ESG is understood to be an acronym for “environmental, social and governance,” but the term can be challenging because it’s used to describe similar but distinct communities of practice, including corporate social responsibility, socially responsible investing, corporate sustainability and impact finance.

In the 1980s, pension investor concerns for social and environmental issues evolved into what became known as socially responsible investing, which screened out investments that raised concerns over various human rights and environmental issues. This eventually spurred a corporate social responsibility (CSR) movement, pressuring corporations to take responsibility for the negative external impacts of their operations.

A global sustainability movement also began in the 1980s seeking to reconcile economic development with the protection of social and environmental balance. This was adapted in the private sector into corporate sustainability, an intentional strategy to create long-term value through improved social and environmental impact. Corporate sustainability differs from CSR in that the latter is often not driven by strategic business imperatives.

The investor perspective on financially material aspects of corporate sustainability coalesced under the term ESG, as famously used in a 2004 United Nations report issued by a coalition of 20 major financial institutions. The report included recommendations on integrating ESG value drivers into financial market research, analysis and investment. This was the birth of ESG, which has blossomed into an important asset class in worldwide financial markets.

Although ESG has become politically fraught in the United States, internationally ESG regulation is becoming pervasive. This issue details these global developments, which, with the potential to more closely align business imperatives with social good, are fundamentally altering standards of corporate responsibility and investment decisions and analysis.

After the post-pandemic boom enjoyed by the Life Sciences sector in 2021, the keyword going into 2023 is uncertainty. On the investment side, it’s shifted dramatically from a seller’s to a buyer’s market, and uncertainty is impacting every aspect of business, including the new transition timelines announced for the EU and UK medical device regimes, and protection of sensitive patient and commercial data owing to the stratospheric rise in cybersecurity insurance premiums.

Never has it been more important for businesses to manage the issues that are within their control, such as ensuring robust compliance and proactively preparing for dispute resolution.

Some extremely positive messages did, however, emerge from panel discussions at McDermott’s Health and Private Equity (HPE) Europe 2022 and European Life Sciences and Healthcare Symposium. Businesses that deliver excellence, whether that’s in patient care or with good scientific assets or an advanced product, are likely to weather the current challenges. In addition, the launch in Spring 2023 of the Unified Patent Court and the European patent with unitary effect will revolutionise the way patents are enforced in Europe, finally delivering the option to enforce, attack, and defend a patent before a single court.

It is always the case that businesses must keep up with changes to tax rules, but never have tax rules had to pay equally close attention to changes in business. The evolution of technology and the internet age have driven seismic shifts in the ways companies operate, and presented new challenges for tax regimes.

The long-awaited Organisation for Economic Co-operation and Development (OECD)/G20 Global Anti-Base Erosion Model Rules, intended to address perceived challenges to longstanding international taxation principles by the increasing digitalisation of the economy, are coming closer to becoming a reality with the agreement by 137 OECD/G20 countries and jurisdictions to join the official statement of the Two-Pillar Solution. But we’re still not there yet. Similarly, despite the Non Fungible Token (NFT) market being worth US$21 billion, the US Internal Revenue Service (IRS) still hasn’t explicitly stated how NFTs will be taxed.

Without clear rules and guidance, businesses need to be highly vigilant. The continuing trend of working outside the office means international companies must ensure their remote workforce doesn’t inadvertently trigger tax liabilities by creating a permanent establishment or permanent representative; and trustees must undertake regular reviews to ensure changes within the trust don’t generate new taxable events. In addition, companies need to be aware of how expected changes to tax laws may be more aggressive than anticipated, such as the withdrawal by the US IRS of certain foreign tax credits.

Please contact the authors directly if you have any comments on our articles, or would like to discuss any of the issues raised.

This is a phenomenally interesting time to be a Private Equity investor. The dramatic shifts in focus caused by the global COVID-19 pandemic, the increasing challenge of climate change, and the growing emphasis on corporate governance, have converged to create a perfect storm of opportunity and demand for investment.

Nowhere is this more apparent than in the healthcare and life sciences sectors, which are seeing unprecedented expansion as a result of the existing, pre-pandemic move towards a new world of healthcare delivery, and the reinforcement of healthcare services as a major priority across the globe. Our HPE New York 2021 panel of experts provide insight on how the most successful funds are maximising the current opportunities.

Running a close second, the shift towards renewable energy has opened up avenues for investment that might not be immediately obvious: the upstream oil and gas industry. Demand for oil continues to surge, but the current importance of environmental, social, and governance considerations, has rendered hydrocarbons unattractive for public investment. PE and private wealth look poised to step into the void.

Of course, these opportunities also create challenges and potential pitfalls for over-enthusiastic but unprepared investors who may fear they are missing out on the next big thing. A clear-eyed understanding of risk, and a strong commitment to mitigating it, have never been more valuable.

Please contact our authors directly if you have any comments on our articles, or would like to discuss any of the issues raised.

In a joint statement issued in June this year, the G7 nations pledged to support a “green revolution that creates jobs, cuts emissions and seeks to limit the rise in global temperatures to 1.5 degrees,” and committed to “net zero no later than 2050, halving our collective emissions over the two decades to 2030.”

The renewable energy sector is at the front of this green revolution. The demands of the transition to net zero are causing unprecedented impacts on fields as diverse as competition law and employee unionization, are being granted major significance in once-in-a-generation national projects such as the $2.3 Trillion American Jobs Infrastructure Plan, or are the focus of multi-national collaborations such as the Association of Southeast Asian Nations power grid system.

Renewable energy is no longer considered a niche investment and there are myriad opportunities in new technologies or the repurposing of old technology, such as using green ammonia to transport hydrogen.

But the old ways aren’t dead yet, and our current reliance on oil means there is still a need for astute investment in this sector to make hydrocarbons cleaner and more efficient until net zero is achieved.