ESG Risks for Financial Institutions Operating in the United States: What to Expect in 2022 | Jones Day

In Short

The Background: Demand for ESG-aligned companies and investment products are likely to continue to accelerate transformation of the investing landscape in 2022.

The Issues: Although investor demand for ESG-related transactions continues to grow, these opportunities, along with the markets’ and regulators’ focus on ESG-related issues, can create significant legal uncertainty and risk for financial institutions. The conflict in Ukraine has only further complicated these considerations, although the direction and scope of its impact on ESG considerations is very much an open question.

Looking Ahead: The prominence of ESG-related issues in both the financial markets and the public discourse will present opportunities, but also create significant risks, for financial institutions in 2022, which may be magnified in light of the current broader geopolitical context.

ESG considerations will continue to play an ever-increasing role in financial markets in 2022. ESG-related transactions will continue to present significant opportunities for financial institutions as they respond to and support the needs of the market. However, these opportunities, along with the markets’ and regulators’ focus on other ESG-related issues, can create significant risk. ESG-focused concerns for financial institutions generally arise in two broad contexts: (i) disclosure-related risks and (ii) conduct-related risks.

This Commentary updates our prior observations concerning potential…