Davis Polk's "Legal Liability for ESG Disclosures – Investor Pressure, State of Play and Practical Recommendations" (see page 3) includes practical key takeaways and recommended "best practices" for companies that are voluntarily disclosing or intend to voluntarily disclose ESG information due to investor pressures, corporate initiatives, or otherwise, with a view toward mitigating attendant litigation risks.
- #1: Disclaimers are Critical: When drafting ESG disclaimers, companies should explicitly cover ESG data; state that ESG data is non-GAAP and non-audited (if true), and ensure consistency across disclaimers that address ESG data.
- #2: ESG Reporting Can Pose Risks to a Company: Statements in ESG reports should be accurate and supported by facts or data, relevant to the company, and not overly aspirational.
- #3: ESG Reporting Can Also be Beneficial for Companies: Companies should try to understand key ESG rating and reporting methodologies and how they match their company profile.
In addition to identifying potential upsides and downsides associated with voluntary disclosure, the article includes limited but helpful benchmarking information on forward-looking disclaimers in heavily targeted industries.
See our new Society/Gibson Dunn & Crutcher: "ESG Legal Update: What Corporate Governance & ESG Professionals Need to Know." This post first appeared in the weekly Society Alert!