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CMS: Advising the Board on ESG Risk

CMS have published new Risk Report – Advising the Board on ESG Risk. Environmental, social and governance (‘ESG’) related disclosures are one of the main means by which businesses communicate their ESG performance, strategy and impact to stakeholders. Corporates also increasingly make marketing claims, commitments and pledges relating to ESG factors, or about their products’ or services’ ESG credentials and metrics.

While ESG related disclosures are increasingly mandatory, even voluntary disclosures can provide significant benefits and opportunities to businesses, such as enhancing their reputation, attracting new business and capital, and fostering stakeholder engagement. However, they also entail significant risks, especially in terms of regulatory and litigation exposure.

Businesses that make ESG related disclosures and/or marketing claims may face regulatory action or legal challenges if their disclosures or marketing claims are found or appear to be inaccurate, incomplete, inconsistent, misleading or non-compliant with applicable laws and regulations.

This risk is compounded by claimants bringing novel complaints, alongside onerous regulatory sanctions for non-compliance, such as imposing penalties equivalent to a certain percentage of turnover. In many jurisdictions, there are also liability considerations for individuals, including directors and officers.

ESG related disclosures and marketing claims are therefore a significant board level risk.

The ‘Advising the Board on ESG Risk’ Report considers three main risk areas:

  • Regulatory risk
  • Litigation risk
  • Commercial claims

A Practical Guidance perspective is also provided with 10 areas to consider.

The ‘Advising the Board’ series links to the ‘CMS Advising the Board Training Programme’ which is highly flexible, relevant and seeks to cover the three core sections of a Board’s to-do list, namely:

  • Have to do: meeting regulatory requirements for directors and senior managers, we can deliver this and provide all the necessary supporting documentation.
  • Want to do: training that supports directors on specific issues around their role including those which may give rise to personal liability.
  • Ought to do: topics of strategic importance for the company and the board– including pensions, remuneration, ESG and cyber risk.

To read more about the Programme go to this website page:

To read the full Risk Report click on the link.




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