ESG Disclosures Risk Factor
(Reputational Risk)

Summary

This risk factor is meant for use in a public company's periodic disclosure, such as a Form 10-K, or a registration statement, such as a Form S-1, to disclose risks relating to investors' increased attention to environmental, social, and governance (ESG) issues and the company's ability to meet their expectations. This clause includes practical guidance and drafting notes. In recent years, investors have significantly increased their emphasis on ESG concerns when making investment decisions. In addition, regulatory agencies such as the Securities Exchange Commission (SEC) have increased their scrutiny of ESG disclosures in public company disclosures and have begun to propose new rules mandating ESG disclosures. See [SEC Proposes Expanded ESG Disclosures for Certain Investment Companies and Investment Advisers: Client Alert Digest]. One risk that is common to companies across industries is the risk of market dissatisfaction with the company's ESG initiatives, its disclosure regarding those initiatives, or the amount of progress made towards the goals of those initiatives. This risk factor discusses that reputational risk both generally and in the context of a company's existing ESG initiative. When drafting this risk factor, tailor it to the company, the company's industry, and any other circumstances which may be relevant. For information on drafting risk factors, see Risk Factor Drafting for a Registration Statement and Top 10 Practice Tips: Risk Factors. For more ESG-related risk factors, see ESG Disclosures Risk Factor (Climate Change) and ESG Disclosures Risk Factor (GHG Emissions) For more information relating to ESG disclosure, see the Environmental, Social, and Governance (ESG) Resource Kit, Corporate ESG Disclosure: Recent Trends and Developments, and 5 Tips on Getting Started with an ESG Strategy Video.