LEGAL OPERATIONS
Navigating the ESG Landscape: Proxy Statement Challenges and Opportunities By LAURA ANN SMITH the ever-changing ESG landscape. All of this is made more complicated by the need to consider disclosures in light of recent anti-ESG sentiment and Supreme Court decisions which create additional potential for litigation.
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s interest in Environmental, Social, and Governance (ESG) continues to expand, investors now expect disclosure around ESG topics in proxy statements. Each year more companies are including ESG highlights in their proxy. According to Labrador’s most recent review, more than three-quarters of the S&P BSE 250 Small Cap Index included a discussion of ESG-specific topics in 2023. In the proxy statement, companies should focus on helping stakeholders understand how their ESG approach aligns with their stated strategy and business model as well
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Because ESG encompasses an ever-increasing list of areas, it can be a challenge to determine what to discuss in a proxy statement and the level of detail to provide.
as demonstrate how the board’s oversight of ESG is part of the board’s oversight of strategy. In addition, stakeholders are looking for confirmation that companies are evaluating ESG risk and opportunities, adopting sustainable business strategies, establishing appropriate goals and metrics, and committing to regular ESG reporting using appropriate frameworks. The challenge for general counsel and their teams is to ensure consistency of disclosures across multiple reports and to continually monitor
DECEMBER 2023
WHERE SHOULD THE ESG SUMMARY LIVE?
According to the Labrador study, the most common locations for ESG disclosures within proxy statements are a summary within the proxy summar y (39 percent) or governance section (41 percent), or a standalone ESG section (23 percent). Most disclosures range from two to five pages, and a well-constructed, highly visual two-to-four-page summary can be just as effective as a longer dedicated section.
HOW MUCH IS TOO MUCH? Because ESG encompasses an ever-increasing list of areas, it can be a challenge to determine what to BACK TO CONTENTS
