Herbert Smith Freehills’ Ernst Müller and Silke Goldberg speak to Jack McRae about their new tool which will allow companies to track emerging ESG regulatory and reporting requirements
“ESG is the law of everything,” Ernst Müller, ESG director at Herbert Smith Freehills (HSF), begins simply. Calling from Johannesburg, Müller is one of the few full-time ESG lawyers on the continent and is fixated by the ever-changing regulatory landscape.
He is joined by Silke Goldberg, partner and global head of ESG at HSF, whose belief that, “ESG is contagious”, offers a similarly clear depiction of their fascination with ESG.
She explains: “Sometimes when you can see a particular trend in the EU, you might find those elements manifest in other countries’ developments. By providing our clients with a very detailed overview, we also put them in a position where they can anticipate what might come their way.”
Müller and Goldberg bounce off one another throughout the discussion and the former anecdotes that “Silke and I start most of our presentations with that opening line of ‘ESG is the law of everything’ because it’s important to understand that ESG concerns the whole universe of impacts that people and the planet can have on a business’ model, operations and strategy.”
The focus on ESG has grown, and grown rapidly, in recent years. Müller describes how, “even this morning, I spoke to an African-based sovereign wealth fund and they said to me, ‘don’t talk to me about ESG. We know everything about ESG’. That’s not a conversation you would have had in Africa five years ago.”
Under Müller and Goldberg’s stewardship, HSF has developed a new tool for companies to track ESG regulatory and reporting requirement changes across the globe. The need for such a tool is underscored by Goldberg’s opening lines, ESG is contagious.
Possessing the tools
Sharing his screen, Müller talks through the 75 page document that is sent out once a month to subscribers to their tool. Country flags followed by a concise breakdown of all the latest regulatory changes fill the screen as Müller scrolls down and through the document.
He explains the process: “We developed a platform where we’ve assembled a team of about 140 odd researchers across a 23 office network that do the research for us on a continuous basis.
“We have a SharePoint platform system where they upload the information into the central depository, and then we review the information as it gets uploaded. Then once a month, we cut the cake for clients, so that we can help them stay on top of ESG focused legal developments that emanate from the executive, legislative or judicial arms of government in the jurisdictions in which they take an interest.”
What is most important, however, is ensuring clients can digest the information. Müller expresses that, “The updates are provided in short bitesize units to allow subscribers to communicate the information across the business.”
Companies will be able to not only keep abreast with ESG regulation affecting them directly, but also the global trends and the regulatory changes in jurisdictions where companies they do business with work.
Turning the volume up
The greatest challenge for clients trying to track regulatory changes every month is in their sheer quantity, Goldberg explains. She describes how the volume and level of detail that clients have to be familiar with is a hurdle that makes it “complicated for companies to stay on top of the regulatory framework changes on an ongoing basis.”
Questioned whether AI could be the solution for trawling through huge sets of data, both Goldberg and Müller are unconvinced the technology is advanced enough to deliver reliably accurate results.
Goldberg believes that “AI is still in the learning stage. AI tools can only do what they are meant to if companies feed AI with the relevant data. Our own tool, the CSRD method, is a digital tool that helps with checking whether a company is subject to CSRD, but we still need to input a certain level of information. So AI will help, but it’s not magic.”
Müller is optimistic for the future of AI. He laughs as he tells how he is often told by friends in technology that AI in its current form is “the worst possible iteration of AI, it will never be as basic as it is now, and it will only improve going forward — not to say that it’s not great already, but there are hiccups.”
He details how HSF had considered and trialled using AI in their research stage for the tracker. He points out that “given the amount of hallucinations that you get, it often takes longer to just sift out the accurate information from the hallucinations than just to do the research yourself.”
Future is green
How much difference can an ESG tracker make for the industry?
The reception to the tool suggests it could be game changing. Müller explains with pride at how, “I have had engagement from clients in New Zealand in the south east, all the way through to Canada in the northwest. It has made its way around the globe.”
He feels that people across the world believe that they are establishing “a tool is that it’s an insurance product that you’re buying, there’s somebody else that’s keeping an eye out specifically for regulatory developments for you and it is coming to your inbox once a month.”
Müller appreciates that given all the regulatory updates are public information, what they are doing could be done by anyone with enough time to put together a 75 page legal update document. However, that is “time that most teams don’t have the ability to assign.”
He adds: “You need somebody to collate the information for you and deliver it in short, punchy, factual updates. My science friends need to understand it as much as the finance teams, the risk teams, compliance teams, legal teams, boards, executive management teams. That’s the key benefit of the tracker.”
Müller is insistent that the tracker’s success will only grow, promising that “we already have things in the works”, including an online platform for clients. He suggests that these developments will be shaped by an attitude shift in society.
“People want to know things faster. We grew up in an age of microwaves, where we need food to be ready in two minutes, not slow roasted for five hours,” Müller explains.
“We want to give people access to a platform that they can log in, click a few buttons and get a customised tracker produced for them instantly.”
The development of ESG within the industry will only continue to grow and Müller experiences how, “the focus on the impact of people and the planet is gaining momentum every day.”
As ESG’s prevalence booms, HSF wants to be with clients at the forefront of everything that is to come. Müller finishes proudly: “We want to be there with clients every step of the way to make sure that they follow our catchy slogan: ‘You’re not just up to date, you’re leading.’”
