Leveraging Pro Bono Services for ESG Advancement in Pakistan’s Legal Sector
Friday 2 June 2023
Sahar Iqbal
Akhund Forbes, Karachi
sahar.iqbal@akhundforbes.com
How pro bono legal services help law firms attain ESG goals
There is a link between pro bono work for law firms and Environmental, Social, and Governance (ESG) goals in that both are focused on promoting social good and positive impacts on society. By providing pro bono legal services, law firms can help promote access to justice for those who may otherwise be unable to afford it. This can have a positive impact on social and environmental issues, such as protecting the rights of marginalised groups or promoting environmental conservation.
In addition, law firms which prioritise pro bono work are often seen as more socially responsible and committed to making a positive impact on society. This can help attract clients and employees who share these values and are interested in working with firms which prioritise ESG goals. By incorporating pro bono work into their ESG strategies, law firms can demonstrate their commitment to sustainability, responsibility and ethical business practices.
Many firms start with sustainability efforts as they yield almost immediate results. A growing number of education opportunities, self-assessment tools and measurement techniques are available. Even if they do not serve ESG-motivated clients, law firms should consider incorporating ESG goals into their mission, as firms which are slow to adapt to this new reality risk being left behind by those who align their purpose with their clients, employees and communities.
Pakistan has a significant opportunity to benefit economically by integrating ESG considerations into its corporate and investment frameworks
The legal and regulatory framework in Pakistan provides firms with an enabling environment to set and attain ESG goals, which can attract much-needed investments in the corporate sector. In 2021, a record $649 billion was invested in ESG-focused funds globally, and the sustainable finance industry is seeing the emergence of ESG-linked loans and incentive-linked securities in different parts of the world.[1]
Several rating agencies, such as Sustainalytics, MSCI ESG Ratings and MSCI ESG Fund Ratings, have developed systems to evaluate companies and funds based on defined ESG criteria. Investors are increasingly relying on these third-party scores to assess and reinforce credibility in their ESG-linked loans and investments.[2]
Pakistan ranks as the eighth most vulnerable to climate-related disasters country as per the Global Climate Risk Index (GCRI). Therefore, it is crucial for Pakistan to take into account ESG considerations when making corporate and investment decisions. Research suggests that integrating ESG factors can lead to better financial performance, higher scores, improved financial valuation and cost savings.
Additionally, Pakistan is set to receive climate reparations through a fund established at the United Nations’ COP-27, which will attract private investments in sectors such as agriculture, renewable energy and climate. International firms are encouraged to consider ESG ratings before investing, making it imperative for firms and corporations in Pakistan to prioritise ESG.[3] Law firms can support initiatives raising climate change awareness, for example, Akhund Forbes sponsored an expedition to K2 by a pioneering Pakistani mountaineer. The expedition was made to raise awareness for melting glaciers.[4]
The dearth of ESG reporting for corporations and law firms in Pakistan
Globally, there is a growing trend to use highly developed reporting frameworks to improve the comparability of disclosures. These frameworks fall into two groups: becoming signatories to adhere to a set of principles, or reporting on specific qualitative and quantitative indicators. While the number of signatories of Pakistani companies to the first type of global frameworks has risen in recent years, the interest in using frameworks to report on specific qualitative and quantitative indicators using globally recognised frameworks such as the Global Reporting Initiative (GRI) is low in Pakistan. A low number of firms voluntarily set ESG goals for themselves.
A survey conducted in 2019 by the Centre of Excellence in Responsible Business (CERB) and the United Nations Development Programme (UNDP) showed that only 17 per cent of companies in Pakistan report using the GRI standards, compared to 73 per cent globally. Despite various efforts to nudge the private sector towards sustainability disclosure, there remains a gap in guidance on what to disclose.[5]
In 2002, Pakistan adopted a code of corporate governance based on the principles of the Organisation for Economic Co-operation and Development and the United Kingdom’s Cadbury Code, recognising the importance of probity, transparency and accountability in driving long-term sustainable growth and increasing share price stability. The corporate sector welcomes good governance’s value addition to enterprises at a micro and macroeconomic level. The Code is now an integral part of Pakistan’s regulatory framework and is recognised as a key pillar in its corporate governance value addition.[6]
ESG risks have become interconnected with the financial well-being of businesses from the investor perspective. Providers of capital no longer base their investment decisions solely on financial Key Performance Indicators but also consider ESG risks in the short, medium and long term. Therefore, the custodians, key players, stakeholders and regulators of Pakistan’s capital markets, including SECP, PSX, SBP and PAKRE, must recognise the global importance of ESG dimensions, improve ESG risk management, monitoring and capacity, adopt global measurement and reporting standards and encourage Pakistani enterprises to voluntarily embrace ESG reporting standards. Moreover, they must document sector and firm level material ESG risks for Pakistan to prevent capital flight risk and the loss of long-term investment opportunities.[7]
Conclusion
The growing importance of ESG considerations in the global business landscape presents an opportunity for Pakistan’s legal sector to proactively integrate these factors into their practices. By leveraging their pro bono services, law firms can demonstrate their commitment to ESG goals, attract like-minded clients and employees and promote access to justice for underprivileged and marginalised communities. As Pakistan faces increasing climate-related risks, the integration of ESG considerations into corporate and investment decisions can lead to long-term economic benefits and help attract much-needed investments. Law firms in Pakistan have a unique opportunity to lead the way in ESG advancement by embracing sustainable practices and leveraging pro bono services to create a positive social impact.