ESG and Listed Companies

We examine the ESG legal framework, through an overview of the main European initiatives, and some of the difficulties faced by companies impacted by the new European Union’ ESG regulation and the main ESG-related challenges that companies are embracing as “issuers”. The danger exists that sustainability factors may cause European listed companies to be unfairly penalised in comparison with privately owned companies across the same regions or industries. We argue that it is of essence that the European Commission supports capital markets as an efficient mechanism for the capitalization of companies, concentrating its efforts on real market failures, and avoids further complex and unnecessary regulation that constraints and hinders the economy. We identify the EC “sustainable corporate governance initiative”, which clearly seems to be an antechamber to new and likely deep changes to corporate law with probable unintended consequences, as an example of unnecessary and unbalanced approach to regulation, likely to hinder the ESG and sustainability development as it will lead to corporate dilemma, decision-making stalemate and an increase in litigation. The legal framework is further examined for the purpose of the corporation in Portugal, to provide evidence that there is no real market failure in the European legal framework concerning the companies’ boards duties for sustainability.