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ARTICLE · 31 MARCH 2021

ESG Risks For Financial Institutions: Eliminating Significant "Gotchas"

Jones Day
Jones Day
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Demand for environmental, social, and governance ("ESG")-aligned companies and investment products is transforming the investing landscape.

United StatesFinance and Banking
Linda Hesse
Linda Hesse
Joel May
Joel May
Howard Sidman
Howard Sidman
Jayant W. Tambe
Jayant W. Tambe
John Tang
John Tang
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In Short

The Background: Demand for environmental, social, and governance ("ESG")-aligned companies and investment products is transforming the investing landscape. Financial institutions will be at the forefront of this change, as public companies themselves, as intermediaries and facilitators of financial markets transactions with ESG-focused companies, and as developers and marketers of ESG-compliant investment opportunities demanded by institutional and retail investors.

The Issues: Although investor demand is growing, there is a lack of clarity around what constitutes ESG and how to measure compliance with ESG goals. This can create significant legal uncertainty and risk for financial institutions. Financial institutions are faced with the competing concerns of demonstrating to their stakeholders that they are committed to ESG principles, while not exposing themselves to undue litigation risk. ESG-related litigation and regulatory risks may arise

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