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What is ESG?
Environmental, social and governance (ESG) is an overarching term that encompasses the focus upon a company’s performance in regard to environmental, social and governance challenges. ESG considerations have come to the forefront of businesses’ strategies. This is due to the heightened awareness of the impacts of climate change and the wider shift in views on the importance of corporate social responsibility. ESG is, therefore, increasingly demanding the attention of the legal world, as firms seek to support and advise clients through their transition to a more sustainable and positive future.
During my first seat at Michelmores, I have gained a greater understanding of the pertinence of ESG issues across all areas of legal practice. It is exciting to see how teams across Michelmores are engaging collaboratively to solve ESG issues for clients and aspiring lawyers will need to get to grips with the broad range of challenges faced in this regard.
This article focuses on the “E” in ESG: It highlights some (but by no means all!) of the key practice areas through which a trainee solicitor at Michelmores can get involved in environmental and sustainability work during their training contract.
- Real Estate
Approximately one-quarter of UK carbon emissions are generated from the built environment[1]. The real estate sector, therefore, faces major challenges in the transition to net zero, including the development of energy-efficient commercial property and the decarbonisation of existing building stock. Developers, owners and occupiers are increasingly scrutinising the ESG credentials of their properties, which has led to heightened due diligence on buildings’ societal, wellbeing and biodiversity benefits. An example of these heightened concerns in practice is evidenced in the growth of green leases.
ESG considerations remain present in all stages of the conveyancing process. For example, Landowners looking to sell their land are now also considering the future value of the land’s natural capital potential. Overage provisions, traditionally used in conveyancing to provide for additional payments to the outgoing landowner if the value of the land increases in the future (such as on the granting of planning permission), are now being drafted to provide sellers with a portion of any revenue generated through future natural capital schemes.
Real estate, therefore, represents a key area through which legal professionals can advise clients on navigating environmental concerns and opportunities, and a good seat choice for aspiring solicitors wishing to upskill on ESG issues.
- Planning/Projects
The passing of the Environment Act 2021 (EA 2021) has increased the obligations on planning authorities to consider the environment and the sustainability impacts of large projects and developments when assessing planning applications. A key example of this is the requirement for almost all new developments to produce a 10% uplift in biodiversity, known as biodiversity net gain (BNG). In practice, BNG and other statutory environmental protections are set out in s.106 agreements and conservation covenants between landowners and local authorities or responsible bodies. Clients require legal advice throughout the planning process to ensure compliance with new environmental regulations that now form part of wider planning requirements.
- Agriculture
Agricultural land has become central to developers’ strategies to fulfil habitat conservation obligations via the purchase of off-site BNG, carbon or nutrient “credits”. Lawyers draft bespoke agreements that reflect the unique circumstance of the land involved and protect the interests of different stakeholders entering into environmental habitat schemes. Michelmores works closely with agricultural landowners and investors to advise on the merits and risks of such schemes.
At Michelmores, the exciting sustainability-focused legal work that is involved in the agricultural sector is further evidenced by our Sustainable Agriculture team. The team has provided advice on cutting-edge sustainable agricultural practices for clients – including work for WWF to produce a report into the use of insect protein in UK farm feeds (which you can read more about here).
Agricultural law is an interesting and important aspect of wider environmental progress and an area that I would recommend to trainees hoping to gain exposure to sustainability initiatives in their training contract.
- Corporate and commercial law
The financing of environmental projects and the commercial contracts that underpin them both represent further areas of law through which trainees can get exposure to environmental and sustainability work. This includes advising on corporate structures, drafting sale and purchase agreements for BNG credits, and drafting the contracts governing roles and responsibilities of stakeholders involved in habitat generation projects.
The success of future environmental projects will require the aid of private funding and an understanding of corporate and commercial mechanisms. Contracts for environmental schemes are often complex agreements that deal with the fast-paced change of environmental legislation. A strong understanding of contract law is therefore essential for aspiring lawyers hoping to progress their ESG legal credentials and seats in corporate and commercial teams will be valuable.
Further thoughts – the diversity of ESG work in law:
The above sectors represent just some examples of the areas of law through which a trainee solicitor at Michelmores can experience environmental and sustainability-focused legal work. The diversity of these areas demonstrates the benefits of experiencing varied seats during your training contract, as this will help improve your understanding of the different facets of ESG challenges faced by clients.
[1] UK GBC, Climate Change Mitigation Climate Change Mitigation | UKGBC
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