Sustainability and ESG responsibilities are increasingly being spearheaded by in-house counsel
By placing a focus on sustainability and environmental, social and governance efforts, many organizations are showing an awareness of an emerging imperative, while also creating new business opportunities. Although such matters were historically not considered to have any relationship to legal, more and more in-house counsel are taking the lead in managing sustainability efforts for their businesses.
“There used to be a thinking that sustainability was a law-free zone because it’s voluntary, but this is patently false,” says Michael Torrance, chief sustainability officer and associate general counsel at BMO Financial Group. “Increasingly, there is an inter-relationship between sustainability and legal expectations. I think the skills that legal counsel have in being strategic advisors on opportunities and risk management and having an eye to the reputation of a company are very valuable in navigating a strong sustainability program.”
Under his lead, BMO’s legal department has implemented initiatives to address climate change, following recommendations issued by the Financial Stability Board’s task force on climate-related financial disclosures. This included integrating climate change into everything from strategy to risk management and doing an in-depth analysis into how climate risks could materialize within a business.
“It was a really interesting exercise to lead and was really only the beginning of more integration of climate-related considerations into all different parts of our business,” says Torrance. He championed an initiative to set a target for sustainable finance within the bank by creating a new category of sustainable financial products including green bonds and ESG integrations in asset management. In addition, BMO recently launched a podcast series on sustainability, in which Torrance is one of the hosts.
In 2019, BMO announced a renewed purpose commitment to “boldly grow the good in business and life,” and this is something that Torrance is taking very seriously. The commitment includes pushing $400 billion into sustainable finance by 2025 to align sustainability goals with the overall business strategy.
“If you ignore a very important phenomenon like sustainability, you’re doing your organization a disservice. Merging your legal mind with a business advisory role is something that every lawyer should be striving to achieve,” says Torrance.
Also leading the way in sustainability from the legal department is Jennifer Suess, RioCan Real Estate Investment Trust’s senior vice president, general counsel and corporate secretary.
“As in-house counsel, we are in a privileged position of having a bird’s-eye view of everything happening throughout the organization, so that allows us to see opportunities for creating new policies and cultural advancement within the organization,” says Suess.
Among the many initiatives implemented by Suess and her team, tenants have been asked to commit to a “green lease” clause that requires them to minimize the resources they consume and to measure their usage. In the 18 months since the clause was introduced, RioCan has seen a 90-per-cent uptake by tenants.
Suess also introduced a women’s initiative network two years ago to highlight the fact that, in commercial real estate, the representation of women at the senior levels has historically been quite low. The initiative, which aimed to elevate female employees, resulted in a 17-per-cent increase in women moving to the senior ranks of the organization.
In addition to leading and initiating many ESG programs, RioCan’s legal department also partners with other departments within the organization in certain initiatives. For example, a recent program was run through RioCan’s HR department and supported by the legal team, requiring employees to have an ESG-related objective in their personal goals every year.
“The beauty of being in legal is it gives you the opportunity to partner with any department and collaborate in a proactive way,” says Suess. “Every legal department, whether a public or private company, is well positioned to consider the impact of different ESG initiatives and how they can improve the organization. We can see that they really do drive revenue because it’s something our investment community is focused on,” she adds.
In-house counsel often take sustainability and ESG efforts into consideration when selecting external counsel partners.
“I use a diversity screen, so I tend not to use law firms that don’t have diversity and inclusivity as one of their objectives,” says Kate Chisholm, senior vice president, chief legal and sustainability officer at Edmonton-based Capital Power Corporation. “I look for firms that have women and visible minorities in partnership and at leadership levels because I believe that law firms that have employee diversity in their own decision-making and in advice to clients are probably providing a better service.”
Chisholm has played a major role in many of Capital Power’s sustainability and ESG initiatives including sustainable sourcing, biodiversity and examining ways to combat climate change. The organization recently announced the creation of the world’s first commercial-scale carbon nanotube production facility at its Genesee power station. The objective is to incorporate carbon nanotubes into steel, aluminum and cement to reduce carbon emissions from the manufacture of those materials and to reduce greenhouse gas emissions.
“There are so many more socially responsible investors now than there were a year or two ago,” says Chisholm. “At the end of the day, those companies that don’t place sustainability at the forefront of strategic thinking will suffer for not doing so.”