ESG and sustainability

Tax as part of the ESG landscape

Fiscal policy and tax measures are macroeconomic tools that provide a powerful way of influencing the behaviour of businesses and other market participants. In this context, it is critical to understand how tax fits into the ESG landscape.

Tax is a key factor in each element of the ESG landscape. Under the ‘E’ heading, this takes the form of green taxes and/or incentives which seek to encourage more environmentally friendly behaviour. From the ‘S’ viewpoint, there is increasing pressure on businesses to pay their ‘fair share’ of tax, ultimately resulting in the OECD’s ambitious proposal to implement a global minimum tax rate for large multinationals as well as ongoing EU proposals to tackle perceived tax abuse and avoidance. The ongoing global trend for tax transparency has also resulted in increasing tax ‘G’ obligations, including requirements to publish tax strategies as well as increased tax reporting requirements accompanied by cross-border tax information exchange between tax authorities.

Our global tax team can help clients navigate new tax rules and adapt tax policies to changing rules and the evolving political and social climate. We provide cutting-edge tax advice on structuring and implementing deals, including identifying risk areas posed by new tax rules and raised standards for tax good governance, as well as practical solutions for dealing with these in transaction documentation.

Businesses should be aware of the potential for information reported under increased tax transparency obligations to lead to increased tax audits and investigations. We advise on tax investigations and disputes arising under new tax rules and challenge new tax rules if they are not designed equitably. We work as one team, combining knowledge and experience from our award-winning corporate tax and dispute resolution practices across our global offices.

We also contribute to the legislative process for new tax rules by responding to tax policy consultations published by governmental bodies and tax authorities as well as providing strategic advice to clients on how to engage with governments and other authorities under pressure to take fiscal action to address ESG issues.

Client successes

Advising a publicly listed energy provider on its de-carbonising strategy and energy taxes.

Advising energy providers in proceedings leading to the abolition of an energy tax provision due to breaches of European and constitutional law.

Advising importers of goods on their obligations under the EU Carbon Border Adjustment Mechanism (CBAM) and the adaptation to the different stages of implementation.

Advising real estate companies on their applications for tax exemptions for self-generated electricity.

Advising The Royal Foundation of The Duke and Duchess of Cambridge on the spin out of The Earthshot Prize (a global environmental prize and platform designed to discover, accelerate and scale ground-breaking solutions to environmental problems) into its own stand-alone charitable entity.