Can Mischon save the planet?
Lawyers should be at the heart of resolving the climate crisis, and Mishcon Purpose is the firm’s attempt to make big changes. “Pardon me, but in order to govern one needs, after all, to have a precise plan for a certain, at least somewhat decent, length of time. Allow me to ask you, then, how can man govern, if he is not only deprived of the opportunity of making a plan for at least some ridiculously short period – well, say, a thousand years – but cannot even vouch for his own tomorrow?” Mikhail Bulgakov, the Master and Margarita
In 1938, Guy Callendar released his findings to the world: that the activities that people had been engaging in – from burning fossil fuels to industrialising factories and using cars – were causing the earth to warm. And people were just not that bothered. Decades too late, sustainability, climate change and the dangerous consequences that come from damaging the Earth are finally on everyone’s radars – although many nations remain slow to respond. But as the crisis worsens, having a long-term plan is more important than ever. Paul Clements-Hunt, once part of the UN team that coined the term ‘environmental, social and governance’ (ESG) back in 2004, is focusing exactly on that: how companies can and their lawyers. Now a director at Mishcon Purpose (a “specialist sustainability business govern themselves amid the shifting ESG landscape and how this affects their future plans – integrating lawyers and ESG experts”), Clements-Hunt argues that it is time for lawyers to be taking the reins.
Joining head of Mishcon Purpose Alexander Rhodes, top of Clements-Hunt’s priority list is fine-tuning the offering that it is going to take to market. Lawyers are having to do their best with dealing with an environment that is continually shifting and responding to current and new sustainability issues. In order to ensure the companies they work for govern themselves well, they need to be able to vouch for the potential risks of tomorrow and how companies can not just protect themselves, but also be seen to be actively handling them.
“What we are seeing in Mishcon Purpose at this point in time are complex converging systemic risks creating new risks. In fact the whole nature of risk is changing on a crowded, warming planet,” Clements-Hunt says. “This promotes both threats and new market opportunities. In climate we know that there is a commitment from companies to achieving sustainability goals like reaching net zero; many of them just don’t have the architecture tdeliver it. This is something we can work with companies to develop,”
As part of this, Mishcon Purpose is developing its own framework discussing risks and how they can be dealt with by companies. Much of this work will be directly relevant for in-house https://www.thelawyer.com/can-mishcon-save-the-planet/ 1/5
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counsel, especially GCs.
Prior to joining Mishcon Purpose, Clements-Hunt had
been working on a research paper for The Blended
Capital Group titled ‘Chasing the Dragon.’
key risks they needed to think about in order to Researching 55 law firms, the paper highlighted 11
effectively cover the ESG agenda. One of these was targets will drive growth in climate change-related how the 2015 Paris Agreement along with carbon zero
(and particularly ESG-related) litigation. Indeed, ESG breaking and shocking claims of the 21st century. crises have made for some of the most record-
Earlier this year, the Court of Appeal granted relating to the collapse of the Fundao dam in Brazil permission for a class action to be brought in the UK
that killed 19 people and left hundreds displaced from their homes. The dam was part of the Vale and English-Australian company BHP. The value of the class action reaches an eye- Germano mine complex in southern Brazil, owned as a joint venture by Brazilian company watering £5bn and has been brought on behalf of 202,600 Brazilian claimants. This alone shows just how costly environmental disasters can be not just to individuals and the planet, but also to the financial stability of entire corporations. The damage of the disaster itself is valued at over $6.17bn.
Another case that demonstrated the dangers of avoiding ESG principles came earlier this year when a French court upheld charges against Lafarge for complicity in crimes against humanity and financing of a terrorist organisation. While other large transnational corporations like Total left the area, Lafarge kept its Syrian subsidiary LCS open, of which it despite knowing ISIS’s core purpose was criminal. This case was particularly huge in terms of owned 98.67 per cent, making payments over three years to ISIS as part of its business criminal corporate accountability, as the charges were made against both Lafarge as a legal entity as well as its executives. It has since become a warning for companies continuing operations in locations struggling with conflict, and a reminder of why a sturdy ESG policy is so vital to avoid critical risks.
In response to the need for a focus on ESG litigation, Mishcon Purpose founded the Greener Litigation pledge, designed to get litigators and companies thinking about how they can make litigation more sustainable. An example of this is thinking about whether it is necessary to print numerous copies of a giant bundle for a hearing, when e-bundles are now the norm and better for the environment. With a mixture of law firms and chambers already signed up,
it had its first associate member, Vodafone, added to the pledge in August. A slower uptake is, interestingly, preferred; it is important to Mishcon Purpose that the pledge actually means something and isn’t just another badge companies acquire, only to forget about in practice. “The fact is that businesses respond to issues of financial materiality – not ethics. So it’s a question of what is the financial risk for the business, what new risks are evolving that could Hunt explains. affect the way we run our business and how we decide to handle these new risks.” Clements- EY’s General Counsel Sustainability Survey found that while organisations were deeply aware not fully appreciate the implications of this. The financial and reputational risks linked to
of the changing risk profile that sustainability issues bring, many GCs that their company did sustainability are huge, and the conflict between public expectations exceeding legal and regulatory obligations can prove to be a contentious point for GCs to get across to their boards https://www.thelawyer.com/can-mishcon-save-the-planet/ 2/5
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Such issues of reputational risk have been tightly linked to greenwashing concerns which have risen to the top of GCs worry-list. Rapid growth of green bonds has led to an explosion of greenwashing accusations, small and large. Deutsche Bank are just one institution to be caught out, with Asoka Woerhmann having to resign as CEO of its DWS Group after allegations that investors were misled about how green certain investments were. It was estimated that $1tr of investments were given green ratings that were far higher than they should have been.
This isn’t a lone occurrence – Influence Map reported that 71 per cent of funds specifically marketed using ESG and climate key words had a negative Portfolio Paris Alignment score, which showed that the investments were misaligned from global climate targets despite selling themselves as ‘green’.
Greenwashing calls into question the integrity of entire company boards as does using ESG for marketing rather than for authentic purposes. Companies are faced with the challenge of ensuring that there is agreement on what kind of sustainability processes they want to take on, and how to engrain this from the top down leaving a genuine and impactful legacy. “In my early discussions, what impressed me about Mishcon de Reya was that to develop the sustainability practice and making sure it wasn’t just for show, the partners went back to amend the partners agreement for the firm. They sought to align it with the principles they are seeking to promote and that includes positive impact on society, now embedded in the governing documents of the firm.”
One of the ways Clements-Hunt believes is important for companies to effect real sustainable change is by looking at their global value chains. “Mishcon Purpose sees good business evolving in efforts to understand both risks and new markets associated with complex global value chains. For example, there are 45 million artisanal miners worldwide supporting some 250 million dependents. The relationships between large scale miners (LSMs) and artisanal miners across the world is complex, sometimes contentious. If the developed economies of the G7/G20 and OECD countries want to effectively decarbonise they will rely on both large scale and artisianal miners to deliver the strategic minerals to speed decarbonisation. In short, we cannot just shut down mines without thinking of future market needs and future employment needs of affected communities.” The Carbon Trust analysed that up to 90 per cent of an organisation’s environmental impact lies in the value chain, and a robust ESG materiality framework will improve the ability of companies to adequately assess their environmental impact, risk management, and deal with issues – and opportunities – early.
With the value needed to deliver the UN Sustainable Development Goals agenda globally increasing from $2.7tr to $3.4tr , now is the time for companies to start looking forward to global best practices to leave a better legacy. Having purpose should mean deploying value for the benefit of the earth, not just taking from it, and the team at MP look to develop significantly on this. There is a need for a more balanced planet, and at the root of it lawyers have to be involved. There will be plenty more ESG claims to come, at the least...
By Lucie Cruz 23 September 2022 09:00 Climate crisis Law firms News Mishcon de Reya
