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Integrating ESG in Corporate Practices:The Role of CounselJanuary 12, 2021Cynthia MabryBrian PattersonStacey MitchellMonica Karuturi 2021 Akin Gump Strauss Hauer & Feld LLP

Why Are We Here?“Who Cares Wins.”Ivo Knoepel, catalyst of modern ESG investing 2021 Akin Gump Strauss Hauer & Feld LLP2

Agenda Overview of Environmental, Social andGovernance (ESG)Overview What Do Investors (and Other Stakeholders)Want to See?Investors/Stakeholders Preparing for ESG Programs and Reporting The Road Ahead: What to Expect in 2021 What is ESG? Why Care about ESG? How is Corporate America Responding? Reporting Frameworks Reporting Mechanisms Strategic Considerations and RisksGetting Started Creating and Updating a Policy Defining Goals and Setting Targets Assessment and Accountability2021 Outlook Biden Effect 2021 Akin Gump Strauss Hauer & Feld LLP3

Overview of ESG 2021 Akin Gump Strauss Hauer & Feld LLP4

What is ESG?ESG is evolving rapidly into a prominentrole in the way companies communicatewith customers, employees,shareholders, investors, regulators, andvirtually every other stakeholder.EnvironmentalCompanies integrate ESG measures intotheir operations to showcase corporateresponsibility, enhance their valueproposition, differentiate their brand,commit publicly to measurable targets,and embrace the reality of doingbusiness in the twenty-first century.ESGGovernanceESG requires real commitments tomaterial and measurable outcomes. 2021 Akin Gump Strauss Hauer & Feld LLPSocialThe ESG vocabulary is anoutgrowth of CorporateSocial Responsibility thatenables companies toassess their impact acrossa number of issues andtake action. Manycompanies look for ESGinitiatives that align withtheir environmental andsocial impact goals in thecommunities where theydo business.5

Why Care about ESG? Value creation Stakeholders / Investors Geopolitical influences Public pressure 2021 Akin Gump Strauss Hauer & Feld LLP6

Value Creation 2021 Akin Gump Strauss Hauer & Feld LLP7

Stakeholders Stockholders Strategic partners / investors Regulators / government Public / community Employees Customers Suppliers 2021 Akin Gump Strauss Hauer & Feld LLPInternal ESG Team Board C-Suite Counsel Investor relations / treasury Internal audit / reporting / ERM Human resources Operations / supply chain8

Investors Making an Impact 2021 Akin Gump Strauss Hauer & Feld LLP9

Geopolitical InfluencesPolitical risks and risingglobal tensions result inless overall stability andpredictability, greatereconomic uncertainty, andnew barriers tosustainability efforts thatdepend on internationalcooperation.Political risk is among the largest threats to growthSocial polarization, spreading public discontent, andincreasing social unrest threaten stabilityGeopolitical tension can contribute to trade wars,restricted borders that inhibit the free exchange ofideas, and heightened national security concerns 2021 Akin Gump Strauss Hauer & Feld LLP10

Geopolitical Influences (con’t) Global investment community is subject to additional ESG regulations EU’s Sustainable Finance Action Plan and the European Green Deal–Sustainable Finance Disclosure Regulation (SFDR)–The Taxonomy Regulation UK’s Green Finance Strategy– Task Force on Climate-related Financial Disclosures (TCFD)Global (and U.S.) corporations must think beyond U.S. border 2021 Akin Gump Strauss Hauer & Feld LLP11

Public Pressure 2021 Akin Gump Strauss Hauer & Feld LLP12

Public Pressure: Board Priorities Regulations designed to accelerate corporate board diversity List of states mandating some form of board diversity/disclosure is growing: California, Colorado, Hawaii, Illinois,Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania and Washington Proposed Nasdaq listing rule requiring at least one director who self-identifies as a female, and at least one directorwho self-identifies as an underrepresented minority or as LGBTQ -- or disclose why the company does not Demand for corporate positions/actions on social justice matters Environmental directors, climate-focused board committees, or entire board’sconsideration of climate impacts from existing operations and lobbying efforts Corporate reputation 2021 Akin Gump Strauss Hauer & Feld LLP13

Business Roundtable: Purpose of a Corporation212 CEOs* have committed to: Deliver value to customers Invest in employees (e.g.,compensation, benefits, training,D&I, respect) Deal fairly and ethically withsuppliers Support communities by respectinglocals and protecting theenvironment across all businesses Generate long-term shareholdervalue with transparent engagement*As of October 2020 2021 Akin Gump Strauss Hauer & Feld LLP14

Business Roundtable: Statement on Climate“To combat the worst impacts of climatechange, Business Roundtable CEOs arecalling on businesses and governmentsaround the world to work together to limitglobal temperature rise this century to wellbelow 2 degrees Celsius above pre-industriallevels, consistent with the goals of the ParisAgreement. In the United States, this meansreducing net-greenhouse gas emissions by atleast 80 percent by 2050 as compared to2005 levels.”Addressing Climate Change: Policies and PrinciplesBusiness Roundtable, September 16, 2020 2021 Akin Gump Strauss Hauer & Feld LLP15

Rise of the Benefit Corporation 2021 Akin Gump Strauss Hauer & Feld LLP16

What Do Investors (and OtherStakeholders) Want to See? 2021 Akin Gump Strauss Hauer & Feld LLP17

How to Disclose: Reporting Frameworks There are many ESG reporting frameworks, but they have a lot of overlap. ESG is broad – start with materiality to focus on what is most important toyour company and to your stakeholders. Starting with a simple, standalone and voluntary ESG report may be morepalatable than jumping into disclosures in financial filings. Companies receive “credit” for transparency and long-term thinking onESG. 2021 Akin Gump Strauss Hauer & Feld LLP18

FrameworksThree disclosure frameworks are among the most prominent: The Task Force on Climate-related FinancialDisclosure (TCFD) and the Sustainability Accounting Standards Board (SASB) share the belief thatclimate change is one of the biggest economic risks the world faces today. The Global ReportingInitiative (GRI) focuses on impacts including climate change, human rights and corruption.TCFD Climate-based disclosuresGovernance, strategy, riskmanagement and key metricsand targetsScenario analysisDecision-useful information forinvestorsChaired by Michael BloombergRepresents 477 investors withmore than 34 trillion in assets 2021 Akin Gump Strauss Hauer & Feld LLPSASBGRI 77 industry standards withpredetermined material topicsFocus on the most materialsustainability topicsSet of quantitative ESGindicatorsU.S.-originated – being takenup across 200 differentcountriesIncreasing adaptation ESG disclosures with universalstandards and topic-specificstandardsTopic-specific standards arefocused on most materialtopicsAlignment to Core orComprehensiveTargets all stakeholders (notjust investors)19

Reporting MechanismsThere are a number of ways to report:VoluntaryAdvisedMandatory ESG/sustainability report Website Industry-specific reporting frameworksStakeholder-specific metrics (e.g., investors)Institutional Shareholder Services (ISS) and Glass LewisESG ranking and rating organizations U.S. Securities and Exchange Commission (e.g., proxy statement and ExchangeAct filings) and stock exchange requirements State law (e.g., board diversity) Foreign jurisdictions 2021 Akin Gump Strauss Hauer & Feld LLP20

Strategic Considerations and RisksIncreasingly, companiesare engaging in voluntaryreporting related to theirESG commitments.Reporting increasestransparency and fosters astrong reputation, but canexpose companies torisks. 2021 Akin Gump Strauss Hauer & Feld LLPCompetitive edge: What are my peers doing? How doI measure up to my competitors? What do my investors,business partners, and customers want to see?Risk management: Has my reporting identified areaswhere I can better manage operational risk? How can Ido better or report better?Legal risk: Have I made promises I can’t keep? Have Imade false or inaccurate disclosures that could misleadinvestors, regulators, or anyone else who could raise aclaim against me?21

Preparing for ESGPrograms andReporting 2021 Akin Gump Strauss Hauer & Feld LLP22

Reporting and Goalsetting Start with a simple ESG report and remember your company can buildupon disclosures year over year. Simple, internal programs can be a good start for an ESG program. Define goals and targets: Start with materiality and stakeholder expectations. Pick pillars and goals that are authentic and attainable for your company. Work cross-functionally to develop a comprehensive strategy; or start with the mostimportant area. Be flexible: ESG is a journey, and any progress leads to a better impactfor your company and for society. 2021 Akin Gump Strauss Hauer & Feld LLP23

The BasicsThe following elements arecentral tenets of the ESGprograms implemented bycompanies with establishedESG programs.Overarching ESG Commitment/Policy Published policy or mission statement by senior leadership articulating firm’s commitmentto ESG. e.g., statement of foundational principles; letter from CEO; online ESG visibility.Clear Framework of Self-Governance Internal infrastructure and initiatives that enable firm to fulfill ESG commitment/policy. e.g., key personnel and business functions; key internal initiatives such as environmental,diversity and inclusion and supply chain.Established Approach to Management Structure for engaging business units (e.g., subsidiaries, portfolio companies) in ESG intheir operations. Incorporating ESG into business unit decisions. e.g., resources and training; ESG reporting by business units; ESG due diligence.Reporting and Metrics Measuring progress against established standards. Communicating impact to investors, portfolio companies, employees and the public. e.g., annual report; metrics for amount of charitable giving; volume of waste recycled. 2021 Akin Gump Strauss Hauer & Feld LLP24

Getting StartedGetting started with a basic, rudimentaryESG program is not necessarilyexpensive or all that time consumingWith the help of free, online resourcesfrom standard-setting organizations likeSASB, TCFD, or GRI, communicate apolicy and formulate a plan to addressthose issues material to your companyOftentimes, the best starting point is withwhat you are already doing 2021 Akin Gump Strauss Hauer & Feld LLP25

ESG – Disclosure EvolutionGetting started:Environmental (E) Social (S)Conservation programs (e.g.,waste, recycling, water,energy efficiency) Labor, health and safety Product safetyRecordkeeping and datacollection regardingenvironmental impacts fromexisting operations andsupply chain Community service initiatives Training programs Internal policiesBasic reporting 2021 Akin Gump Strauss Hauer & Feld LLPCorporate Governance (G) Board structure andgovernance guidelines Code of ethics Executive compensation andKPIs ERM and audit function Shareholder rights/takeoverdefenses Data privacy/security26