 needs a bit of clarification. Norton offers her view that stakeholder capitalism to her means that “[c]ompanies are reshaping themselves to appeal to talented workers who are more diverse than ever and to customers who are increasingly consuming in line with their values.” As one supporting point, she point to the increasing use of ESG metrics in executive compensation:

“These metrics are something that Lisa Pollina, who serves on the board of directors for insurer Munich Re and water technology firm Energy Recovery ERII, already looks at. ‘From a board perspective, I’m looking at governance, compliance, ethics, business continuity,’ she says. ‘I’m looking at developing diverse talent, understanding and looking at climate change. Does any of that go away if you don’t call it ESG? No.'”

I completely agree with the point Pollina makes about whether what you call corporate ESG efforts is important. I myself have said “Does it really matter if an initiative is called sustainability, cost optimization or flying pigs?” Even so, I wish Norton had chosen different wording other than “stakeholder capitalism”.

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The Editor

Lawrence Heim has been practicing in the field of ESG management for more than 35 years. He began his career as a legal assistant in the Environmental Practice of Vinson & Elkins working for a partner who is nationally recognized and an adjunct professor of environmental law at the University of Texas Law School. He moved into technical environmental consulting with ENSR Consulting & Engineering at the height of regulatory development, working across a range of disciplines. He was one… View Profile