Financial Times Moral Money Forum reports, in partnership with White & Case

White & Case LLP has partnered with the Financial Times on the publication of its Moral Money Forum reports, which explore key issues from the ESG debate.

Sustainability under the microscope: legal considerations for impact investors

As impact investing gains momentum, asset allocators face critical decisions about aligning financial returns with social and environmental outcomes (promoting the positive while mitigating the negative). The rising prominence of dedicated impact funds is redefining investor expectations, with increasing scrutiny on due diligence, fund governance, greenwashing and sustainable finance disclosure compliance. Strategies once viewed as novel (given the long-standing notion that profitability and sustainability are mutually exclusive) are now central to private markets – but the lack of universal standards, and evolving regulations, such as the EU's SFDR pose challenges. Our comment piece for the latest FT Moral Money Forum report examines the legal nuances asset allocators face when navigating impact funds, from pioneering ESG metrics in fund structures to the complexities of sustainable finance disclosure regulations, offering guidance for investors striving to balance financial returns with impact.

Rescuing diversity from the DEI backlash

As companies consider their diversity and inclusion efforts, it’s worth taking a moment to reflect on what is at stake. Amid intensifying competition for talent in major industries, companies that fail to build a diverse and inclusive culture will be putting themselves at risk — as well as missing an opportunity to contribute to positive social change. White men might make up the majority of chief executives at big US and European companies, but they’re a minority of global talent — and companies that recognise this will reap benefits. Those that fail to do so risk being spurned by those they try to hire, with young graduates increasingly prioritising diversity and inclusion at the companies they consider working for. Investors, too, are intensifying pressures on the companies they invest in to implement robust strategies on these issues, particularly against the backdrop of new non-financial disclosure regulations driving increased transparency.

Even as these subjects have surged up the corporate agenda, it remains unclear to many what is best practice — what a really effective business approach to diversity, equity and inclusion looks like. Our comment piece for the latest FT Moral Money Forum report explores the legal, reputational and shareholder activism risks emerging from corporate DEI programmes.

What does AI mean for a responsible business?

"If anyone had any doubt as to the significance of artificial intelligence, last year's one-sentence open letter from many of the top figures in the field should have opened their eyes. The letter, signed by more than 350 AI experts and executives, warned the world that AI posed a "risk of extinction" no less than other threats like pandemics and nuclear war. For investors and business people who are still getting used to talking about environmental, social and governance risks, the threat of human extinction is hard to top. Yet advocates point out that this area of technology could bring huge benefits for society, whether through improved healthcare and education or a boost to productivity." – Forward by Simon Mundy, FT Moral Money Editor

Our comment piece for the latest FT Moral Money Forum report on 'What does AI mean for a responsible business?', explores how to navigate the unique legal challenges associated with the rapidly developing, world-changing, AI technology landscape.

Why nature’s future underpins the future of business

The latest Moral Money Forum report in our partnership with the Financial Times 'Why nature's future underpins the future of business', discusses the world economy's reliance on nature, and the serious threats posed by accelerating biodiversity loss. Companies are increasingly likely to face costlier and scarcer raw material supplies, reputational risks, pressure from campaign groups as well as legal challenges and tightening regulations. 

From a legal perspective, the explosion of "greenwashing" litigation against companies indicates a potential new frontier of "nature-washing" claims. At future AGMs, biodiversity-related shareholder resolutions are expected to feature more prominently. As for regulation, frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD), released in September, are expected to be adopted into the domestic legislative architecture of certain jurisdictions in coming years, requiring businesses to assess and disclose biodiversity-related risks throughout their operations and value chains.

Can private equity meet public responsibilities?

The latest Moral Money Forum report in our partnership with the Financial Times digs into the work that private equity firms are doing to equip themselves for the ESG era, and the lively debate over their place in it.

Some argue that they are uniquely well-placed to push their portfolio companies to move rapidly on sustainability, and to pursue long-term (or at least medium-term) value creation without the distraction of quarterly earnings reports and daily share price fluctuations. Critics contend that the sector's pedigree of "asset-stripping", sometimes with dire impacts on workers, makes it impossible to take its ESG claims seriously.

Can carbon markets accelerate progress towards net zero?

For executives tasked with crafting, implementing and following a corporate climate strategy, the nascent voluntary carbon market presents complex challenges. Whilst companies are not required to participate in the voluntary carbon market by law, many choose to do so in furtherance of net zero goals or other climate change mitigation targets.

However, the integrity and true effect of carbon offsetting on global emissions has come under considerable scrutiny, and companies using offsets to claim 'carbon neutrality' risk being accused of "greenwashing". Companies should exercise caution and learn to distinguish high-quality from low-quality carbon credits and monitor developments in the regulatory landscape as it continues to rapidly evolve.

The latest Moral Money Forum report in our partnership with the Financial Times, Can carbon markets accelerate progress towards net zero?, looks at why carbon markets are increasingly seen as an essential part of efforts to reach net zero emissions, and the extent to which more regulation is needed to ensure the integrity of carbon credits, and to regulate environmental and social impacts of offsetting projects.

So you think you know your supply chain?

The fragility of supply chains is at the forefront of business thinking: heightened by disruption caused by global events and natural disasters, and exacerbated by climate-change. But responsible supply chain management is driven not only by an ethical imperative that warrants a place at the top of boards' agendas, but also by reputational risks and greater scrutiny by investors and consumers alike.

Companies must evaluate the litigation risk they could face in connection with their supply chain responsibilities, alongside growing regulatory pressures.

The report, "So you think you know your supply chain?", details how forced labour and other forms of worker abuse remain a shockingly common feature of the global economy, and how reducing the ESG-data deficit will help companies identify and tackle potential or existing harms.

How to pay executives in the age of stakeholder capitalism?

The cost-of-living crisis has resulted in investors and consumers scrutinising businesses' ESG credentials more closely, especially when it comes to executive pay. Can a company be considered responsible or ethical if it pays its chief executive hundreds of times the typical income of its frontline workers? What about the investors who vote through such lavish pay packages? Debate over these questions has taken on a new urgency, but despite public support for curbing excessive renumeration, legislation has been slow to catch up.

This Moral Money Forum report, "How to pay executives in the age of stakeholder capitalism?", draws on the responses of a survey of Moral Money newsletter readers, who overwhelmingly agreed that executive pay increases have gone too far. But as the report makes clear, that is far from the prevailing view in corporate boardrooms.

Must ESG be bad news for emerging markets?

Notwithstanding the threat of an economic downturn, the momentum that drives focus on ESG strategy is accelerating. Yet there is evidence that companies are treating climate-related considerations as risks without adequately balancing such risks against the considerable opportunities.

Once investors realise how they can mitigate the perception of ESG risk by applying responsible investment approaches to emerging market investments, they can reap the financial and reputational rewards of gaining exposure to growing economies while creating long-term impact.

The report, "Must ESG be bad news for emerging markets?", explores whether "ESG" is, as critics suggest, a mere means for financial companies to manage risks and charge higher fees, or a valuable tool for tackling some of the globe's urgent challenges. The report also discusses how funding flows can be directed into the markets that need it the most.

When should business take a stand?

The public's expectations in relation to corporate social and political responsibility is increasing, across a wide range of issues, including climate change, sustainability, and diversity. However, a company's public disclosures and statements must align with internal policies and operations within the business and throughout value chains. Companies should seek to mitigate risk and protect their brand in ways they have previously not considered.

The report "When should business take a stand?" explores how in recent years expectations on companies to engage in social and political debates have risen sharply, and have exposed businesses to the risk of political, consumer, employee and wider stakeholder backlash. The report further considers how companies would benefit from putting in place specific guidelines on corporate political engagement.

Stakeholders incorporated

The third Moral Money Forum report in our partnership with the Financial Times, "Stakeholders incorporated", explores the rise of alternative corporate forms such as the public benefit corporation (PBC), which sees companies balancing shareholders' financial interests with the interests of employees, customers and the environment.

The rise of the PBC has been a striking phenomenon, but such alternative structures are still exceptions to the rule, and many people in business and investment remain confused about their exact meaning. The third report in the Moral Money Forum series cuts through the complexities and illuminates a trend that looks likely to become more important to all of us, whether we are acting as an investor or consumer.

Measuring what matters

The proliferation of ESG acronyms, metrics and reporting frameworks in recent years has left executives and investors struggling to keep up with the explosion of emerging standards.

The second report in the series, "Measuring what matters", explores whether current ESG reporting frameworks are truly measuring companies' impact on people or the planet. With stakeholder capitalism forcing companies to adjust their single-minded focus on investors, things have become more complicated. How should we assess a company's social and environmental impact? And with most investors having accepted that environmental, social and governance factors affect their financial returns, what data should they be demanding?

Long-term view in a short-term world

The inaugural report, "Long-term view in a short-term world", addresses the increasing focus on long-term sustainability for businesses.

Investor focus on ESG has become critical, in recognition of the fact that a long-term strategy will be essential for any company wanting to deliver long-term financial and reputational success. 
This report focuses not just on the case for looking to a further horizon, but also on the practical ways in which leaders with a long-term vision are demonstrating that it can be done.

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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