We write a lot on this blog about the importance of a strong ESG business case. Business fundamentals are central to any ESG strategy, providing companies with a durable rationale for pursuing ESG objectives. We often discuss this in the context of winning over stakeholders, both internally and externally. Contributions to the bottom line are compelling, and it’s hard to argue with cost savings, risk reduction, and operational efficiencies. However, a strong business case may do more than win hearts and minds. It may also serve as a legal bulwark, insulating your ESG program from anti-ESG litigation. A recent Morgan Lewis memo discusses the state of ESG investing in the US and provides valuable insight into how to best frame ESG:
“The US ESG investing landscape remains complex, fragmented, and highly dynamic. Legal and regulatory pressure spans state public assets, private retirement plans, sustainability commitments, and proxy voting practices. Yet, despite these challenges, ESG considerations are not prohibited, and investor demand for disciplined, return-driven ESG-adjacent strategies persists…
In this environment, success depends less on slogans and more on substance: leading with returns and risk management, maintaining consistent and supportable disclosures, and aligning stewardship practices with fiduciary and regulatory expectations. A disciplined, well-governed ESG strategy remains possible, particularly where ESG narratives are grounded in, and substantiated by, what firms actually do.”
While directed at financial firms using ESG criteria, this advice is sound for any business with an ESG program. ESG has unfortunately become the rope in a political tug-of-war. Companies and investors are regularly accused of putting “politics before profit” by pursuing sustainability objectives. That argument falls apart when you can tie your sustainability efforts directly to your profits.
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