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Hong Kong Arbitration Week Recap: ADR in Asia Convention – Past Mere Greenwashing? The Influence of ESG on Worldwide Arbitration – Kluwer Arbitration Weblog Receive US

On the third day of Hong Kong Arbitration Week 2022, HKIAC hosted a panel as a part of the ADR in Asia Convention entitled “Past Mere Greenwashing? The Influence of ESG on Worldwide Arbitration”. This panel introduced collectively a gaggle of specialists who mentioned what environmental, social, and governance (“ESG”) is, the way it impacts dispute decision, the way it impacts the way in which by which shoppers conduct their enterprise and mark investments, how arbitral proceedings can grow to be extra sustainable, and the rising pattern of disputes arising out of ESG points.

The panel was comprised of Mr. Christopher Tung (Accomplice, Ok&L Gates), Mr. Leiming Chen (Senior Vice President, Ant Group), and Ms. Wendy Miles KC (Barrister, Twenty Essex). The panel dialogue was moderated by Ms. Denise Fung (Accomplice, Linklaters).

 

What’s ESG?

Historic & Theoretical Perspective

Mr. Tung kicked off the panel by responding to the query of whether or not ESG nonetheless has that means regardless of the latest considerations over “greenwashing”. Better scrutiny and reporting (constructive or destructive) tended to recommend that ESG is gaining rising traction worldwide.

Emphasizing the significance of conceptual accuracy and the necessity for clear terminology in sustainability and ESG issues, Mr. Tung made the purpose that ESG ought to all the time be theoretically underpinned by the sustainable growth ideas which embody “financial”, “social” and “environmental” spheres or pillars of sustainability. For ESG to be absolutely efficient, all three spheres of sustainability have to be thought-about to realize a balanced and sustainable outcome. Sustainability ideas, ideas and legal guidelines sit above ESG ideas, ideas and legal guidelines, and shouldn’t be used interchangeably, particularly if the ESG guidelines, standards, disclosure and reporting have a narrower and selective scope (in different phrases, a smaller variety of environmental, social and governance components are chosen or required). In contrast, optimum sustainability observe ought to tackle all related financial, environmental and social points and never “cherry decide” points.

Mr. Tung referred to varied sources of sustainable growth legal guidelines, ideas, and objectives, in addition to particular ESG rules and inventory trade guidelines, such because the Hong Kong Inventory Trade Itemizing Guidelines ESG Information, which has mandated ESG disclosure and reporting by listed firms in Hong Kong since 2020. A substantial variety of Hong Kong-listed firms reporting underneath these guidelines are choosing full sustainability disclosure and reviews, moderately than narrower ESG disclosure and reviews.

Non-public Sector’s Perspective

Mr. Chen highlighted the drivers behind Ant Group’s ESG technique, shedding mild on how ESG concerns and obligations affect the way in which by which Ant Group conducts enterprise. Ant Group, a know-how supplier that operates Alipay, believes that business worth creation is built-in with social worth. It’s because the social worth created can in flip add to the momentum of the business worth development and make it really sustainable as a enterprise. Mr. Chen made the purpose that business entities should sustain with the occasions with the intention to provide their companies to finish customers. Because the customers of its monetary companies grow to be extra conscious of ESG points, Ant Group’s “buyer first” method means its ESG technique is now a needed driver in the way it seeks to succeed in shoppers and small and micro-sized enterprises, and to in the end grow to be a long-lasting firm itself. This echoed Mr. Tung’s level on the significance of contemplating all three facets of sustainability.

Mr. Chen additionally demonstrated how Ant Group’s enterprise insurance policies and initiatives search to undertake the very best observe in pushing for a greener future. For instance, Alipay launched a inexperienced initiative throughout the Alipay app in 2016 known as “Ant Forest” that encourages low-carbon life-style decisions by awarding customers with inexperienced vitality factors. This Inexperienced Power Factors Initiative included greater than 100 manufacturers to advertise average consumption, low carbon and eco-friendly life-style.

Ant Group has additionally established an ESG Sustainable Improvement Committee and ESG Sustainable Improvement Advisory Committee. The Chief Sustainability Improvement Officer works intently with the CEO and numerous working teams to combine new ESG initiatives within the enterprise of Ant Group.

Authorized Practitioner’s Perspective

Ms. Miles KC shared her insights on how ESG concerns impacted the authorized sector and the way ESG featured as a component {of professional} competence. Referring to the codes of conduct for solicitors and barristers training in Hong Kong in addition to the UK, Ms. Miles KC tied the concept of ESG again to the elemental responsibility of care of authorized counsel. The codes of conduct require all authorized counsel to advise their shopper to an inexpensive commonplace. With the more and more complete world rules, ESG and sustainability points will inevitably grow to be extra prevalent within the business world and the every day lives of our shoppers. The identical ought to grow to be a brick within the mind of all competent legal professionals of their recommendation to shoppers. Ms. Miles KC demonstrated this level with the instance of a conveyancing lawyer needing to advise their shoppers on local weather dangers concerned in relation to actual property.

 

How does ESG Influence Disputes?

Worldwide Arbitration

The panelists agreed that worldwide arbitration will even grow to be extra sustainable over time because the arbitration trade continues to search for methods to cut back its personal carbon footprint.

Given the cross-border nature of worldwide arbitration, practitioners who have been used to travelling to locations for conferences and hearings have been compelled to modify to on-line digital conferences. Ms. Miles KC mentioned she hopes that the arbitration group will grasp on to among the higher and greener habits that grew out of the pandemic. Because the world opens up once more, not the whole lot ought to revert again to the outdated norm. Whereas there is no such thing as a one dimension that matches all, and face-to-face conferences and in individual hearings might be most well-liked for sure substantive hearings, authorized counsel and arbitrators ought to give extra thought to the potential alternate options, particularly when coping with procedural issues that don’t contain witnesses.

Local weather Disputes

The vitality transition has and can proceed to be fraught with obstacles and challenges, creating fertile floor for disputes in occasions of uncertainty and alter. Mr. Tung highlighted key tendencies and developments which can be on the rise with respect to ESG disputes.

Whereas ESG legal responsibility and disputes arose throughout a broad vary of topic issues and points, Mr. Tung famous that local weather and setting claims have been two of the extra outstanding sorts of claims being pursued, with ESG additionally shortly broadening the authorized danger publicity of organizations of all kinds and sizes. These rising authorized dangers included potential breach of contract, responsibility of care/negligence, misrepresentation, deceptive/false descriptions and promoting, non-compliance with ESG rules and inventory trade disclosure and reporting guidelines. Potential breaches of fiduciary duties by administrators, firms and asset managers can be one other supply of claims from dissatisfied shareholders and buyers. Along with the above bases of declare, local weather claims may be made towards states underneath multilateral or bilateral funding treaties for unfair therapy or expropriation of conventional fossil gas investments. Claims in tort for hurt brought on by greenhouse gasoline (“GHG”) emissions would proceed to be difficult in frequent regulation jurisdictions on account of difficulties in establishing causation between hurt finished and the GHG emissions attributable to the respondent.

 

Conclusion

Because the enterprise world turns into extra acutely aware of ESG, its underlying sustainability ideas and ideas, and obligatory ESG necessities in finance and different industries, arbitration legal professionals are anticipated to play an necessary half in advising on ESG legal responsibility and disputes and in striving to make worldwide arbitration itself extra sustainable.

 

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