ESG 2023 Comparisons

Last Updated November 09, 2023

Contributed By Insight4

Law and Practice


Insight4 is an independent law firm based in Spain. Its integrated, informed and experienced team is composed of professionals with extensive experience in law, finance, the energy sector, technology and consultancy gained at leading global organisations. The team is particularly focused on the financial markets, including the capital markets, credit markets, insurance markets, and energy and commodities. Insight4 has recently created a division specifically focused on ESG, delivering a full range of solutions in this area, including legal, consultancy and technology. The firm’s current portfolio of clients includes blue chip companies, investment banks, credit institutions and energy companies.


Over the last decade, governance, social and, mainly, environment-related issues have attracted significant interest in Spain.

Driven by the course and rhythm of the EU on this matter, ESG-related topics have permeated Spanish policy. This has resulted, among other things, in:

  • the creation of specific ministries – eg, the Ministry for Ecological Transition and Demographic Challenge, the Ministry of Equality and the Ministry of Social Rights;
  • the creation of organisations – eg, the State Council on Corporate Social Responsibility (Consejo Estatal de RSE or CERSE); and
  • the inclusion of a specific ESG axis within the agenda of the traditional supervisory bodies – eg, the Bank of Spain and the financial markets supervisor (Comisión Nacional del Mercado de Valores or CNMV).

While the State is responsible for setting and executing the global strategy on ESG matters, regional authorities also have a voice, in particular, regarding the environment and social areas.

There is no standalone ESG framework in Spain. Instead, there is a highly fragmented, complex and ever-growing landscape, comprising a hard-law approach – with legal obligations set out in a dynamic body of legislation, integrating EU regulations and domestic laws – and a soft-law approach, resulting from a myriad of recommendations and best practices issued by different public and private bodies.

As in other countries, ESG is currently facing several challenges in Spain, including allegations of lack of data quality, of transparency, of homogeneous standards, of comparability in disclosure, and of comparability in certifications. This situation, according to some commentators – backed in some cases by economic research – may be bringing ESG to a crossroad. In this context, we identify four tendencies in this article:

  • the consolidation of the presence of ESG strategy within large organisations;
  • the growing importance of the accuracy of ESG disclosures;
  • the tackling of ESG washing; and
  • the increasing tension between ESG-labelled products and buyer demands.

We also anticipate some future trends.

The Consolidation of the Presence of ESG Strategy Within Large Organisations

While the approach within large organisations in Spain used to be to treat ESG as a separate policy, it is now becoming clear that today ESG is more often woven into the fabric of an organisation’s culture and strategy, leading to more inclusive approaches.

Nowadays, ESG strategy is usually designed and implemented in large organisations taking into account two perspectives: ESG as an opportunity, in which marketing plays a central role, and ESG as a risk, where legal and reputational issues are usually addressed.

ESG strategy is ordinarily structured around an ESG policy, which is usually designed so that it is aligned with the culture of the organisation, co-ordinated with the organisation’s values, and ultimately integrated with the value proposal of the organisation and its general strategy.

Implementation of the ESG policy focuses primarily on the formal perspective, including addressing ESG in the by-laws (which sometimes regulate social interest and social dividend), integrating ESG into the existing codes of conduct or ethics, establishing ESG commitments (including objectives), monitoring compliance with the commitments, carrying out audits, and publishing information.

Given the cross-cutting impact of ESG within any organisation, ESG responsibilities are spread across a number of functional areas, which ordinarily include compliance, legal, risk, institutional relations, shareholder relations, audit, finance, and business.

Although in some cases some or all of these functional areas report directly to the board, it is increasingly common that ESG tasks – such as data collection, the monitoring of progress, the drafting of the relevant reports, and even the assumption of a certain degree of responsibility for external disclosure – are usually carried out through a delegated mechanism, with different structures and individuals involved. The resulting structures vary from organisation to organisation, and may include the establishment of a single ESG committee (which is sometimes an extension of the existing corporate social responsibility committee of the organisation), the creation of different specialised commissions or committees or departments (eg, sustainability commissions or sustainability transition departments), and the appointment of specific individuals within the C-suite, even leading in some companies to the creation of the role of chief ESG officer.

There is no standard mechanism or approach for monitoring the implementation of ESG strategies in Spain. Mechanisms that are frequently used include both internal mechanisms and external monitoring. Internal monitoring may be conducted through periodic assessments or checklist reviews, whereby ESG is monitored using a wide array of systems, from key performance indicators (KPIs) to scoring systems and analytics tools. Although there is no uniform structure, this process is usually led by the relevant committee or committees for different ESG areas. As regards external monitoring, this usually takes the form of a periodic audit, which is benchmarked against certain standards or ratings. The results of the monitoring process usually appear in the form of reports published by the company, whether specific reports on a particular topic (eg, sustainability or social policies) or, more generally, in the annual accounts.

The board of directors is frequently ultimately responsible for the design and supervision of the ESG strategy and the ESG policy – the establishment of the ESG objectives; the development of the internal codes of conduct; the communication of the above both internally and externally; the monitoring; the provision of information on the development, results and status of the company; and the impact of its activity with respect to ESG (eg, pollution, resources, the circular economy and climate change) – as well as the design of the relevant internal structure required for the above purposes. As with any corporate issue, it should be noted that ESG-related issues may not be neutral from a liability perspective.

The Growing Importance of the Accuracy of ESG Disclosures

One of the main challenges facing companies in Spain nowadays is how to communicate ESG strategy and performance to their internal and external stakeholders, as well as to the public in general. In this regard, the EU is in the process of establishing a regulatory framework that sets out the rules for such disclosure. However, until said process is completed, companies are currently making ESG disclosures according to some existing compulsory reporting obligations and under certain voluntary disclosure frameworks. While the need to make the former depends ultimately on the characteristics of the company and on the sector in which it operates, the latter depends solely on the willingness of the company.

Compulsory disclosure obligations break from the traditional approach to company disclosure – focused on financial issues – and, as with most ESG issues, derives mainly from EU regulatory framework, comprising both sector-specific disclosure obligations and more general obligations.

Starting with the latter, listed and large companies must comply with the reporting obligations contained in the Non-financial Reporting Directive, which is to be replaced by the recently adopted Corporate Sustainability Reporting Directive (CSRD). The CSRD will also make the reporting obligations mandatory for certain SMEs. Along with the CSRD, the European Commission has approved the European Sustainability Reporting Standards (ESRS). These rules set out common standards on environmental, social and governance matters, including the treatment of employees, respect for human rights, the diversity of company boards, and anti-corruption and bribery. Under them, companies will be obliged to report both from an inside-out perspective – that is, the extent of the company’s impact on the environment or on society – and from an outside-in perspective – describing the risks and/or opportunities the ESG performance is creating for the company.

In addition, the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy regulation set specific ESG reporting obligations for certain categories of entities operating in the financial markets industry.

Apart from the mandatory reporting obligations set out in the aforementioned rules, it is not uncommon for Spanish companies to voluntarily disclose information on their ESG performance. Said disclosures may be based on a variety of (mainly non-coordinated) standards, including the UN Global Compact, the UN Principles for Responsible Banking, the Finance for Biodiversity Pledge, the UN Principles for Responsible Investment and the UN Principles for Sustainable Insurance and Climate Action100+. These voluntary disclosures may be included in the official reporting documents such as the annual accounts, but also in other formats, such as a company website. They usually consist of more generic references to certain aspects of the ESG performance of a company and can refer to environmental matters – eg, decarbonisation and circular economy issues, increased use of renewable energy, offsetting or waste reduction; social matters – eg, respect for human rights, diversity and non-discrimination, and equal treatment in the workplace; and governance issues – including anti-corruption.

As in other countries, Spanish supervisors are starting to highlight the crucial nature of ESG reporting obligations, and are increasingly focusing on the omission of material information or the inclusion of data that is not accurate.

The Tackling of “ESG Washing”

Although there is no specific legislation in Spain about the use of ESG claims by organisations, compliance with the various applicable laws needs to be considered, including those laws relating to consumer protection, advertising and competition. For example, the General Advertising Law and the Unfair Competition Law already forbid the use of any advertising which may be misleading to the public. In addition, more than a decade ago, a Code of Good Practices that set up a self-regulation regime for member companies using “green” claims was approved. However, this regime has rarely been enforced, and there is only information on less than five cases where companies had to change their advertising in relation to ESG claims.

In recent years, Spanish supervisors have been advocating, however, about the risk of “ESG washing”. In particular, the Bank of Spain has voiced concerns about the lack of homogeneous criteria and the subsequent risk of greenwashing of some assets. On its part, the CNMV included tackling greenwashing as a top priority in its most recent activity plan.

This paradigm shift, which is not unique to Spain, is supported by data, including the recent study on green claims carried out by the European Commission, which highlighted that more than 53% of examined environmental claims across the EU were found to be vague, misleading or unfounded, and 40% were unsubstantiated. Although the findings were not specific to Spain, it should be noted that the results were similar across the countries subject to the study. 

The supervisory conclusion is that the absence of common rules for companies making ESG claims may lead to ESG washing and create an uneven playing field in the EU’s market, to the disadvantage of genuinely sustainable companies. As a result, the tackling of greenwashing has become a priority for the European regulator.

In this context, the European Commission released a set of proposals to amend the EU’s existing rules regulating unfair commercial practices, such as untruthful advertising, proposing common criteria against greenwashing and misleading environmental claims. Its main objective is that claims should be communicated clearly and in a comparable way. Following on this, lawmakers at the European Parliament and European Council recently announced they have reached a provisional agreement on these new rules aimed at protecting consumers from greenwashing practices. Said initiatives will, among other things, ban unverified generic environmental claims and those based on emissions offsetting. They will also prohibit the use of sustainability labels that are not based on approved certification schemes.       

The Increasing Tension Between ESG-Labelled Products and Buyer Demands

In the past few years, there has been a substantial increase in different industries in the inclusion of so-called “ESG-labelled products” within product portfolios. While in some cases such labelling has been driven by the desire to pivot to more sustainable products, in other cases it has been done following legal requirements. There may also be cases where ESG labelling has been adopted mainly for marketing purposes. 

An example of ESG labelling driven by legal requirement can be found in the financial markets industry, where ESG issues are now both part of some categories of financial instruments and of the suitability tests to be carried out on clients.

The inclusion of the same has not, however, been neutral from a market perspective. Some commentators claim, for example, that the inclusion of ESG within suitability tests in the offering and contract-signing of retail financial services has substantially increased both the complexity for the sell-side (including banks, insurance companies and financial services advisers) and the pressure on the distribution networks. It has also increased the costs, requiring additional investments in creating, managing and selling the products, as well as in training and technology.

Focusing on instruments, ESG-labelled products are now part of the financial markets industry. In the credit markets segment, green loans and social loans (ie, facilities which have as a key characteristic a requirement that the proceeds be utilised for a specific and restricted environmental or social purpose) are becoming increasingly prominent, as are sustainability-linked loans (ie, facilities that focus on the sustainability characteristics of the borrower’s business). In turn, in the capital markets segment – driven by increased demand from investors (in some cases, to meet internal eligibility requirements or regulatory allocation buckets) – green bonds, social bonds and sustainability bonds have become relatively common, as well as ESG-labelled funds.

The effort has not, however, fully met buy-side demands, as, in the context of ESG interest (sometimes driven by the need to comply with ESG-related eligibility criteria), concerns are starting to appear on the part of buyers of ESG-labelled products in different industries. In this regard, and continuing in the financial markets industry, some players – including institutional investors – are starting to complain about the increasing complexity of making investment decisions (recent reallocations of ESG-labelled funds are an example of this), and about lower returns on ESG-labelled products.

Other Trends

The coming years may show the consolidation of certain trends which are starting to be detected in the Spanish market, including, from a regulatory perspective, an increasing shift from a soft-law approach to a hard-law approach; from a supervisory perspective, from a “comply or explain” approach to a hard approach; and from a company perspective, from the marketing approach to the addressing of what could be called the “risk dimension” of ESG. Said risk dimension can be broken down with respect to each of the four developments identified in this article in several particular risks.

Regarding ESG strategy, the risk dimension may include the potential litigation risk arising from claims brought by stakeholders, and the consequent liability that may arise not only for the company, but also for its directors and officers. In this regard, it should be noted that ESG-related litigation has been limited to date in Spain. However, it is possible that this may start to change in the coming years, as ESG-related litigation, usually focused on environmental aspects, is on the rise globally across different industries, with a strong focus on fashion, travel, energy and the financial markets.

The increasing demands on disclosure may lead, in addition to potential ligation risk, to potential reputational risk and sanction risk, following paths initiated in other countries.

As regards ESG washing, the potential sanction risk must be taken into account, as supervisors have expressed their desire to detect and eradicate greenwashing. This should be added to the appearance of the first sanctions at international level on the environmental side of ESG, currently focused on the fashion and financial markets sectors, and to the greenwashing crackdown carried out by foreign supervisors among asset managers and funds labelled as ESG.

Finally, regarding ESG labelling, the obvious potential commercial risk regarding the purchasers of the products cannot be discarded.


ESG practices are no longer just a “nice-to-have” benefit, but a responsibility to advance the transition to more sustainable business practices. It is desirable that said advance tackles not only certain specific weaknesses that have appeared in connection with the four developments referred to in this article, but also some wider global needs.

In the area of ESG strategy, it would be advisable to walk away from “tick-the-box” approaches, in order to effectively and comprehensively integrate ESG within organisations; to align the implementation of ESG strategies with demands from internal and external stakeholders; and – as in other matters – to align the interests of directors with those of their organisations.

Effective ESG disclosures may need to tackle the lack of agreed criteria and definitions, the difficulties in comparing the various verification methods, the lack of transparency of verification processes, the lack of independent supervision of ESG players (including entities that issue opinions and entities in charge of verification or certification), and the need to avoid potential cognitive dissonance.

In the area of ESG washing and labelling, conflicts of interest between players (not only from a legal perspective, but also from a commercial and data perspective) need to be detected. In addition, a clear approach to matters that are not ESG, but necessary from an economic or state perspective needs to be adopted, in addition to a clear approach to the interaction of ESG with other “hot topics” and trade-offs (eg, in the current context, the trade-off between energy security, the green transition and price stability). An open dialogue between all organisations involved in ESG also needs to be promoted.

Finally, attention should be paid to wider points, which include the need to take a holistic approach when addressing ESG – integrating the different elements rather than looking at them in isolation (eg, joining environmental and social issues) – the need to leverage technology and the need to reduce the cost and burden of implementation.

All these elements will be central to making ESG a real source of long-term value for both organisations and society as a whole.


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Law and Practice in Spain


Insight4 is an independent law firm based in Spain. Its integrated, informed and experienced team is composed of professionals with extensive experience in law, finance, the energy sector, technology and consultancy gained at leading global organisations. The team is particularly focused on the financial markets, including the capital markets, credit markets, insurance markets, and energy and commodities. Insight4 has recently created a division specifically focused on ESG, delivering a full range of solutions in this area, including legal, consultancy and technology. The firm’s current portfolio of clients includes blue chip companies, investment banks, credit institutions and energy companies.