ESG – Environmental, Social, and Governance

Legal & Regulatory Advice

All actors of the financial sector are facing the challenge of implementing vast and complex legal obligations arising from the extensive and constantly evolving ESG requirements that have been adopted at EU and national level.

Our lawyers have developed proficient knowledge and expertise to help you navigate the ESG framework, made of many intertwining legal texts and obligations that vary in scope and compliance deadline.

We regularly advise clients on any requirements deriving therefrom, including with regard to disclosure, risk management, product governance as well as organisational and conduct of business rules. We assist you with the review of your contractual documentation, policies, procedures and websites.

Strategic Advice

Due Diligence / Transactions

As part of our overall ESG offering, our Forensic Investigations & Corporate Intelligence team has established a due diligence service model that can support our clients in managing key aspects of identifying ESG risks across different stakeholders, in the supply chain, and in potential acquisition or investment targets.

• Due diligence and risk assessment process to support our clients in identifying ESG risks across stakeholders (supply chain, partners, acquisitions/investments targets) and across sectors, geographies, policies, companies’ structures, and business relationships.
• Our 3 levels of due diligence allow for proportionate and adequate diligence. From “red flags / controversy checks” on ESG-related topics to enhanced due diligence including source enquiries and on-site visits when necessary. This can encompass ESG maturity and performance, including e.g., competitiveness assessment, helping to identify and mitigate potential reputational, regulatory and financial risks.

Our due diligence service model can apply to any stakeholders: supply chain, partners, investment or acquisition targets and is tailored to the nature of the transaction, the sector and operations, based on a comprehensive risk-assessment. This can include identification of ESG “material” topics and determination of corresponding data needs.

Manages Services

Risk Management

The ESG Data landscape is challenging due to partial, unharmonized data being provided by a seemingly growing number of providers and tools. We help you design a data model that is efficient and builds on your current data infrastructure, looking holistically at all the systems already implemented across your organization.

The ESG strategy and features put in the prospectus have operational implications on many systems, notably in terms of investments restriction monitoring. We help teams implement effective investment compliance processes and systems to ensure that ESG characteristics promoted are complied with at all times. Of course, we also provide project management services where we can bridge different expertise within your organization.

Arendt also helps its clients to implement their ESG Risk Monitoring:

Arendt supports risk managers of AIFMs and ManCos to implement ESG risks. This starts with support on the identification of financially material ESG factors and subsequently the choice of relevant KRIs that can help risk such financially material ESG risks. To do so we have computed a database of hundreds of relevant KRIs and geographical exposures. We identify the most relevant indicators that should be measured and monitor for effective sustainability risk management.

This eventually can then be integrated into funds risk profiles, valuation policy, board reporting, etc. Our ESG Due Diligence Manager tool is an online platform that helps track ESG performance on portfolio companies, but also helps to identify potentially areas of expertise where you, or you portfolio companies, might be at risk from an ESG point of view. This online tool also allows for data visualisation and analytics, easy generation of reports, etc.

• Updating of risk management policies and risk profiles
• Establishing of KPI
• Identifying of material risks
• Risk assessing of corporate sustainability
• Analysing stranded asset

Documentation / Production

Within Arendt, we have been assisting our clients for years in the preparation and review of their legal documentation and we are now bringing that expertise to the required changes prompted by the ESG context. Since 2020 and the entry into force of the Level I SFDR, our ESG team has been drafting pre-contractual and website disclosures for hundreds of funds across all asset classes and strategies.

While pre-contractual disclosures are produced ad-hoc when launching a fund, the SFDR periodic reports are produced regularly. We help asset managers by pre-completing these reports based on the pre-contractual disclosures and support the data quality check and overall review of the documents.

Similarly, pre-contractual EETs are produced on an ad-hoc basis, while periodic EETs need to be produced and maintained on an annual basis. Arendt is happy to assist with the production and maintenance thereof.

Should you need assistance with the review and/or production of entity-level disclosures, policies which integrate sustainability risks, or your firm-wide ESG policy, the Arendt team is of course at your disposal as well.

We review and update the following:

• Funds documentation (PPM, contracts) to integrate ESG disclosures
• ESG policy/charter
• Investment process/policy to integrate ESG considerations
• Risk management framework to integrate sustainability risks
• Materiality assessment
• Standard ESG due diligence questionnaires
• Engagement/voting rights policy

Crisis Prevention / Management

The number of climate related litigation cases worldwide has more than doubled since 2015, and litigation on ESG matters will likely not slow down. A broader variety of parties is initiating litigation or investigations, as many “right holders” can be affected by the conduct of a company. Additionally, due to many new triggers, more class actions are expected. Lawsuits are now not only filed against ESG laggards, but also against companies with initiatives on ESG-related matters which are falling short of claimed aspirations.

Arendt finds evidence and establishes the narrative to put the best chances on your side. We assist with regulatory and internal investigations on various topics with ethical, boundary-pushing intelligence gathering to reconstruct facts, put pieces of a puzzle together, strengthen compliance and find solutions.

Relying on experts in forensic accounting, financial investigations and asset tracing and recovery, our teams are well equipped to prepare the defence of our clients’ interests.

Training

Arendt assists its clients in understanding what is at stake when discussing ESG and sustainable finance and in strengthening their competencies on ever-evolving ESG requirements.

Arendt’s specialised legal training entity – Arendt Institute – proposes a wide range of learning programmes and practical courses in all business areas to a large target audience including top executives, managers, officers and client-facing staff.

The content of our learning modules is tailored to your needs and the specificities of your organisation and offers a unique combination of technical up-to-date knowledge and evolving pragmatic advice.

Arendt also provides Boards of directors with regular regulatory updates covering ESG requirements and helps you defining a future strategy in considering ESG considerations.