Banks and ESG: Lessons from Climate Change-Related Initiatives
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Key takeaways:
- The banking industry is increasingly focused on ESG and, with respect to environmental initiatives, many banks have committed publicly to taking actions to counter climate change and to reducing their carbon footprints.
- Though currently there are no sweeping ESG mandates on banks from a U.S. legal or regulatory perspective, there are some risk management expectations and disclosure requirements that apply to banks which touch on climate change-related risks, and Democratic lawmakers, especially given recent electoral successes, are pushing for stronger climate-related legislation and regulation that would more broadly impact banks and other financial firms.
- Through prudent tracking and response to developments in climate change and other ESG issues, banks can mitigate litigation, enforcement and other risks, as an emerging international web of regulations, disclosure requirements, soft law instruments and industry standards dealing with these issues exposes businesses to potential government sanctions, lawsuits under domestic tort and securities laws, contract claims and investor pressure.