ICLG – Environmental, Social & Governance Law 2024

ESG for Asset Managers

The role of ESG matters in the operations and investment management activities of asset managers has long been a subject of discussion. In recent years, however, the conversation has become more urgent and focused, driven by the growing evidence of the global impact of climate change. These concerns underlie the United Nations 2030 Agenda for Sustainable Development and 2015 Paris Agreement on Climate Change (Paris Agreement), the latter seeking to combat climate change and to direct finance flows towards low greenhouse gas emissions and climate-resilient development. The Paris Agreement was the impetus for a growing body of law and regulation in the EU focused on ESG concerns and, in particular, ESG and sustainable investment. In other jurisdictions, including the US, Hong Kong and Singapore, regulators have either adopted, or proposed to adopt, regulations or guidelines focused on similar concerns, although their scope and purpose may differ in significant ways from the EU.

At the same time, the conversation relating to ESG has become much more political and nuanced, particularly in the US. For example, in the US, private litigants, “red state” attorneys general and other US government officials have been increasingly critically scrutinising ESG-related investment activities. By contrast, certain investors, “blue state” officials and regulators continue to advocate for the inclusion of ESG factors in asset managers’ investment decision-making and proxy voting practices.

These conversations and controversies, which reflect differing attitudes on ESG and its role in asset management, will likely continue for the foreseeable future. For global asset managers, it is becoming increasingly difficult to navigate the differing regulatory approaches to and investor views on ESG in the jurisdictions in which they seek to offer and manage investment products.

In this chapter, Dechert lawyers discuss the primary regulatory framework relating to ESG and sustainable finance in several key jurisdictions, namely the EU, the UK, Hong Kong, Singapore and the US.

The authors gratefully acknowledge the contributions of Julien Bourgeois, Philippa List, Mikhaelle Schiappacasse, Stanley Tiu, and Shawn Yeo to this chapter.