Boards Need to Increase ESG Activity, Scrutiny

It’s easy to talk the talk. Walking the walk is a different endeavor. And that’s consistently the case when it comes to the corporate adoption of environmental, social, and governance (ESG) principles.

A lengthy list of companies were “caught” boasting about ESG efforts while delivering little in the way of tangible results. Some experts believe it’s time for boards of directors to involve themselves on that front. Additionally, over time, that could be beneficial, but investors want results now. The Calvert US Large-Cap Core Responsible Index ETF (CVLC) could be worth considering.

The Calvert ETF employs an approach that’s elegant in its simplicity. And one that steers investors away from shares of companies that are greenwashing offenders. That could be a sign that the boards and management teams at many CVLC member firms are credibly prioritizing ESG, not just talking to that effect to appease investors and regulators.

CVLC Approach Matters

CVLC’s approach to ESG and sustainable investing is particularly meaningful at a time when more customers, investors, and regulators are applying scrutiny to how companies embrace ESG and back up those claims. That’s true across myriad industries, including consumer cyclical, financial services, and technology, to name just a few.

“As institutions place greater importance on the ESG status of assets they purchase, market, and sell across multiple jurisdictions, the commercial incentive to amplify or omit environmental aspects of company activity may also get stronger,” wrote Kate Gee and Alex Cheah, attorneys at Signature Litigation, in a recent op-ed for Reuters.

Errors or fibs by omission or inflated ESG resumes are issues in which boards should take active roles. And preventative action over the near term can help companies avoid long-term issues that can sap shareholder value.

Those are actions worth taking. Regulators around the world, including the Securities and Exchange Commission in the U.S., are increasing scrutiny of companies’ ESG claims. That includes how fund issuers apply the ESG designation. There are lessons to learn from other developed markets – ones that arguably underscore the benefits of the CVLC approach.

“Future claims about greenwashing in England and Wales are likely to be brought under group litigation orders. Especially where there are multiple affected claimants,” conclude Gee and Cheah. “As the scrutiny of companies’ environmental behavior continues to increase and opportunistic claimants, who may have third party funding and therefore have little to lose, seek to use legal proceedings and media campaigns to put pressure on corporates, ESG litigation will feature more in the English courts.”

For more news, information, and analysis, visit the Responsible Investing Channel.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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