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Environmental, social and governance (ESG) criteria are evolving as reporting and investment metrics at a rapid pace. While the term ‘ESG’ and the push to integrate ESG criteria into a central role in corporate reporting and investment are relatively new, as a conceptual matter ESG has been on the minds of regulators and corporate monitoring organisations for several decades. The recent increased focus on ESG criteria can be viewed as a call for companies to take a longer-term view of enterprise value, in contrast to focusing so heavily on short-term financial returns. Indeed, to some observers the ESG movement is something of a re-examination of – or even, a referendum on – the modern capitalist focus on maximising returns above all else.

At its broadest, incorporating ESG criteria into business activities requires a more holistic and people-centric approach to business. Countries that require ESG reporting and companies that are benchmarking their operations against ESG standards are declaring their intention to prioritise environmental, social and governance criteria. ESG touches all aspects of a business and has short-, medium- and long-term implications. That being said, ‘measuring’ ESG performance is a monumentally complex endeavour, and Latin America – and the world – continue to grapple with how to do so.

For investors, environmental, social and governance considerations are a growing priority as ESG performance has been shown to correlate strongly with financial performance. Stock prices of companies with high ESG rankings tend to be more stable. In contrast, companies that experience controversial ESG events can see their stock lose significant value in the market. Among society’s many current challenges, climate change, social inequality and diversity are often top of mind, and the ESG movement seeks to engage private companies in addressing such issues by requiring that they report on their performance with respect to such ESG matters. What is made clear by the chapters in this book is that all levels of governments, international governmental organisations and non-governmental organisations are grappling with ESG and how to ensure that ESG considerations are primary in governmental and corporate decision-making. Stakeholders and regulators are using a combination of ESG adoption, measurement and accompanying disclosure to try to achieve this.

While climate change concerns are often used synonymously with the term ‘ESG’ in the media and in common parlance, it is helpful to recall that ESG is comprised of three separate components: environmental, social and governance. Environmental standards refer to a company’s or government’s environmental impact and environmental risk management practices. Factors when assessing a company’s or government’s environmental impact could include greenhouse gas emissions, water quality, waste management and energy efficiency. Social criteria refer to a company’s or government’s relationship with its employees, consumers and society at large, including its performance with respect to human rights, labour standards in the supply chain, child labour laws, workplace health, community impacts and safety. Finally, governance refers to how a company or government is managed or led with respect to its different stakeholders. This criterion relates to a well-defined corporate governance system that supports a company’s long-term strategy.

Politics are inherently embedded at all levels of ESG efforts. Although, as noted above, the scope of ESG criteria is much broader, recently climate change has been the primary motivator for the heightened focus on ESG criteria. Climate change was the focal point of the Paris Agreement of 2016. UN member countries committed in the Paris Agreement to try to limit the global temperature increase above pre-industrial levels to 1.5ºC, which does not appear likely to be achieved.[2] The signatory countries followed up the Paris Conference with the UN Climate Change Conference in Glasgow (or COP26), which took place in November 2021 and resulted in the Glasgow Climate Pact. Among other commitments, the countries agreeing to the Glasgow Climate Pact targeted a 45 per cent reduction in global carbon dioxide emissions in order to reach net zero by 2050.

At the time of writing, UN member governments had just concluded the UN Climate Change Conference in Sharm-el-Sheik, Egypt (or COP 27), and one of the resulting agreements was that developed and high-polluting countries will compensate the developing countries that are hardest hit by the impacts of global warming. On the other hand, COP27 was itself controversially accused of promoting greenwashing. Both the venue – Egypt, a country with a significantly checkered record on human rights – and one of the main sponsors – Coca-Cola, the world’s largest plastics polluter – were openly challenged in the global media with respect to their involvement in the event.[3]

In each country, the regulation of ESG disclosure has fallen mainly on securities and stock exchange regulators. There is something of a natural fit for these authorities given that they already regulate financial reporting and projections. In certain countries such as the United States, Latin America’s most important trading partner, there is currently a wave of political backlash against the focus on ESG as an investment strategy and as a regulatory topic, with certain politicians and pundits railing against the use of ESG criteria as an investment tool or subject worthy of regulatory oversight. Nevertheless, given that ESG criteria are at base a tool for measuring long-term enterprise value, the political backlash will likely amount to more noise than actual policy. Major businesses have already made ESG criteria an important investment and evaluation tool and are seeking to promote themselves as ESG-friendly.[4]

In a region such as Latin America, where economic development is critical and there is a substantial energy and infrastructure gap, balancing ESG frameworks and standard-setting with development goals can be difficult. Though many governments and companies in Latin America are rightfully pursuing more sustainable energy, infrastructure and industry practices, the need to develop and maintain economic stability for their citizens in the short- and medium-term will still often take precedence. The challenge is to balance the short-term demands of electoral politics and putting food on the table with the longer-term threats to the planet and society that can result from a failure to deal with the issues encompassed by ESG. Many of the countries, if not most, in the region have a significant percentage of impoverished citizens and large informal economies – people living and trying to survive under such circumstances can hardly be expected to make ESG-mindedness a priority. Some smaller, relatively wealthier, and more homogeneous countries, such as Costa Rica and Chile, have shown an ability to redirect their political economy towards an ESG-centric approach in relatively short order. On the other hand, larger, more diverse, and populous countries in the region are finding it much more challenging to prioritise ESG criteria while balancing development needs.

This book will examine the ESG movement across a variety of timely topics. There is a mix of topics and approaches – a couple of the chapters are partial surveys, in particular Chapter 1, which looks at the developing reporting landscape, and Chapter 3, which looks at the range of ESG-related financing products available in the international and local financial markets. Other chapters are monographs, which take a deep dive into how a particular country is dealing with a particular ESG issue. It is a truism, but each country in Latin America is unique in its history and current politics; nevertheless, countries can learn from each other and can adopt ideas that are working in one country and apply them in another. Likewise, legal practitioners in the region can draw on the observations, lessons learned and successes highlighted in this book to better execute ESG-related transactions in their practice, and to help them influence and shape ESG policy in their countries. The ESG movement is dynamic politically and economically and lawyers play an important role in the shape and direction it takes.

The first half of the book reviews ESG’s influence on regulation, corporate practices, financing tools, country policy and disputes. Chapter 1 examines the current state of play with respect to ESG framework and standard-setting, including the potential for greenwashing and the likelihood of more consistent standardisation in reporting. Chapter 2 reviews what is happening in the corporate boardroom and how companies are addressing surging ESG reporting requirements. Chapter 3 reviews the range of financing instruments being utilised to generate sustainable development and the preservation of natural resources, such as blue and green bonds. Chapter 4 reviews the steps that Costa Rica is taking to translate its COP26 commitments into concrete action at home. Chapter 5 reviews the current landscape of ESG-related litigation and arbitration.

The second half of the book dives into specific ESG-related trends and practices. Chapter 6 takes a hard look at the essential nature of the social licence in the natural resources sector in Mexico, including recent case studies, lessons learned and what steps extractive companies can take to ensure they remain ‘onsides’ with the local communities in which they operate. Chapter 7 examines the evaluation tools that private equity investors are using in Latin American when making ESG investments. Chapter 8 discusses ESG trends in commercial real estate investment in Brazil, while Chapter 9 reviews ESG in the real estate industry in Mexico. Chapter 10 examines the state of the carbon credit markets in Latin America and the extent of their success. Chapter 11 looks forward at the opportunities for green energy in Latin America, its potential and likely challenges to its growth.

The book concludes with information about the many contributing authors and provides their contact information.

As editors, we want to especially thank our colleagues who are not named authors herein but who contributed significantly to the editing of the chapters in this book, including Dan Feldman, Mehran Massih, Malcolm Montgomery, Chris Ryan, Cynthia Urda Kassis and Dhruti Tummalapalli.


[1] Antonia Stolper is of counsel and Robert O’Leary is counsel at Shearman & Sterling LLP.

[2] See 'The world is going to miss the totemic 1.5°C climate target', The Economist, 5 November 2022, available at

[3] See 'At COP27 in Egypt, Climate Change Accountability Will Be Challenging', Posner, Michael, Forbes, 21 October 2022, available at

[4] See 'The tenacity of ESG investing', Buttonwood, The Economist, 16 November 2022, available at

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