2023 will be a big year for developing standards, taxonomy, and objectives for ESG, they say
Canadian Lawyer spoke with Jason Kroft and Bruno Caron, co-chairs of the recently launched ESG and carbon finance practice at Miller Thomson LLP. The firm says its new group brings together several pre-existing practice areas under the ESG umbrella.
Jason – tell me about your background
Kroft: I was at Stikeman Elliott for over 25 years. I had a wonderful time there and hold Stikemans in the highest regard. But last year, I talked with the wonderful people at Miller Thomson. I realized I wanted to join a firm and collaborate with a national bench of lawyers in many disciplines. I was looking to expand my interest in ESG and carbon finance.
I’m a corporate transactional lawyer focusing on structured and alternative finance. When the opportunity came to join Miller Thomson and collaborate with people like Bruno and others in our offices, I was very excited about it.
I’m most excited about the conversations that clients want to have in this next chapter. One of the top priorities for our clients is ESG, dealing with climate change, and running a business in this changing environment.
Bruno – tell me about your background
Caron: Jason and I met when I did a certificate program at Osgoode law school that he was running about climate change and ESG.
I’m a capital markets lawyer. I’ve been practising securities law for many years. We’ve been representing clients who issued green bonds as part of that work. Our client was the second green bond issuer in Canada. That is when I became interested in ESG, specifically climate change.
Climate change disclosure and the financial risk that goes with it are now a big part of the US capital markets. Regulators are asking issuers to disclose those risks. People are now talking about the interrelation between biodiversity and climate change.
Tell me why your firm decided to launch your ESG and carbon finance practice now
Kroft: I was immensely impressed by the Miller Thomson team’s national strength in all the disciplines you need to have a vibrant ESG and carbon finance practice. This expertise includes litigation, environmental, regulatory, labour and employment, M&A, capital markets and Indigenous issues.
Why now? Because it’s a convergence of everything in the market. All levels of the Canadian government, businesses, investors, stakeholders and consumers are interested.
Caron: Before the VP of sustainability was in charge of ESG, but this is now moving into risk and compliance because of governmental regulations and standards. It is now becoming an issue for CFOs and the C-suite.
What differentiates Miller Thomson in this area?
Kroft: It is truly national in scope. In some firms, ESG and carbon finance expertise is only in the Toronto or Calgary offices.
At Miller Thomson, ESG is not housed in any one person. It’s a disparate group of people in different practice areas. Bruno and I are leading the charge, and we know certain things about the ESG world, but we’re not the only champions of this. We are part of a diverse team.
We also added carbon finance to the group’s name because climate change has regulatory and compliance aspects. It may be a burden sometimes, but it’s also an opportunity. The ability to access and advise on carbon markets is a differentiator.
Caron: Regarding sustainability and finance, we’ve done large deals such as the green bonds offering.
We also have a social impact group led by Susan Manwaring, and they have been active for many years.
So Jason and I regrouped and repackaged that, making it a national offering for our clients. We’ve branded the group, but it’s been there for many years. It’s not new.
Tell me about your green transaction execution protocol
Caron: We may have a client working on reducing their greenhouse gas emissions. When they enter into an M&A transaction, for example, they will try to make this transaction as low carbon as possible.
So, we’ve devised a protocol where we can tell our client, “If you want us to do the transaction in such a way to reduce your carbon footprint, we can do it.”
Kroft: One of the emerging questions is, “What does the enhancement of ESG mean for business?” For many businesses, it’s the cost of carbon.
Carbon as a cost is not going away, and it is likely going up. Few opportunities in business, investments or capital fundraising will not be seen through an ESG and carbon lens. Knowing that and getting ahead will differentiate the winners and the losers in a new economy.
Is ESG more of an issue for larger publicly listed companies?
Caron: I wouldn’t say so. Even if you’re not a public company, you are likely seeking financing from financial institutions that are embarking on a path to net zero by 2050. They have set targets for themselves and will want to ensure that their loan portfolio achieves those targets.
So, it impacts our mid-market clients seeking financing from those financial institutions.
On the other side, those mid-market clients also have clients. Those clients are beginning to have a collective social conscience about, for example, climate change and the environment.
It’s not just an exercise of reducing risk, but it’s also a license to operate that a company is buying by going on the ESG path.
Kroft: For Canada, clients are principally mid-market. Miller Thomson is well-positioned to service them. However, we routinely talk to banks, Fortune 500 companies, and owner-operated companies in Canada, so we can entertain any conversation.
Some critics say that ESG is little more than a marketing gimmick
Kroft: 2023 will be a big year for developing standards, taxonomy, and objectives that inform the prudent development of ESG. Doing it thoughtfully and prudently means doing it in a way that can be verified, audited, accounted for, and measured.
As a law firm, we’re, in a way, agnostic. Sometimes it means someone’s going to engage us because there’s a greenwashing claim, and we advise them on responding to that. At other times, we will help develop a sound policy for internal ESG management.
The progress of human capital on our planet depends on the sound development of ESG. It makes workplaces reasonable, our world liveable and encourages efficient business governance.
ESG is developing and evolving, and criticism is probably rightfully laid in some aspects.
*Answers have been edited for length and clarity.