Environmental, Social & Governance (ESG)

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Pressures from investors and other stakeholders, the wide range of ESG interests and issues, and the fluid nature of ESG can be overwhelming. The proposed rule serves as a reminder that companies should not overlook traditional environmental regulatory developments and their potential impacts when considering ESG risks. When evaluating material ESG risks under a financial materiality analysis (or otherwise), a company should consider these regulatory developments. CERCLA actions can be lengthy and costly, and frequently financially material. Delays or additional restrictions in permitting can have similar consequences. Companies should consider whether new risks resulting from the proposed rule are excluded from environmental insurance policies. In addition, public companies and other companies engaged in ESG reporting should consider disclosures in SEC filings and sustainability reports through the lens of the proposed rule, particularly in the context of disclosures of material ESG risks. Such companies also should consider the scope and impact of the proposed rule before making any statements or commitments about actions they will take to address PFOA and PFOS risks. In the transactional context, financial institutions acting as lenders or underwriters, as well as companies engaging in M&A activity (as discussed in more detail below), should consider appropriate due diligence to identify the scope of potential risk around the proposed rule.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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