ESG is not dead – despite all of the noise in the press. ESG and Sustainability—in various forms—have survived, reinforcing its longevity but with more clarity, standardization, transparency, and accountability. It is true that, during 2023, the ESG and sustainability space experienced significant attacks on multiple fronts, increased politicization, and redirected attention from stakeholders. Stakeholders became more interested in how a company stacks up against its claims versus whether it was making ESG considerations at all. Regardless of the headwinds, three predictions from 2022 proved true: ESG regulations multiplied across the globe, industries continued to converge, and fragmentation is waning, positioning specific elements of ESG and Sustainability as priorities for boards, management, and investors for years to come.
In the series of trends and outlooks to follow, we provide a snapshot of major developments in the ESG and sustainability space in 2023 and provide our predictions for 2024.
Our global ESG Steering Committee, which includes more than 35 partners from across the firm, contributed to the writing of this alert.
In this review, we categorize notable events under regulations, guidance, and standards; litigation; political, market, and strategic trends; and antitrust concerns.
Last year likely saw the greatest number of ESG and sustainability regulations passed in a single year. Globally and nationally, policymakers reinforced commitments to standardize, sanitize, and scrutinize the space. Most regulators are following S1 and S2 under ISSB, which is a good place to start for established players and those trying to make sense of this sector for the first time.
Increased regulations forced companies to think about how their processes and policies stack up against regulations, compliance budgets, and human resource capacity to fulfil regulatory requirements. While they are at it, companies must also map where their businesses intersect with regulatory requirements, examine coverage—direct and indirect—and understand their jurisdictional footprint to see if they are covered by third-country obligations.
In light of these developments, companies are advised to:
Although 2023 witnessed a climate litigation plunge, the year also saw nuances in litigation as plaintiffs and recent precedent continue to show that constitutional rights and legal remedies are tools that can compel action and alignment. Plaintiffs cut across states, individuals, employees, consumers, shareholders, and non-governmental organizations.
As of December 31, 2022, the Sabin Center’s Climate Change Litigation databases identified 1,522 cases filed in the United States. As of December 14, 2023, the number has increased to 1,636 cases in the United States and 222 cases filed against corporations globally. The United States has the largest share of climate litigation.
Novelty in Climate Litigation
Claims included rights to a safe environment, voluntary carbon markets (VCMs), derivatives litigation, and securities litigation around companies not living up to environmental commitments or environmental-oriented claims. Examples include plaintiff’s victory in Montana v. Held on the right to a safe environment, VCMs’ greenwashing case against Delta, California’s lawsuit against Big Oil companies, and the lawsuit against KLM Royal Dutch Airlines for misleading advertisements about its carbon emission goals and its commitment to them.
Notable litigation was centered around diversity, equity, and inclusion considerations by institutions and corporations. Examples include:
Consumer Protection Litigation
Stakeholders brought claims based on ESG considerations and communications to consumers. For example:
We expect that as regulations proliferate, there will be more litigation. To navigate these developments, companies and investors are advised to:
Central Themes Across Investors and Companies Included:
ESG Backlash Proliferated
State ESG backlash increased but more anti-ESG bills failed than passed; 240 bills were introduced, up from 37 bills in 2021 and 2022 combined. Of the 240 bills, 95 failed and 38 passed as of December 14, 2023.
Corporate and Investor Posture on ESG Varied
Trends will continue to evolve as stakeholders act for compliance, risk, or opportunity reasons. Companies and investors are advised to:
Antitrust pushbacks on DEI, climate, and supply chain considerations increased, with concerns around “institutionalized antitrust violations based on ESG and sustainability initiatives” such as coordinated efforts to compel action, industry alliances, and boycotts. As a result, companies and investors should:
Our thoughts on what is likely to happen in the ESG and sustainability space in 2024 are as follows.
Social and Human Rights Considerations
Mergers and Acquisitions
Investment Funds and Advisers
The anti-ESG movement will continue to investigate ESG initiatives that violate antitrust laws and the pro-ESG movement will promote innovative ways of pursuing ESG without violating antitrust laws.
Our team remains well positioned to continue supporting clients that are strategizing and developing holistic programs to position them for leadership and effective performance in ESG and sustainability.