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A recent report by the International Bar Association highlighted that:
“We believe that Latin American law firms will play a relevant role in the development of the ESG agenda in the region. As a starting point, law firms will participate in the development of legislation and self-regulation, advise their clients on ESG-related matters and increasingly incorporate ESG practices to their own businesses. At a later stage, law firms may be involved in more complex discussions about ESG practices, such as whether providing certain types of advice to certain clients would be aligned with ESG principles.”
ESGs refer to environmental, social, and governance criteria that are used to assess a company’s sustainability and ethical practices. While such considerations were initially focused on investment decisions, they are today being applied in a variety of industries, including in the legal sector.
The origins of the concepts can be traced back to the early 2000’s and the growing recognition by global stakeholders that financial performance is not the core factor that investors should consider when looking at potential investment opportunities. As a result, ESGs emerged as a critical framework for evaluating corporate, sustainability social and ethical impact.
The principles are broad and comprehensive, and range from an examination of a company’s carbon emissions, to social and labour standards, diversity, or human rights issues, giving just a few examples. In addition, areas such as privacy and data security are also increasingly viewed as ESG related matters.
Why are ESGs they important to law firms?
The concept of ESGs is increasingly present within the legal industry, with some law firms already starting the process of incorporating the criteria into their operations and investments. Others have started to offer related solutions and services to help their clients deal with the complex compliance obligations, as well as integrating the relevant principles into their traditional practice areas (e.g., mergers, securities law, certain types of corporate transactions).
ESGs are increasingly important for the legal industry, since companies that fail to address these issues can face problems down the line, including reputational damage, legal liability, or regulatory fines.
In addition, it’s becoming clear that investment in the right initiatives bring strong long-term benefits, including in terms of customer loyalty and financial reward.
ESGs in Latin America
In Latin America, ESGs are also becoming an increasingly important in companies’ agendas, with law firms playing an important role in helping them with their implementation, and more broadly, to promote sustainable development in the region.
In 2020, just for an example, Brazilian companies issued a record number of green bonds (that is, bonds for environmentally sustainable projects).
As investors become more focused on sustainability, companies will need to adapt and evolve their practices. Latin American law firms have a critical role to play in helping their clients navigate these important areas and incorporate the relevant changes to be ready for the future.
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Julian Cornelius is an international lawyer based in Rio de Janeiro, Brazil. He works as a consultant and coach, offering a positive external perspective on businesses in the legal sector, with the aim of helping them continuously achieve their goals.
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