ESG and Sustainability

Climate change and decarbonization are key issues for companies as they transition to lower-carbon energy resources, adopt new technologies and business practices to meet energy efficiency goals, and, where appropriate, use carbon offsets and trading to achieve decarbonization. Companies in all sectors are addressing their contributions to climate change, as well as the risks it poses to their economic prospects, competitive position and viability. 

With careful consideration, sound legal advice, an understanding of commercial realities and technological costs, and a focus on the future, companies can be powerful forces in mitigating and adapting to climate change while achieving long-term business success.

Governance in the context of ESG directly affects how executive management, boards and top executives interact with stakeholders, including shareholders, employees, customers, suppliers and the wider public. Key questions include whether the company gives back to its local community, if its actions reflect stakeholder values, if it prioritizes integrity and transparency, and if corporate statements align with actual practices. Companies must address challenges, uncertainties and mitigation actions in securities filings without increasing exposure. 

Corporate governance encompasses financial and accounting transparency and full, honest financial reporting. Board members acting in a fiduciary capacity must avoid conflicts of interest. Many ESG investors focus on diversity and inclusion at the board and enterprise level, and may scrutinize executive compensation and involvement as a measure of long-term value and compared to rank-and-file pay. 

Regulatory risk includes financial disclosure requirements and ESG reporting obligations, along with changing and overlapping regimes for companies operating in multiple jurisdictions. ESG capital markets issues are broad, affecting every company in some way, but can also be highly specific depending on industry and operations. There is no single set of metrics or shared taxonomy covering all ESG issues for all companies. The ESG landscape continually changes, with issues moving quickly from peripheral to central—or uncertain—in importance. 

From new startups to long-established companies, modern businesses are focusing on their environmental impact and the significant risks they may face from environmental factors, such as climate change and growing public and government attention to sustainability. Whether related to particular projects or overall strategy, companies are hearing from more stakeholders about their operations and impacts.

Companies must maintain positive relationships with the natural environment and the communities where they operate. Advancing environmental and social values—both externally and internally—can support long-term commercial success. 

Sustainable business and projects now include financial products aimed at achieving environmental, social and organizational integrity goals on commercially sustainable terms. Achieving these goals is increasingly recognized as vital to long-term business health and success, as institutional and individual investors seek out investments that support these objectives and certain asset classes linked to these goals have delivered high returns. Investment based on environmental, social and governance criteria continues to grow at a rapid pace. 

Our leading renewable energy financing practice covers a wide range of technologies and infrastructure, including utility-scale wind and solar generation, distributed generation, fuel cells, biomass, renewable natural gas, green hydrogen, and transmission infrastructure. We advise on pipelines, carbon capture and sequestration, offshore wind, and electric energy storage projects—such as flow and lithium-ion batteries, stand-alone energy storage, and storage paired with solar, wind, or gas-fired generation. 

Renewable energy and infrastructure projects raise a wide range of ESG and sustainability issues. These include how projects both affect and are affected by environmental conditions like climate change, environmental justice, the rights of Indigenous communities, employee working conditions, supply chain integrity and whether projects are suitable for ESG-sensitive investors. 

These challenges influence project development and implementation well beyond traditional financial and regulatory concerns. We help clients plan and implement renewable energy and infrastructure projects with a focus on the impact for all stakeholders—from initial research and development through to full implementation and distribution. By taking a proactive approach, we help clients avoid issues before they arise and, if challenges do occur, guide them through dispute resolution proceedings. 

Environmental regulations have expanded over time from focusing mainly on heavy industry, emissions and disposal to addressing the full lifecycle of products, including supply chains, retail and circular economy principles. The regulations governing land use and natural resources are also constantly evolving. We closely monitor these developments at both the micro and macro levels and counsel clients accordingly. 

Environmental sustainability, social justice and corporate integrity—from racial inequality to forced labor—are increasingly important to consumers, businesses and regulators. Stakeholders want their purchasing decisions to reflect their values.

Sheppard’s ESG and Sustainability Team helps companies understand which marketing and consumer communications are permitted or prohibited, and how to demonstrate their ESG and sustainability commitments in accordance with applicable laws and regulations. 

We guide clients through a fast-changing legal landscape to protect brand integrity and align practices and communications with ESG and sustainability values. The stakes are high, with consumers and regulators scrutinizing marketing claims and high-profile cases of “greenwashing” and unethical sourcing making headlines. 

Our team provides real-time advice on ESG marketing, including product descriptions and labels, social media, mission statements, product origin and composition, employee programs, and investor and public relations. We also handle sensitive litigation with long-term strategies to protect and enhance brand integrity. 

With the United Nations Guiding Principles on Business and Human Rights becoming an increasingly important reference point, companies are placing greater focus on the human rights implications of their business practices. Business and human rights intersect throughout the entire lifecycle of product and service development, from sourcing raw materials and selecting manufacturing locations, to labor conditions, whistleblower protection, trade law compliance (including carbon tariffs), distribution aligned with human rights sanctions, product and service safety, and responsible disposal and waste management. 

Our comprehensive approach to business and human rights helps clients avoid complicity in human rights violations, maintain the integrity of their products and services, and protect their reputations. 

In addition to a company’s relationship with external stakeholders, one of its most important relationships is with its own employees. Workplace policies on diversity, equity, inclusion and the prevention of sexual harassment, as well as pro bono and community service, require careful attention. 

Maintaining a safe and healthy work environment means ensuring the physical safety of employees, but it goes beyond that. Employee training and education programs that offer opportunities for advancement are important, as are fostering employee engagement with management and protecting whistleblowers. Compliance with applicable labor and employment laws is essential. A healthy and equitable workplace, especially one that incorporates ESG and sustainability values, helps protect employers and leads to better morale.