DOJ NATIONAL SECURITY DIVISION’S ENFORCEMENT POLICY, EXPLAINED

THE GROWING IMPORTANCE OF ESG DUE DILIGENCE POST-COVID-19

Prepared for TRACE by Jonathan C. Drimmer and Timothy L. Dickinson, Paul Hastings LLP

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In the halcyon days of February 2020, before COVID-19 took hold across the globe, McKinsey & Company released a survey on the implications of environmental, social and governance (ESG) factors for business and investments. The survey focused on C-suite leaders and investment professionals: those who run, acquire and invest in businesses. Eighty-three percent of those surveyed said they expect that ESG programs will contribute more shareholder value in five years than today. They believe strong ESG performance creates value over the short term and the long term, and that the long-term value of environmental and social programs rivals or exceeds the value of governance programs. They also indicated that they would be willing to pay a 10 percent premium to acquire a company with a positive ESG record over one with a negative record.1

Those results are consistent with the individual efforts of institutional investors. In January 2020, Larry Fink, the founder and CEO of BlackRock, the world’s largest asset manager, penned a letter to the chief executives of the world’s largest companies advising them of a shift in BlackRock’s investment strategy. Stating his belief that “we are on the edge of a fundamental reshaping of finance,” Fink announced initiatives “to place sustainability at the center of our investment approach,” emphasizing that “sustainability- and climate-integrated portfolios can provide better risk-adjusted returns to investors.” While emphasizing climate risks and sustainability more generally, every company’s “prospects for growth are inextricable from its ability to operate sustainably and serve its full set of stakeholders,” the letter said.2

The COVID-19 pandemic has further shaken up corporate priorities, and if anything, it will solidify ESG as a priority for companies. Studies consistently demonstrate that ESG funds and businesses with strong ESG records are outperforming others.3 Because governance is a “central element of corporate resilience”—and businesses with robust ESG performance have stronger reputations and standing among customers, employees, communities, policymakers and other key stakeholders—they are more likely to retain loyalties and sympathies in times of volatility.

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THE GROWING IMPORTANCE OF ESG DUE DILIGENCE POST-COVID-19

The 10 percent ESG acquisition premium identified in the McKinsey survey, along with Fink’s message on reshaping finance, will become increasingly relevant over the next year. As The Economist concludes, the crisis will “alter the structure of global business.” There will be substantial shifts in investments, and to bolster their market share, stronger companies will acquire those that are foundering, often with the encouragement of government.4 Given the short- and long-term risks and opportunities ESG factors can bring, ESG due diligence will have a pronounced role in acquisition and investment decisions—especially during the COVID-19 crisis, and more recently, in light of societal demands and strong corporate responses toward addressing institutional racism in the wake of the death of George Floyd. However, as another recent survey concluded, a primary challenge is that because “ESG diligence is still in its infancy,” there is a perceived lack of “processes to properly judge the ESG risks associated with a target.”5

This paper seeks to help address that challenge, identifying the key considerations and processes in conducting ESG diligence. It discusses the rise of ESG due diligence in investments and acquisitions, and the steps investors and businesses can take to identify key ESG risks and opportunities by sector and geography, and ultimately, by individual company.

“EIGHTY-THREE PERCENT OF THOSE SURVEYED SAID THEY EXPECT THAT ESG PROGRAMS WILL CONTRIBUTE MORE SHAREHOLDER VALUE IN FIVE YEARS THAN TODAY.”

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BACKGROUND: THE RISE OF ESGESG issues have rapidly become a core component of the investment and acquisition process. As IHS Markit and Mergermarket concluded in their 2019 survey of private equity, asset management and corporate executives, “after identifying a promising target, nearly all our respondents (90%) said they conduct ESG due diligence—once again confirming that it has become a core element of the M&A process despite its relative newness.”6 Investors applied both defensive approaches such as “actively avoid[ing] assets with poor ESG profiles,” as well as affirmative approaches like seeking companies with stronger ESG performance.

The specific issues that can be assessed in an ESG diligence exercise vary. A list of potential issues is in Fig. 1.

ENVIRONMENTAL SOCIAL GOVERNANCE

� Impact on climate and greenhouse gas emissions

� Climate change risks � Energy efficiency and use � Air and water pollution � Hazardous materials and waste � Water scarcity and waste

management � Site rehabilitation � Biodiversity and habitat protection,

and ecological impacts � Land contamination

� Human rights and modern slavery � Community impact and relations � Local economic development � Impact on indigenous peoples, including

land rights � Employee relations and welfare � Talent attraction and retention � Working conditions � Discrimination and harassment � Employee diversity � Health and safety � Consumer relations � Data security and privacy � Responsible marketing � Responsible products and sustainability

within supply chain

� Alignment of interests between executives and shareholders

� Executive compensation � Board independence � Board composition, including diversity � Board oversight of ESG risks � Systemic and critical risk management � Shareholder rights � Transparency and disclosure � Anti-corruption � Business ethics and conduct � Grievance procedures � Financial policies

Fig. 1: Potential ESG issues.

Some of those issues—such as employee diversity, discrimination and harassment, and board composition—will arise in virtually all diligence exercises. That now includes so-called “Weinstein clauses” that seek the disclosure of allegations of sexual misconduct among senior executives. And some of those issues, such as diversity and discrimination, are likely to increase in prominence as part of the larger movement toward eradicating racial injustices and institutional racism at all levels of society. But the relevance of most ESG issues will vary widely between companies.

As a general proposition, salient ESG risks and opportunities differ according to three primary variables: (1) the sector, (2) the relevant geographies, and (3) the maturity of the program and its integration of ESG into the company’s culture. For example, the typical pertinent risks and opportunities for natural resource companies differ from those for technology firms, health care, or footwear and apparel businesses. Even within sectors, operating locales create significant distinctions in potential ESG implications. For example, the challenges in African countries are distinct from those in Middle Eastern and European countries. Likewise, challenges in urban areas may diverge from those in rural areas, and those for large public multinational companies may differ from small, private domestic ones. Challenges may arise where tribal practices, norms and other social systems influence corporate conduct, or where Sharia law applies.

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THE GROWING IMPORTANCE OF ESG DUE DILIGENCE POST-COVID-19

Finally, the maturity of the target company’s approach to its ESG issues, and whether ESG has been engrained into the corporate culture, is highly germane. That includes whether the company has assessed its salient ESG issues, instituted systems and processes responsive to those issues, and devoted resources and attention to those systems and processes. Also relevant is how the company has handled issues that have risen in the past, and the extent to which ESG has been seamlessly integrated into how the company does business and engages with stakeholders. While an ESG inquiry into a target company may start generally, it quickly becomes highly individualized.

THE FIRST STEP IN DILIGENCE: IDENTIFYING THE INHERENT RISKS BY INDUSTRY AND GEOGRAPHYThe first step in an ESG diligence exercise is to identify the traditional sector-level risks, and how those may be impacted by the geographies in which the target company operates. Most sectors share at least the potential for common significant ESG risks and opportunities. Those can generally be identified with relative ease through consultations with industry experts and desktop resources. The Sustainability Accounting Standards Board (SASB), for instance, maintains a chart of 26 sustainability issues likely to affect the condition or performance of companies in 11 industries.7 S&P Global likewise has created an interactive atlas for social and environmental risks for some 30 industries and countries around the world.8

In the extractive sector, for instance, there are seven core ESG risks and opportunities that apply across companies: environment, health and safety, security, local communities, access to land, corruption and workplace issues—with some key variables for each. Figure 2 illustrates a sample of two of these areas for mining companies:

ESG AREA RISKS/OPPORTUNITIES KEY VARIABLES

Environment Risk of environmental incident and negative environmental impacts, including tailings, water impacts and air emissions

Available water supply, air and water pollution, impacts from other companies (collective harms), energy use, hazardous or toxic waste and materials management, climate impacts and risks, biodiversity impacts

Health & Safety Risks of human health impacts from unsafe working conditions and exposures

Exposure to naturally occurring chemicals, strength of safety systems, availability of protective equipment, age of equipment, earthquakes and natural disasters

Fig. 2: Sample sector-level mining ESG issues and variables.

Other industries will have different risks, opportunities and variables. For instance, life sciences companies are unlikely to have environmental risks, but are likely to have risks associated with the safety of clinical trial participants, access to medicines, drug safety, ethical marketing, supply chains, corruption and regulatory approvals unique to their industries. Aerospace and defense companies will not be concerned about clinical trials but will be particularly concerned about energy management and emissions, hazardous waste management, data security, corruption, materials sourcing and supply chains, product quality and safety, and controls on weapons. In the technology

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and communications, energy, and waste management industries, data privacy and security, freedom of expression, anti-competitive behavior, materials sourcing and supply chain, and business ethics are traditionally germane, depending on the specific lines of business. The use of artificial intelligence and surveillance products for racial profiling has recently become particularly significant.9

Once the sector-level risks and opportunities are identified, it is important to determine the extent to which those risks may be present in the target company’s geographies. Numerous public databases and benchmarks can assist in that effort. Those may include, for instance, the Heidelberg Conflict Barometer or Control Risks’ Interactive Risk Map to identify the potential for security-related incidents, or the TRACE Bribery Risk Matrix to identify corruption concerns.10 Those benchmarks can then be applied to each of the relevant sector-level risks to identify the extent to which diligence should be pursued. For example, while Serbia is known to hold mineral and metal reserves, which can present concerns around indigenous communities, the World Bank has identified no indigenous peoples there. By the same token, the TRACE Matrix dentifies substantial corruption risks in the Democratic Republic of Congo but far fewer in Australia.

THE SECOND STEP IN DILIGENCE: IDENTIFYING THE COMPANY’S ESG HEALTHAfter the target company’s salient sector-level risks and opportunities are identified and honed through an analysis of relevant geographic risks, the ESG diligence process turns to the target itself. The extent of company-specific diligence can vary widely, from a lighter assessment largely relying on public information—perhaps appropriate for modest investments or a hostile or confidential transaction—to a far more in-depth exercise.

More in-depth ESG diligence exercises often begin in tandem with a commercial diligence process but then diverge with detailed ESG-specific questions and analysis. That typically involves targeted written questionnaires and follow-up. It also involves some level of engagement with management, which can be particularly instructive in identifying the target company’s ESG culture and priorities, and in the acquisition context, predicting the cultural fit. However, regardless of whether the diligence is light or involved, the object is the same: to identify the company’s specific risks and opportunities, and to assess the maturity of the company’s approach to addressing them. That generally involves a three-part inquiry.

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THE GROWING IMPORTANCE OF ESG DUE DILIGENCE POST-COVID-19

1. THE COMPANY’S ASSESSMENT AND RESPONSEFirst, it is important to identify the extent to which the company has assessed and responded to its salient ESG risks and opportunities. Although the sector and general geographic analyses are an important starting point, specific ESG issues differ from company to company, and often from operation to operation and product to product. For instance, while corruption is a key governance risk for many companies, it is not a substantial risk for others. Likewise, emerging ESG risks in corporate governance and local corporate charters are another area an acquiring company may want to consider.

The extent to which the target company has considered its ESG risks and opportunities is critical to understanding what they are and how they are being managed. This information is often publicly available, as companies are increasingly disclosing their material ESG risks through sustainability reports, their websites, securities filings or organizations that administer sustainability reporting standards. Thousands of companies make disclosures consistent with the Global Reporting Initiative (GRI) standards, which ask companies to identify their material risks—defined as those that reflect significant economic, environmental and social impacts, or that substantively influence the assessments and decisions of shareholders.11

Similarly, the authoritative SASB standards call upon companies to disclose “financially material” sustainability issues, “which are the issues that are reasonably likely to impact the financial condition or operating performance of a company and therefore are most important to investors.”12 Reporting standards also exist on a subject-matter level. For example, Shift’s Human Rights Reporting and Assurance Framework Initiative includes disclosure of salient human rights risks to potential victims.13

If the target company has not conducted an assessment, it is a strong signal that its approach to ESG is less mature. Without an assessment, there can be no tailored approach to managing ESG risks, amplifying the possibility of missteps. Even if the company has assessed its ESG risks, however, it is important to engage with management where possible to gain confidence that the assessment was appropriately rigorous and thorough, and employed a defensible methodology.

Further, given the variance of substantive ESG issues, consulting with subject matter experts on the reliability of the assessment may be prudent. By the same token, if the assessment is more of a check-the-box exercise or is based on the subjective perspective of senior management, it could be a signal that ESG issues are not well managed.

Regardless of whether and how the company has assessed its salient ESG risks and opportunities, it is useful to understand how it is managing the risks it has identified or that are otherwise likely to be present. Approaches can differ from company to company. In general, it is reassuring when companies institute management systems that encompass or are tailored to relevant issues. Effective systems may include relevant policies and procedures, training, monitoring, internal reporting and auditing, and assigning relevant personnel to oversee the system. Smaller companies, however, may tend to focus more on close management oversight than formal systems.

“THE EXTENT TO WHICH THE TARGET COMPANY HAS CONSIDERED ITS ESG RISKS AND OPPORTUNITIES IS CRITICAL TO UNDERSTANDING WHAT THEY ARE AND HOW THEY ARE BEING MANAGED.”

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Whatever approach is undertaken, it is important to learn whether the company aligns its processes with key leading standards and principles. For instance, the management of human rights risks should align with and be assessed against the UN Guiding Principles for Business and Human Rights; security risks should align with and be assessed against the Voluntary Principles on Business and Human Rights; environmental issues should align with and be assessed against ISO 14001; and anti-corruption risks should align with and be assessed against the U.S. Department of Justice’s Evaluation of Corporate Compliance Programs or the UK’s Bribery Act 2010 Guidance.14 Because that exercise typically requires engagement with management, it may be less easily achieved in hostile or confidential diligence exercises.

2. THE COMPANY’S COMMITMENT TO ITS SYSTEMSIn addition to understanding the extent to which the company has identified its ESG issues and appropriately tailored its systems, for acquiring companies and investors, it is important to gain insight into a target company’s commitment to those processes and its risk appetite. Company commitment is a critical difference between programs that may be well-designed on paper—where risks are not being substantially mitigated and opportunities are not being captured—and those that are implemented robustly and effectively.

The commitment can be assessed in different ways, including:

• the extent to which the board of directors oversees ESG issues and receives regular reports; • the experience and seniority of management personnel assigned to manage ESG risks; • whether the importance of ESG issues is communicated throughout the company and to external

stakeholders; • whether the company has established and met meaningful key performance indicators appropriate to the

business, or tracked information against pertinent metrics; • whether aspects of ESG performance are included within compensation or bonus structures;• whether nonfinancial audits have been conducted, and their results; • whether the company has conducted any sort of supply chain mapping; • whether salient ESG issues have been externally assessed or certified; • whether culture surveys have been conducted, and the extent to which the company’s commitment has

been engrained into the culture; • whether ESG issues are included in the company risk register; and • whether sufficient resources are dedicated to managing ESG risks and opportunities, in terms of budget

and full-time equivalents.

Some of that information may be publicly available on websites, in sustainability reports and in financial disclosures. Alternatively, it may be available through information requests or engagement with company insiders, which would require more effort. The importance of assessing the company’s commitment on any given issue may increase or decrease depending on its nature, scope and materiality. But gaining understanding of its commitment to effectively managing important ESG issues is critical to distinguishing between companies that merely proclaim to place importance on ESG issues, and those that have a strong approach to actually addressing pertinent risks and capturing opportunities.

Likewise, understanding the target company’s directional momentum regarding ESG is highly informative. ESG is engrained into some companies’ culture and values, and has been for many years. Some are newer to the issues,

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THE GROWING IMPORTANCE OF ESG DUE DILIGENCE POST-COVID-19

and for others, it is part of a risk mitigation or cost-benefit exercise and not an inherent part of the corporate ethos. Questions that might be posed to ascertain the company’s directional momentum include whether ESG resources have been increasing or decreasing, whether there have been changes in the company’s ESG strategies, and whether there have been senior management changes with personnel who have greater or lesser ESG sophistication.

Far more difficult, but just as important, is gaining insight into the degree to which ESG is entrenched in the way the company operates. In general, cultural factors and organizational alignment are critical to success—and avoiding failure—in mergers and acquisitions. As ESG is a proxy for corporate culture, studies have shown that deals between companies that devote comparable attention to ESG greatly outperform deals with ESG incompatibility.15 In certain ESG areas, like anti-corruption, the criticality of maintaining a culture of compliance is well understood and measurable, and insights can be gleaned from metrics such as hotline reporting, retaliation concerns, and managers modeling ethical behavior. Seeking ways to measure the “culture of ESG” will be equally valuable, such as management showing visible leadership on ESG issues, company decisions in the face of dilemmas that may pit ESG performance against profits, the results of culture surveys, whether ESG factors are considered in promotions, and other such steps.

Finally, understanding the target company’s risk appetite is useful in determining the degree to which it may tolerate inherent ESG challenges. This may be obvious, perhaps from the locations where the company operates, public interviews with management, or its expressed ethos. Or it may be learned from the level of the resources it dedicates to risk management. The influence of minority owners, joint venture partners, institutional shareholders and others can also be relevant to risk tolerance, as can the sway of home and host governments.

A high risk appetite should not necessarily be a warning sign or deterrent. It should be well understood, however, as the level of risk should correlate to the expected reward and should factor into the overall investment and acquisition calculus.

“STUDIES HAVE SHOWN THAT DEALS BETWEEN COMPANIES THAT DEVOTE COMPARABLE ATTENTION TO ESG GREATLY OUTPERFORM DEALS WITH ESG INCOMPATIBILITY.”

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3. ISSUE MANAGEMENT The final company-level category for assessment relates to how the company manages issues when they arise. Because nearly every business has negative ESG impacts, companies that claim not to have them should be viewed warily. It may be a sign that the company is not managing its ESG issues or being honest.

By the same token, while understanding the existence or non-existence of past impacts is important, it is not conclusive as to the strength or commitment of a company’s program or the likelihood of future impacts. Luck can play a role, as can rogue actors and third parties. Well-managed ESG programs might have high-profile negative impacts, and poorly managed ESG programs employed under similar circumstances might not. Further, internet reports and self-interested activists often misconstrue and mischaracterize events, creating sharp distinctions between reputation and actual performance. Nonetheless, understanding the frequency, duration and significance of past impacts can help predict future ones and shed light on the effectiveness of the company’s ESG approach. The company’s reaction likewise can help shed light on the seriousness of its commitment and ESG trajectory.

Questions that might be considered include:

• What has been the severity of negative impacts?• What are the frequency rates for incidents, including near misses?• Are the incidents part of a pattern that might indicate a process weakness or lack of commitment?• Are issues and incidents investigated and reviewed to determine the root causes?• Are the root causes addressed through remedial measures, with prophylactic assessments undertaken

to avoid repetition?• How are victims of impacts treated, and what is their view of the company?• How do impacted stakeholders view the company’s management of pertinent issues, and have there been

complaints or vocal concerns?• What is the company’s level of transparency regarding the issues and incidents?• Have there been regulatory, penal or other governmental consequences or investigations?• Have there been lawsuits or legal disputes?• Is the company materially in compliance with key permits and licenses, and how might relevant ESG

impacts influence future governmental licensing, permitting or inspection results?

Additional questions might include whether significant issues were investigated under legal privilege, and the likelihood that investigation results may be made public. As with assessing ESG methodology, subject matter experts may also have useful insights into the credibility of management responses to past issues.

“WHILE THE FULL SCOPE OF COVID-19’S ECONOMIC IMPACT IS NOT YET UNDERSTOOD, ESG DILIGENCE WILL ALMOST CERTAINLY REMAIN A CORE COMPONENT OF THE INVESTMENT AND ACQUISITION PROCESS.”

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THE THIRD STEP IN DILIGENCE: ANALYSIS The final step in the diligence process is evaluating the information obtained. Some companies create a chart of relevant sector-level risks and assign scores to each category. Others produce narrative analyses, and some have both charts and narratives. Frequently, the results of the ESG diligence process are integrated into commercial diligence exercises, leading to a single product. Whatever method of analysis is employed, this diligence process—identifying the sector and geographic ESG risks and opportunities, learning the company’s specific ESG risks and opportunities, and evaluating program maturity—can provide a comprehensive determination of the target company’s ESG health. It can be used to evaluate the extent to which short- and long-term ESG values might be captured; the potential suitability for investment or acquisition; and in the context of mergers and acquisitions, the potential impact of the investment on the reputation, culture and integration of the combined company.

For mergers and acquisitions that consummate, the results of the diligence activities can be used to help formulate detailed and effective integration plans, easing efforts to combine the ESG strategy of the target company with its new parent. Similarly, for private equity funds and asset managers like BlackRock, the heightened and granular appreciation of strong ESG practices can be pressed upon other portfolio companies, improving the ESG performance of their investments: “the engine of long-term profitability,” in Larry Fink’s words. And even for investments that are not pursued, lessons still can be learned from examining the target company’s ESG strategies, honing future diligence, transporting good strategies and avoiding bad ones.

CONCLUSIONWhile the full scope of COVID-19’s economic impact is not yet understood, ESG diligence will almost certainly remain a core component of the investment and acquisition process. Although ESG diligence is still relatively new, the steps outlined in this white paper should help demystify the process for investors and acquiring businesses, and help target companies seeking to best position themselves for investment or acquisition.

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ABOUT TRACE

TRACE is a globally recognized non-profit business association dedicated to anti-bribery, compliance and good governance and leading provider of shared-cost third party risk management solutions. Members and clients include over 500 multinational companies located worldwide. TRACE is headquartered in the United States and registered in Canada, with a presence on five continents.

For more information, visit www.TRACEinternational.org.

ABOUT THE AUTHORSJonathan C. Drimmer is a partner in the Investigations and White Collar Defense practice based in Paul Hastings LLP’s Washington, D.C. office. He resolves complex cross-border problems with the benefit of having sat in every chair at the table: senior legal officer for a global 500 company, federal prosecutor and seasoned legal advocate. He is a recognized international expert on anti-corruption and business and human rights, and is a frequent speaker, author and commentator on issues related to both topics.

Timothy L. Dickinson is a partner in the Litigation practice of Paul Hastings and is based in the firm’s Washington, D.C. office. His practice encompasses a number of areas, including all aspects of the Foreign Corrupt Practices Act (FCPA), U.S. export laws, economic sanctions, ITAR regulations (including enforcement actions), and political risk insurance. Chambers USA has recognized Mr. Dickinson as one of a very few top-tier FCPA experts, every year from 2009 through 2018, and he is currently a Professor from Practice at The University of Michigan Law School, where he teaches Anti-Corruption Law and Practice, and International Commercial Transactions. He is also a founding faculty member of the International Transactions Clinic, which gives students practical experience in international law. Mr. Dickinson served as the chair of the ABA Section of International Law and Practice in 1997-1998, has served on the Executive Council of the American Society of International Law, and serves as a Director for the International Law Institute’s Governance and Anti-Corruption Methods course. Mr. Dickinson also chairs the ABA’s International Legal Resource Center, which provides global legal assistance in conjunction with the United Nations Development Programme.

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REFERENCES

1 “‘The ESG Premium,’ New Perspectives on Value and Performance,” McKinsey, Feb. 2020.

2 Letter from Larry Fink, “A Fundamental Reshaping of Finance,” January 14, 2020, at https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter.

3 Oliver Schutzmann, “ESG Storks Prove Their Value During COVID-19 Crisis,” IR Magazine (April 3, 2020), at https://www.irma-gazine.com/esg/esg-stocks-prove-their-value-during-covid-19-crisis; Ashim Paun, “ESG Stocks Did Best In COVID-19 Slump,” HSBC (March 27, 2020), at https://www.gbm.hsbc.com/insights/global-research/esg-stocks-did-best-in-corona-slump?_lrsc=c-cb36746-1bbe-4d98-85db-0c3bfa89806c; Madison Darbyshire, “ESG Funds Continue to Outperform Wider Market,” Financial Times (April 3, 2020), at https://www.ft.com/content/46bb05a9-23b2-4958-888a-c3e614d75199; David Stevenson, “Are ESG and Sustainability the new Alpha Mantra,” Financial Times (April 1, 2020), at https://www.ft.com/content/6cee0b48-7760-46a5-9759-243aaaff7f8a.

4 “Pandemic Shock Will Make Big, Mighty Firms Even Mightier,” Economist (March 26, 2020), at https://www.economist.com/business/2020/03/26/the-pandemic-shock-will-make-big-powerful-firms-even-mightier.

5 See “ESG on the Rise: Making an Impact in M&A,” HIS Markit & Mergermarket (2019), at https://www.mergermarket.com/assets/Ipreo%20Q1%202019%20Newsletter_AW_FinalLR.pdf.

6 See “ESG on the Rise: Making an Impact in M&A,” HIS Markit & Mergermarket (2019), at https://www.mergermarket.com/assets/Ipreo%20Q1%202019%20Newsletter_AW_FinalLR.pdf.

7 See SASB Materiality Map, at https://materiality.sasb.org/.

8 See S&P Global, Navigating the ESG Risk Atlas, at https://www.spglobal.com/en/research-insights/articles/navigat-ing-the-esg-risk-atlas.

9 For instance, multiple technology companies have declared that their products no longer can be used for racial profiling, and the U.S. government has placed restrictions on business dealings with dozens of Chinese technology companies be-cause of concerns around discrimination of racial minorities in Xinxiang. See Thomas Brewster, “Microsoft Urged To Follow Amazon And IBM: Stop Selling Facial Recognition To Cops After George Floyd’s Death,” Forbes (June 11, 2020), at https://www.forbes.com/sites/thomasbrewster/2020/06/11/microsoft-urged-to-follow-amazon-and-ibm-stop-selling-facial-recognition-to-cops-after-george-floyds-death/#6bd1df465b6b; U.S. Department of Commerce, “Nine Chinese Entities Related to Human Rights Abuses in the Xinjiang Uighur Autonomous Region to the Entity List” (May 220,2020), at https://www.commerce.gov/news/press-releases/2020/05/commerce-department-add-nine-chinese-entities-related-human-rights.

10 See Heidelberg Institute for International Conflict Research, Heidelberg Conflict Barometer, at https://hiik.de/wp-content/uploads/2020/03/CoBa-Final-%C3%BCberarbeitet.pdf; Control Risks, RiskMap 2020, at https://www.controlrisks.com/riskmap/maps; TRACE International, Trace Bribery Risk Matrix, at https://www.traceinternational.org/trace-matrix.

11 See GRI, “Questions about Materiality and Topic Boundary,” https://www.globalreporting.org/standards/ques-tions-and-feedback/materiality-and-topic-boundary/.

12 SASB, “Why is Financial Materiality Important?”, at https://www.sasb.org/standards-overview/materiality-map/.

13 See Shift, “Introduction to Salient Human Rights Issues,” at https://www.shiftproject.org/resources/publications/video-in-troduction-to-salient-human-rights-issues/.

14 See Guiding Principles on Business and Human Rights: implementing the United Nations “Protect. Respect and Remedy” Framework, available at www.ohchr.org/documents/issues/business/A.HRC.17.31.pdf; “The Voluntary Principles on Security and Human Rights,” at https://www.voluntaryprinciples.org/the-principles/ International Organization for Standardization, “ISO 140001,” https://www.iso.org/standard/60857.html; “Evaluation of Corporate Compliance Programs” (“ECCP”), U.S. De-partment of Justice, Criminal Division (April 2019); Ministry of Justice, The Bribery Act 2010 Guidance, at http://www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf.

15 See Cornerstone Capital Group, “ESG Compatibility: A Hidden Success Factor in M&A Transactions” (Nov. 29, 2017), at https://cornerstonecapinc.com/esg-compatibility-a-hidden-success-factor-in-ma-transactions/

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