A lot can happen in a year, and never more so it appears than in the constantly evolving world of the ESG lawyer. Pretty much a year ago to the day, we launched our inaugural ESG report, firms and lawyers having had the bandwidth afforded by the pandemic to get their heads around what they wanted their ESG image to be. In many ways, 2021 felt like a less cynical time. The industry at large was emerging from a health crisis, and we were conditioned to be kind, good corporate citizens because, let’s face it, who knew what personal and professional hell Covid might have wrought on the people we were dealing with?
Last year – the tricky task of getting firms to name mandates they’d rejected on ESG grounds notwithstanding – most firms we canvassed with our ESG questionnaire were tripping over themselves to show off their credentials. In 2021, 77% of firms questioned responded to our survey. With such an encouraging response, this year we went out to more firms, again approaching the top 25 Legal Business 100 firms, but also the top 25 Global London firms, not just the top ten. Only 52% responded.
Perhaps it is little wonder that many firms thought twice about singing their own praises.
Let’s take a stab at the reasons for that. Clearly, Russia’s diabolical invasion of Ukraine has proved something of a double-edged sword in this context. One the one hand, the energy crisis prompted by the war means the path to Net Zero is going to look like a different beast than the one imagined as recently as a year ago. On the other hand, given the desperation of international firms to cut any ties they might have with the Russian regime, it should have provided firms with the perfect virtuous answer to the mandate question. Apparently not.
In our interview, Paul Clements-Hunt, founder of The Blended Capital Group, a former adviser to the UN on sustainable finance (not to mention the person who coined the term ESG), offers an interesting view on COP26 and Glasgow Financial Alliance for Net Zero: ‘All the world’s biggest financial institutions and investors were on a public platform, saying they are committing to the pathway to Net Zero. That’s direct accountability. It is a target on the back. They will have to show forward movement toward that.’
Could it be that firms are finally getting wise to the pitfalls of proclaiming ESG lawyers galore when all they have done is sent them on a training course?
A look at the financial services community, several years ahead of the legal industry in terms of hard-edged regulation, makes for an uncomfortable experience. Goldman Sachs most recently hit the headlines for all the wrong reasons after the Securities and Exchange Commission launched a probe into two of its managed ESG funds. Aviva, HSBC, and DWS have all had embarrassing ESG-related episodes in one way or another.
Perhaps it is little wonder that many firms thought twice about singing their own praises, given the clear direction of travel. As regulators increasingly take a hard line on what was until recently the harmless act of overplaying your ESG credentials, it suddenly seems a lot safer to say nothing at all than run the risk of being exposed for greenwashing. At the moment, it seems the cynics are being proved right.