ESG-related Arbitrations: A New Kid On The Block

Companies are no longer only assessed on their financial performance. Increasingly they are being asked to demonstrate that their business activities are socially responsible, environmentally sensitive and contributory to sustainable development.

This is because ESG (Environmental, Social and Governance) factors have substantially gained in importance. While ESG reporting and regulatory requirements are on the rise, rating agencies are factoring in ESG compliance when assessing creditworthiness. Incentives to showcase ESG compliance are also coming from investors, shareholders, suppliers, employees, customers, local communities and other stakeholders.

Companies are thus increasingly making ESG a part of their decision-making process. They keep looking for legal mechanisms that would allow them to secure ESG compliance. When they fail, their responsibility is often assessed in international arbitration.