October 22, 2024 • 51 mins
Lisa Chase, Founder of Lucky Fish Research & Communications and a leading expert in Environmental, Social, and Governance (ESG) practices, breaks down the fundamentals and significance of ESG criteria in today’s business landscape, focusing on the impact of stringent European Union regulations and the emerging global influence of the ‘Brussels Effect.’ She shares insights on how EU rules are shaping corporate accountability worldwide, including in U.S. states like California, and the growing importance of supply chain reporting and compliance.
Our conversation delves into the intersection of ESG policies with investment attraction, the critical need for U.S. companies to adapt to these standards, and Lisa’s own career journey—from music to law and consulting.
Tune in to hear Lisa’s perspective on global sustainability, the importance of proactive compliance, and the evolving landscape of corporate responsibility.
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Guest info:
Lisa Chase, Lucky Fish Research & Communications
Website: http://www.luckyfishcomm.com *sign-up for her newsletter at http://luckyfishcomm.com/RequestInformationPolicyAnalysis.html
Email: info@luckyfishcomm.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
しゅしゅ Rah // Same Best
(00:07):
これからバス ochers
And we're back on the show, The Advocate Next Door.
(00:36):
I'm Kewy Bellino.
Hello everybody.
I'm Margarita Arango and we're here today with a very, very special guest.
Please Kelby, introduce her.
I am here today with Lisa Chase.
And by the way, the music was great because we wanted to go salsa dancing right now and
you just came back from salsa dancing, which is great.
It feels like Cafe Citron.
It does, right?
(00:56):
Can you believe I've never been to Cafe Citron?
We've got to go.
Right off the block.
Maybe with a launch party.
Nice.
We'll have to do that.
It was a Harvard alumni joint Georgetown University alumni event.
That's a plug for the alumni group.
Yeah.
So that's actually where I met Lisa was at a Harvard alumni event.
(01:16):
I've taken Harvard classes here and there.
Oh, everybody can come.
But yes, everyone can come.
That's totally open to the public.
And it's a great event.
You get to meet people and I fully support anyone who says, hey, let's meet other professionals
in the city.
And that's when I met you and we were just griping about they didn't give us our drinks.
Yeah.
I paid for a drink.
(01:36):
We paid for those drinks and we didn't get those drinks.
But it was fascinating to meet you because I had for a very long time met attorneys,
seen speaking engagements where they talk about ESG, European policy, all this stuff.
And you were talking about it with such enthusiasm, such passion about your profession.
(01:59):
And then when I find out you're not actually an attorney in the US, yet you advocate, you
help companies, nonprofits, law firms to know a little bit more about this.
I don't really know if everyone's going to understand the basics of what this is, why
it's necessary.
So I guess first question, what is ESG?
(02:21):
What does it stand for?
Absolutely.
The first thing I will say is there are a lot of people who will do presentations, they'll
call them professionals, ESG.
It's an acronym.
People love acronyms.
It's environmental, social and governance.
Environmental, social and governance.
(02:42):
Aspect of a business.
The way I frame it is it's essentially about, and the reason I focus on European Union law,
I have a European Union law degree from King's College London, which is why I'm not a licensed
attorney in the US.
And I don't really understand US law.
(03:03):
My perspective on US law is all in the context of EU law from the perspective of the European
Union who is now regulating the role of business in the global society.
That's essentially the big picture of it.
It's part of the mission of the European Union policy makers is to fundamentally shift how
(03:28):
banks, financial institutions, large corporations, medium sized corporations and eventually small
companies function in a global society.
What is their responsibility to the environmental well-being, human well-being of the world?
Because they have a big impact, they make lots of money, et cetera.
(03:51):
So that's really the foundation of environmental social governance.
It sounds like a tall order though.
You're covering a lot of different areas.
It is.
It's pretty huge.
I started working on this after I did my master's program at Harvard.
The gentleman who was the co-chair of the social enterprise initiative at Harvard Business
(04:13):
School, Cash Rangan, was instrumental in teaching me about research and research strategies
and how you collect information.
We published a couple of articles, including one on what was then called corporate social
(04:35):
responsibility.
Same concept.
What's the responsibility of business?
So we published an article in Harvard Business Review.
At that point, it was all voluntary.
The EU had some rules about corporations disclosing their environmental and social impacts, all
voluntary.
(04:56):
Fast forward a decade or so, what really motivates me, what inspires me and inspired me to study
EU law is that now it's regulated.
So I focus on this set of European Union laws, their financial and corporate accountability
(05:20):
rules.
Lots of acronyms, sustainable finance, disclosure regulation, corporate social responsibility
directive, lots of acronyms.
But it's essentially about what the European Union did.
It's essentially about changing the way businesses operate and also shifting.
(05:41):
This thread runs through all of the laws, shifting from what they call short-term thinking,
short-termism, right?
Because most companies, banks, et cetera, they're thinking quarter to quarter.
And the European Union, the European Commission, which introduces the request to create a law
(06:02):
and then the European Parliament discusses and they make their law and then it eventually
gets codified into law.
They said, we're going to fundamentally change that.
You need to, banks, companies, et cetera, you need to think long-term.
What's the long-term impact of what you do, how you invest on the global environment,
(06:27):
transportation systems, labor, et cetera?
So I focus because I started on this at the business school and really looking at how
does the funding get connected to these big global initiatives, right?
(06:47):
To address climate change, environmental conservation.
I also worked at the design school.
So how do you fundamentally rethink the global built environment to be more environmentally
sustainable, et cetera?
So my particular focus is on the sustainable finance rules, how banks, financial institutions
(07:10):
operating in the EU, and this is super relevant.
They don't have to be headquartered in the EU.
They barely have to have an office.
But if they're just marketing one investment portfolio to one EU country, they have to
comply with all these reporting rules that say, so I'm Morgan Stanley and I've got a
(07:34):
bunch of whatever mutual funds, et cetera, that I will let people invest in.
In Germany and France, it can be just one country.
Then this means that for certain types of funds, every year in January, and it's coming
up everybody in January 2025, your next reporting period, you're supposed to, for the whole,
(07:59):
all of the assets in this portfolio, you're supposed to report on all of their environmental
impacts, water, energy consumption, CO2, greenhouse gases, et cetera.
But does it only affect companies doing business in the EU?
So this is very interesting.
(08:19):
There's a whole set of companies that directly have to follow the law.
Initially for banks and financial institutions, it starts with, oh, do I operate in the EU?
Do I have a portfolio that sits there or that's marketed?
And then for corporations, for the corporate sustainability reporting rules, it started
(08:43):
with large corporations, first started with large corporations headquartered in the EU
and then said, but this year, if you are simply a listed company, so a lot of US companies,
multinationals, they're listed on one of the European exchanges, right?
(09:04):
So this year it says, oh, well, if I'm, let's say, General Electric, it's the first one
that comes to mind, super big multinational, if they're listed on one of the European exchanges,
they have to follow exactly the same types of rules for corporations to report.
Do you ever find when you're talking to companies, corporations like this, that they might have
(09:28):
no idea that this applies to them?
Shockingly, yes.
Wow.
Shockingly.
And the other piece of it is that it's the whole supply chain that's affected.
It's catching some companies by surprise because, so I do this a monthly update that people
can subscribe to for what's coming with the sustainable finance rules, the corporate responsibility
(09:51):
rules, the reporting rules, especially since the next reporting deadline is coming up,
is one of the things I outline, which a lot of companies don't comprehend, is what the
supply chain really means and the EU calls it the supply chain, value chain.
So it could be a company, there is a particular automotive company, EU automotive company,
(10:16):
they have production in the US, and I think it's Detroit, they'll manufacture a lot of
their parts, the components for the vehicles.
All that gets shipped to Mexico, where they all get assembled, the vehicles get assembled.
Those vehicles are shipped to primarily Brazil, South America, and then back, this is not
(10:39):
efficient by the way, right?
How well all the energy we're wasting.
They ship them back to the US and sell them in the US, sell them in North America.
Those products never touch the European Union, but the profits accrue to an EU company.
(11:00):
They have to, what they're supposed to start doing is, because there's yet another directive
called the due diligence in supply chains directive that makes this all even more detailed.
So this automotive company is supposed to report on everything.
So it's the parts manufacturer, which I might be making this up, I think it's in Detroit.
(11:23):
By saying that they have to report, they actually would have to then know, have a record of
where their stuff goes.
They have to collect from the factories.
What's your water usage every year, every quarter?
What pollution are you producing?
What are you putting into the waste stream?
What are your calculated greenhouse gas emissions?
(11:45):
And that's going to be the factories in the US, the shipping systems that port these vehicles
here and there and everywhere.
And also the production facilities in Mexico and potentially down in South America where
they're shipping them and they're selling them.
It's super, super complex.
It does sound complex.
(12:06):
It's super complex.
And I think that the sort of pervasive short-term thinking of US companies is that a lot of
them, at least ones I talked to, people who work for some of these companies, they just
don't believe this will be enforced.
They say things like, I'm so big.
(12:27):
Right.
So that's actually my next question.
I'm so big.
Like why, if I am a big company and I'm used to getting slaps on the wrist at like a $20,000
fee or something, why should I care?
Why should I put in this much detail and I'll just pay the fine when I get it?
Right.
Excellent question.
At some point we talked about this.
(12:47):
I think you mentioned a story about...
Yeah.
Yeah, this is funny.
I was in Europe last summer, I was presenting on this topic at a bunch of conferences and
I was on a train to Frankfurt, Germany and I sat down next to a gentleman, I'm chatting
with him and he was American.
(13:08):
And so he was very funny.
He was very coy about where he worked.
People who work for...
It was Google, but they like to be very secretive.
Who do you work for?
I can't tell you and if I told you, I'd have to kill you.
You know, it's that kind of thing.
So we're chatting and I was talking about...
That sounds like a pickup line.
Yeah, I guess.
(13:28):
And so I was talking about why I was there and so, yeah, so what do you do?
And he tells me, so I advise a large technology firm on European Union regulation.
I said, oh really?
Wow.
Big coincidence.
(13:49):
We have a lot in common in what we do.
Who do you work for?
I'm really curious because recently a lot of big technology firms have been fined a
whole lot of money for violating the EU competition law.
They have very strict rules about competition, not violating other companies' ability to
(14:12):
sell across borders, et cetera.
And so I said, so which one do you work for?
And he said, Google.
And I laughed and I said, oh, that's fantastic because the European Court of Justice just
imposed an enormous fine on you people.
And I said to him, it was like $65 billion.
Right?
(14:33):
Right.
That's no slap on the wrist.
Right.
And this is it.
I think they're so accustomed.
And in fact, a woman who consults to a lot of, who I met a while ago, consults to a lot
of financial institutions said, well, you know, the banks and the big companies, they're
all waiting to see if it's really meaningful because in the US, their fine will be something
(14:58):
ridiculous.
Like, oh, $100,000.
Oh gosh, I'll never do it again.
Right?
Right.
Whatever the amount is.
And in the European Court of Justice, which is where any challenges to the law or a case
against a company like Google is heard, the fines can be, especially for the competition
(15:19):
law violations, can be up to 10% of global revenues.
Wow.
Non-profits.
Right?
Wow.
Right?
And so that's happened to Google.
I think it was Google, Microsoft, Amazon.
Apple's getting fined as well.
So I asked this gentleman, did you not tell the grand poobas at Google that this would
(15:45):
happen?
And he said, oh yes.
I told them.
And I said, well, what was their response?
American corporate arrogance.
He said, oh, are you kidding?
We're at Google.
They're not going to fine us because they want our business.
And you know what happened was, so they did their Google thing.
Oh, we don't think we want to pay the fine.
(16:07):
And the European Court of Justice said, well, that's fine.
We can revoke your license to operate in the European Union.
And they said, oh, golly, did we say won't pay the fine?
No, the wire transfers on its way.
Right?
Because they're very serious about it.
The check is in the mail.
Yeah, they're very serious.
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The other thing is, in the US, companies can play this whole court shopping game.
Where's the case being heard?
Who can we influence?
Whatever.
But in the European Union, there's a national court.
Somebody files a case.
Google's violating the competition rules here in France and the Netherlands, et cetera.
(16:51):
It works its way up.
When it gets to the European Court of Justice, there's one court.
And then they have what they call an appeals court.
But as I understand it, it's basically the same court.
So in the case of, I think it was Google.
It might have been Microsoft.
So they got their fine imposed.
(17:11):
They appealed it.
And the appeals court said, this was just comical.
They said, you know, we have decided there is some rationale to your appeal.
And therefore, we are reducing your fine by, it was like, by $200,000.
So they're super serious about it.
(17:33):
And so there are going to be...
Which they probably would have spent in just legal fees.
Exactly.
Exactly.
I'm thinking, so instead of maybe instead of paying this guy I sat on the train next
to who you're not listening to anyway, just, you know, start following the rules and don't
challenge them.
I mean, that's just silly.
It's costing you a lot of money.
(17:54):
So that's the example I like to cite for people because there's already large BNP, the big
French and financial institution.
There's a pending case against them, I believe, for violating greenwashing laws.
So this is part of the thing.
So this environmental, social and governance moniker gets sort of tossed around in the
(18:20):
US, just like an acronym.
I mean, you could throw a penny out the window and you'd probably hit like 100 ESG experts,
right?
Right?
I know the acronym.
I can spell it out, but it's actually huge.
Yeah.
Because really, and this is why I, even when I was working for Cash Rangan, doing research
(18:46):
and publishing and stuff, it was the role of business in society.
So it encompasses US firms, firms around the world really needs to understanding it's not
just about I issue my, you know, used to be CSR report, now they call it an ESG report,
(19:06):
whatever.
It's the same stuff, right?
My company's green, my company's not green.
But in the European Union and certain US states are now following EU law, like the state of
California, in the EU, there's a whole set of anti-greenwashing laws, rules about if
(19:26):
I'm a financial institution and I want to market my green fund, because this is popular,
right?
Oh, look, invest your money in your renewable energy fund and we're going to call it a save
the planet and solve climate change fund, because it's really sexy, right?
(19:47):
But in the European Union, they say, if you use these terms to describe your fund and
you don't have the data to support it, that says, okay, this is the greenhouse gas emissions
that my wind farms produce or have reduced, et cetera.
If you have no data, you're going to get a fine for greenwashing and for misusing terms
(20:13):
in your financial investment vehicle description.
So in the US, interestingly, the state of California announced a climate disclosure
rule which directly references the EU laws.
It's directly borrowed from it.
(20:33):
It's now being challenged by, I don't know, Chamber of Commerce or whoever likes to sue
states for having the audacity to impose environmental regulation.
California usually prevails though, because they're the biggest economy.
It's surprising that your marketing team could potentially get you in trouble with the EU.
Fantastic, isn't it?
(20:54):
For me, this is my hope for the progression of US corporate behavior, financial institution
behavior, because what has happened for a long time, or at least the last decade in
the US, is essentially in the absence of the federal government taking leadership on a
(21:20):
whole host of issues like maybe labor law, environmental policy, real meaningful leadership.
Individual states and cities have looked to the European Union.
There's an academic at Columbia University, Anu Bradford, I think that's her name, and
(21:40):
she coined this term called the Brussels Effect a while ago, which essentially is if a government,
like say the US government, abdicates responsibility for certain issue areas, then institutions,
state governments, et cetera, will look to leadership to essentially the highest common
(22:02):
denominator, which in the world today is the European Union for social policy, environmental
policy, labor policy.
The state of California has for quite some time directly consulted with the European
Commission to advise them on environmental policy and other issues.
And the state of New York has, they were debating a similar climate disclosure law, it hasn't
(22:29):
been approved, but that's what's happening.
So if companies think or banks think, oh, fine, I don't operate in the EU, I don't have
a supply chain, it's going to affect them anyway.
Because once the state of California establishes, and their climate disclosure rule is essentially
(22:49):
just like, it's the same concept as the EU, it says if you do a certain amount of business
in the state of California, if you're a company of a certain size, you must report annually
on your environmental impacts, your climate, scope one, two, and three, which is various
levels of greenhouse gas emissions.
(23:13):
Once they prevail, once this all works its way through the courts, and presumably it'll
end up in the Supreme Court, but the government of the state of California has been fairly
clear, right?
So if you try to negate our laws, well, we're the state of California, so we may just do
(23:35):
it anyway, right?
Other states are going to follow that.
I mean, that's what happened with tailpipe emissions, vehicle tailpipe emissions, all
these things.
So it's essentially a domino effect.
It started across the Atlantic, but the domino is going to continue.
Even in Southeast Asia, there's a number of governments, Indonesia, Bangladesh, and Vietnam,
(24:00):
I think, and some others are poised to do the same thing.
They are adopting the European Union corporate and financial disclosure rules to attract
EU business, because they know, let's say I'm that auto manufacturer that's based in
(24:20):
a certain EU country, and maybe I'm looking for production facilities, and I don't want
to go to China anymore because the economy is unstable, and I know I can't be very confident
if I have a factory in China that the data I'm going to get from them, the figures on
greenhouse gas emissions and water, et cetera.
(24:41):
That's why other governments have said, hey, we want to attract business, and what we're
going to do is we're going to align with you, European Union, European Commission, so that
your companies will want to do business with our factories, with our businesses, because
(25:03):
they'll know when they have to do their environmental and social reporting every year, they will
have reliable, credible data, and they therefore will not get fined.
So a lot of companies out there, like you just said that there's a lot of people that
probably don't know or have a ton of experience in this area, but you do.
(25:23):
I'm imagining there's a lot of brand new lawyers who are now going to be tasked to understand
this, advisor companies, but they don't know.
So what you do is you consult, you help these people.
It sounds like you would be very busy.
Yeah.
So this was sort of surprising to me because I moved to the DC area about six months ago
(25:48):
to be in the milieu of, oh my gosh, policymaking and the international community that's so
vibrant here.
And I'm a little naive, but I thought, oh, the big law firms will all be experts on this
already.
Right?
Because they're big law firms.
Actually, turning to my co-host here, is this something that they would have taught in law
(26:12):
school?
No, actually one of my questions was going to be if I were a law student and I would
like to practice in this field, what should I do?
So when I was looking for European Union law programs, I wanted to focus solely on EU law.
I looked in the US and there were only two universities, University of Southern California
(26:33):
and maybe Harvard that offered European Union law programs.
That's shocking.
Right?
The others have-
Because we do business with the EU all the time.
Right, right.
That's crazy.
Exactly.
So law programs have, I actually have talked to attorneys who would say, well, we had a
(26:57):
class on what is the European Union?
I mean, I'm surprised that law schools would be this narrowly focused, but maybe they figure
I'm educating people in US law.
If you want to learn about EU law, I don't know, go read a book.
So my advice would be if you want to study EU law, go abroad.
(27:24):
I mean, King's College London has a fantastic program.
Heidelberg University in Germany has a fantastic program.
Those are the two I was looking at.
And they both, I think Heidelberg also does part-time residencies.
You go there, study, come back to your reading because it's a ton of reading.
I'm sure that's a great avenue, but you just said that it's possible that a company in
(27:50):
the US could be affected by this.
And there's no way that they would be prepared.
In which case that means that they need to consult, educate themselves right away before
January.
Yes, they could use someone like that to explain to them.
That would be better.
Right.
Because I do know law firms who, they're big law firms and they don't have this competency
(28:11):
yet, maybe because it's new-ish.
The sustainable finance rules are about two years old.
But the thing about all of the EU laws is written into the law, and this is what I love
about EU law, is the requirement that it be updated in two to three years.
(28:33):
So right now, the European Parliament is going to be debating on the updates to the sustainable
finance disclosure regulations.
So it's going to be new again coming up in 2025.
And this is what I like so much about EU law, it's constantly evolving.
(28:55):
That's a requirement of all areas of law.
And so that's why I do this monthly update of what's happening, because it is constantly
changing.
And maybe US law firms who focus primarily on US law are not accustomed to that.
(29:16):
The other thing I've noticed, I go to events where attorneys from big name law firms are
talking about sanctions, sanctions, sanctions.
It's a big theme right now, of course.
And what I've noticed is, if you are indeed going to be useful to the companies, to the
(29:36):
companies, the investors who you advise, you need to understand how broad this is.
So I've been to events where they're talking about sanctions and they are very narrow.
They talk about how you trace, how you try to prevent Russian companies getting around
sanctions, right?
Following where they try to hide money, where they try to root their products, etc.
(30:00):
And so all they think about is, okay, what are the EU sanctions rules?
And they don't follow the web.
They don't follow the trail to understand, okay, it's not just about, did you do business
with this sanctioned Russian oligarch?
But where is your whole supply chain?
(30:24):
And what is your supply chain doing?
What are all the components of your portfolio doing?
What's the entire path of those supply chains?
They're not just, okay, I'm this multinational company.
This year, did I issue a purchase order to the oligarch?
No, I'll check a box and say no.
(30:46):
And then I'm clear.
But you're not clear.
Because another thing that the European Union has started regulating, regulate stuff, which
I love.
If you love the law, the European Union is like Nirvana.
So they've also started regulating all those ESG advisors that issue ratings for funds
(31:14):
for products.
Because they'll do this.
You could throw a penny out the window and there's a bunch of them.
So they'll say, oh, I'm an ESG ratings consultant or whatever.
And they'll actually do this.
Kind of talk to financial institutions, so I'm helping in the EU, who will tell me, oh
(31:34):
yeah, we have an ESG advisor who will come in and give our fund and whatever it is, ESG
gold rating, platinum rating, whatever silliness they make up.
And so-
It's kind of like for law firms, they give out all these awards, top thing.
That's basically, that's how I picture it.
You're the top 20 on this block.
(31:56):
Exactly.
And the European Commission, because the European Commission and the European Union governance
system is, it's enormous.
And they are watching.
They are always watching.
And so they said, okay-
Beware.
Exactly.
That sounds terrifying.
They said, but if your focus is the law, it's fantastic.
(32:19):
But they said, okay, we've had enough of the, ooh, you have a platinum rating for your portfolio,
so sure, you're in compliance.
They said, no, no, no, no, no, no.
In fact, they now require ESG rating advisor firms to be licensed and credentialed.
(32:39):
And now they're watching them.
I try to explain this to companies here.
I try to talk to law firms about it, and they don't always believe it.
You really need to move beyond the very popular American glossing, right?
Because a lot of this is glossing for US companies.
(33:01):
It's voluntary.
A lot of it's just marketing.
Hey, look, I mean, there are companies in this country who blow the tops off of mountains
to get coal, and they call themselves a sustainable company.
And so they're so accustomed to being able to do this in the US that they simply can't
(33:28):
comprehend that there might be another set of rules they have to follow.
Right?
So we've talked about sanctions, we've talked about fees, we talk about the negatives of
not complying with.
But are there any benefits of complying with ESG for companies?
Maybe to sell this in a positive way will be easier whenever you talk to investors or
(33:50):
to companies or to law firms.
If you comply, you're going to have this benefit.
Right.
So I'm glad you asked that question.
So especially for companies of all sizes, because eventually the accountability rules
will apply to certain small and medium sized enterprises, which is the biggest piece of
(34:11):
the economy in the EU.
The biggest reason for companies to comply is because it attracts investment.
So this is one of the areas I look at how this affects companies in the EU enlargement
zone, all those countries that are candidates to join the European Union, including Ukraine.
(34:36):
Ukraine is a fascinating example right now because they are a candidate for EU membership.
They're simultaneously trying to get the invaders out of their country and complying with EU
law to become a member.
(34:57):
Because the way the process works in the EU is, so you negotiate with the European Commission,
they say yes, you can be a candidate.
But in order to get a vote to be a member, you have to demonstrate that you are following
already EU law.
(35:17):
So that means for big companies and the banks and so forth in Ukraine, they have to start
implementing accounting rules and financials, et cetera, but also all of these sustainable
finance rules.
So it's already, I mean, I read the reports because I'm geeky and I like to read regulations
(35:41):
and stuff.
So I read the annual-
She actually does.
I know!
She loves it.
It's like a bedtime reading.
It's a great way to really spark a conversation at a networking event.
So I read EU regulations.
The annual report from the Commission on Ukraine's status, because they report on every country
in the union, and Ukraine actually got better marks for compliance with EU law on certain
(36:09):
areas, especially the ones that I look at, the sustainable finance rules and the corporate
accountability rules, than some countries who have been candidates for several years.
It's super fascinating because, and this is, I'm sure, part of the reason that Ukrainian
companies are working with the government to comply, they will attract investment from
(36:34):
private investment firms in the EU.
The central banks have signaled that they will also be following the same sustainable
finance rules when they make investments outside of the EU, including places like Ukraine.
(36:55):
So even for companies in the US, companies in the enlargement zone, if they start creating
systems to collect all this data, collect all the environmental data, calculate their
greenhouse gas emissions, et cetera, they're going to have a far better chance of getting
(37:16):
investment.
Because there's a ton of EU investment in the US, for example, right?
Many invest in factories, there's a ton of investment in Northern Virginia.
And so if those suppliers, those small and medium-sized enterprises in the US, want to
(37:36):
get EU business, or they want to get investment from a financial institution in the EU, that's
pretty smart, right?
Get the money.
Oops, don't get the money.
I spoke to a gentleman at that same...
We all want to get the money.
I spoke to a gentleman at that same networking event where we met, who does impact investing,
(38:00):
which I also worked on at Harvard.
And he mentioned that he had this fund, and he was trying to persuade an EU entity to
put money into his fund.
And the first question they asked was, can you comply with the sustainable finance rules?
(38:21):
Will you be able to collect all this information?
Because if we invest in you, you're one of our investments, we have to report it every
year.
He said, what the heck is that?
And so they didn't invest.
Not the best response.
It was probably more tactful than that.
As a little girl, is this the kind of thing that you're like, this is what I want to spend
(38:45):
my future on?
Was this around?
I don't even know how you get into this area.
I'm like the wandering path.
My undergraduate degree is in music.
That's so cool.
Really?
Damn.
And so this is...
Where was your undergrad?
Like what city?
University of Oregon.
Go Ducks.
(39:06):
I have to do that.
Best football mascot ever.
Looks just like Donald Duck, which means they had like a whole copyright infringement lawsuit
from Disney, the whole thing.
Were you focusing on like the classics or jazz or something?
Yeah, it was mostly a classical program.
I was doing voice and piano and literature.
(39:26):
That was my minor.
I heard all the jokes about liberal arts students.
A discipline like music is actually one of the ideal setups for something like studying
the law or international relations, which is what I studied at Harvard, because it has
a particular structure to it.
(39:48):
And if you're analyzing music, which is part of what you have to do if you're studying
for music tricky.
So let's say you're listening to a piece of music, like the one in the intro, right?
Sometimes it would be an orchestral piece or our intro music, the cool Latin intro.
We all want to go dancing now, right?
(40:10):
So when you're doing that, you have to, on the one hand, listen to the whole.
So you have to do things like, then we were transcribing by hand.
You had to write out the notation.
So what key is it in?
But then you had to identify every element.
So if it was an orchestral piece of music, you'd have to notate like the string sections,
(40:36):
first violin, second violin, the percussion, et cetera.
So what it teaches you is how to recognize connections.
That's how I put it.
So to be able to understand concepts, like the role of business in global society, and
then understand all the pieces that make it up and recognize connections.
(41:01):
One of the areas that's sort of my specialty areas, because I also worked on urban design
research and writing at the design school at Harvard, is how the intersection of environmental
law, energy efficiency rules for buildings, and for urban development intersect with the
(41:26):
sustainable finance rules, the corporate responsibility rules.
So for example, an investment firm that is investing in real estate, and they want to
invest in buildings that are improving their environmental performance, that intersection
is super interesting, because real estate developers want to get money, so they have
(41:46):
to demonstrate their environmental.
Going back to what you're saying about music, I find that a great way to explain it, because
maybe I haven't thought about it until now, but I used to play the third trombone, fourth
trombone at some point, and it didn't really make sense.
I could never play the orchestra by myself, and I wasn't playing the melody, I was playing
(42:08):
a back note, but all of those pieces are necessary to create what you are hearing.
Even in music today, Western music, even a pop song, you won't hear the little triangle
or the little special effect here and there, and you're wondering why is that even necessary,
but when you take it out, you realize, oh, something's really off about this, and that's
(42:29):
a great jumping point to what you do today.
I relate to that because I see that important, especially at law firms, I understand why
a paralegal is very important, a legal secretary, going through certain research, knowing equipment,
technology, because why is that all important?
When you're doing something like the law or research or presentations, knowing other things
(42:53):
is very useful, but you don't realize that you learn so much of it because of music,
learning musical composition, understanding harmony, and also understanding working together,
training 50 people to be in an orchestra, and all working at the same pace with one
director is very difficult, and you learn so much.
(43:16):
Then after that, but then why did you decide to give up music and then decide on a different
route?
I started out teaching music, and I was teaching music in a private Catholic girls' high school,
which was crazy because they thought I was one of the students.
I have no religious foundation, so it was all a mystery to me.
(43:40):
I loved teaching music.
I was really good at teaching music.
I was not good at classroom management and dance.
Somebody told me early on, the worst mistake you can make is if you laugh at their jokes
and, I mean, they would make jokes about the nuns and they were funny.
But I started my consulting business 15 years ago, I think, and I had been doing some work.
(44:04):
I worked in high tech for a while too because there are striking similarities between-
Consulting in music?
No, I wrote software for a while because it was fun.
It was like, it was when people had-
There were so many musicians in software.
You would not believe the parallels between writing software and Western music because
(44:30):
they're both structured.
I believe you.
It's very mathematical.
It's very structural.
Oh, it's not really, I can barely count to 32, right, if it's a complex time signature.
But it's a lot of like, if then type of work.
Yeah, yeah, and there's a structure you have to follow.
You can be sort of creative within that.
And where I worked, I won't name them because they were acquired by an enormous corporation
(44:52):
that I just don't care for.
But the software company I started with had so many musicians because of the analytic
thinking that involved.
And also for musicians, it was the closest thing to a sort of corporate job they could
tolerate, right?
(45:13):
It was very sort of fluid and yeah, kind of creative.
So when I started my consulting business, I wanted to focus back on writing and research
because I love research and learning.
And so I decided to do a master's program.
(45:34):
And I liked the idea of international relations because I wanted to understand how the global
systems work, right?
The economic systems, the political systems, the influence of the cultural systems.
And again, I don't think I realized until I was studying international relations, the
(45:56):
influence of my musical education.
What you understand is essentially all the patterns.
It's the same patterns in the Asian financial crisis, various US financial crises, the Dutch
bulb crisis, they all follow the same patterns, right?
And the way politics in any country influences the economy, cultural influences, drive political
(46:25):
change, drive economic change, et cetera, they're all patterns.
And they all connect to each other.
And that's really what to me international relations was about.
And like you said, understanding that we're all part of this community, if it's business,
if it's culture, if it's just basic communication.
(46:47):
And I was really excited about discovering this whole concept of the role of business
in a global society.
But it's funny, I considered doing consulting work after my research contract ended.
And I thought at the time, I don't know if I ever want to go back to corporate social
(47:12):
responsibility because it's all voluntary.
My gosh, I think it's meaningless.
So I was doing consulting on advising developers on making their buildings more resource efficient,
energy efficient to qualify for tax credits, that kind of thing.
And then when I discovered that the issue area I was so interested in at Harvard was
(47:36):
now being regulated, I was over the moon.
A lot of law students, especially in the US, are always given this task to decide what
they want to do for the rest of their lives and then pick an area of law.
Yeah, this one seems to be one that needs a lot of people to be experts in.
It does, and especially in the US right now, because businesses are really ready for, probably
(48:02):
the big multinationals are, but even the ones like Google who have lots of legal advice
don't necessarily listen.
So they're going to need a lot of expertise, absolutely.
So the other weird thing, if somebody's thinking, I want to study EU law, but I would like to
be licensed in the US to be a practicing attorney.
(48:25):
So there's this weird exception.
In the state of New York and California, you can have a foreign law degree and sit for
the California bar exam or the New York bar exam.
I mean, presumably that means you would then have to learn about US law so you could pass
the bar exam.
Pass the bar.
Right, right, right.
(48:46):
So you could be a licensed attorney or you could be licensed in the country where you
get your law degree.
But that's the thing.
I mean, there's so many paths.
There's many areas of law that have popped up in the last five, 10 years.
There's a greater need because a lot of the law schools in the US don't teach it.
And as a result, anyone who is thinking about this or this sounds like a sexy field, you
(49:12):
may be successful in it because you're going to be needed.
That's a good, that's a very good point.
Very good point.
Yeah.
And it is, I mean, again, I don't practice US law, but it seems a lot sexier than like
tax law or something.
I don't know.
I mean, I don't know.
Maybe not.
I don't practice tax law.
We'll have to get an equally passionate tax law expert.
(49:35):
Yes, you should because I will learn so much and I will say, oh my God, that's fascinating.
Yeah.
There's so many people who've been so passionate about their profession, their industry.
And I've loved, that's one of the reasons I've loved this podcast is to find those people.
So I'm really, really, I'm glad that you came in to talk to us.
Thank you very much for coming on the show and educating us.
(49:59):
Sure.
Definitely.
On these topics and the importance of it.
And hopefully anyone who is listening and thinking about a career in law can consider
this, but also anyone who is helping to run a company and you're thinking, oh my gosh,
I should be thinking about these issues.
I will post on the podcast your information if they need to reach out to you.
(50:21):
Cool.
Yeah.
You can find me on LinkedIn.
Wonderful.
It's just Luckyfish Research and Communications.
You can read all my fascinating posts about you law.
And subscribe to your newsletter.
And subscribe to my newsletter if you like.
Thank you very much for coming on the show.
Thank you.
しゅしゅ Rah // Same Best
(00:07):
これからバス ochers
And we're back on the show, The Advocate Next Door.
(00:36):
I'm Kewy Bellino.
Hello everybody.
I'm Margarita Arango and we're here today with a very, very special guest.
Please Kelby, introduce her.
I am here today with Lisa Chase.
And by the way, the music was great because we wanted to go salsa dancing right now and
you just came back from salsa dancing, which is great.
It feels like Cafe Citron.
It does, right?
(00:56):
Can you believe I've never been to Cafe Citron?
We've got to go.
Right off the block.
Maybe with a launch party.
Nice.
We'll have to do that.
It was a Harvard alumni joint Georgetown University alumni event.
That's a plug for the alumni group.
Yeah.
So that's actually where I met Lisa was at a Harvard alumni event.
(01:16):
I've taken Harvard classes here and there.
Oh, everybody can come.
But yes, everyone can come.
That's totally open to the public.
And it's a great event.
You get to meet people and I fully support anyone who says, hey, let's meet other professionals
in the city.
And that's when I met you and we were just griping about they didn't give us our drinks.
Yeah.
I paid for a drink.
(01:36):
We paid for those drinks and we didn't get those drinks.
But it was fascinating to meet you because I had for a very long time met attorneys,
seen speaking engagements where they talk about ESG, European policy, all this stuff.
And you were talking about it with such enthusiasm, such passion about your profession.
(01:59):
And then when I find out you're not actually an attorney in the US, yet you advocate, you
help companies, nonprofits, law firms to know a little bit more about this.
I don't really know if everyone's going to understand the basics of what this is, why
it's necessary.
So I guess first question, what is ESG?
(02:21):
What does it stand for?
Absolutely.
The first thing I will say is there are a lot of people who will do presentations, they'll
call them professionals, ESG.
It's an acronym.
People love acronyms.
It's environmental, social and governance.
Environmental, social and governance.
(02:42):
Aspect of a business.
The way I frame it is it's essentially about, and the reason I focus on European Union law,
I have a European Union law degree from King's College London, which is why I'm not a licensed
attorney in the US.
And I don't really understand US law.
(03:03):
My perspective on US law is all in the context of EU law from the perspective of the European
Union who is now regulating the role of business in the global society.
That's essentially the big picture of it.
It's part of the mission of the European Union policy makers is to fundamentally shift how
(03:28):
banks, financial institutions, large corporations, medium sized corporations and eventually small
companies function in a global society.
What is their responsibility to the environmental well-being, human well-being of the world?
Because they have a big impact, they make lots of money, et cetera.
(03:51):
So that's really the foundation of environmental social governance.
It sounds like a tall order though.
You're covering a lot of different areas.
It is.
It's pretty huge.
I started working on this after I did my master's program at Harvard.
The gentleman who was the co-chair of the social enterprise initiative at Harvard Business
(04:13):
School, Cash Rangan, was instrumental in teaching me about research and research strategies
and how you collect information.
We published a couple of articles, including one on what was then called corporate social
(04:35):
responsibility.
Same concept.
What's the responsibility of business?
So we published an article in Harvard Business Review.
At that point, it was all voluntary.
The EU had some rules about corporations disclosing their environmental and social impacts, all
voluntary.
(04:56):
Fast forward a decade or so, what really motivates me, what inspires me and inspired me to study
EU law is that now it's regulated.
So I focus on this set of European Union laws, their financial and corporate accountability
(05:20):
rules.
Lots of acronyms, sustainable finance, disclosure regulation, corporate social responsibility
directive, lots of acronyms.
But it's essentially about what the European Union did.
It's essentially about changing the way businesses operate and also shifting.
(05:41):
This thread runs through all of the laws, shifting from what they call short-term thinking,
short-termism, right?
Because most companies, banks, et cetera, they're thinking quarter to quarter.
And the European Union, the European Commission, which introduces the request to create a law
(06:02):
and then the European Parliament discusses and they make their law and then it eventually
gets codified into law.
They said, we're going to fundamentally change that.
You need to, banks, companies, et cetera, you need to think long-term.
What's the long-term impact of what you do, how you invest on the global environment,
(06:27):
transportation systems, labor, et cetera?
So I focus because I started on this at the business school and really looking at how
does the funding get connected to these big global initiatives, right?
(06:47):
To address climate change, environmental conservation.
I also worked at the design school.
So how do you fundamentally rethink the global built environment to be more environmentally
sustainable, et cetera?
So my particular focus is on the sustainable finance rules, how banks, financial institutions
(07:10):
operating in the EU, and this is super relevant.
They don't have to be headquartered in the EU.
They barely have to have an office.
But if they're just marketing one investment portfolio to one EU country, they have to
comply with all these reporting rules that say, so I'm Morgan Stanley and I've got a
(07:34):
bunch of whatever mutual funds, et cetera, that I will let people invest in.
In Germany and France, it can be just one country.
Then this means that for certain types of funds, every year in January, and it's coming
up everybody in January 2025, your next reporting period, you're supposed to, for the whole,
(07:59):
all of the assets in this portfolio, you're supposed to report on all of their environmental
impacts, water, energy consumption, CO2, greenhouse gases, et cetera.
But does it only affect companies doing business in the EU?
So this is very interesting.
(08:19):
There's a whole set of companies that directly have to follow the law.
Initially for banks and financial institutions, it starts with, oh, do I operate in the EU?
Do I have a portfolio that sits there or that's marketed?
And then for corporations, for the corporate sustainability reporting rules, it started
(08:43):
with large corporations, first started with large corporations headquartered in the EU
and then said, but this year, if you are simply a listed company, so a lot of US companies,
multinationals, they're listed on one of the European exchanges, right?
(09:04):
So this year it says, oh, well, if I'm, let's say, General Electric, it's the first one
that comes to mind, super big multinational, if they're listed on one of the European exchanges,
they have to follow exactly the same types of rules for corporations to report.
Do you ever find when you're talking to companies, corporations like this, that they might have
(09:28):
no idea that this applies to them?
Shockingly, yes.
Wow.
Shockingly.
And the other piece of it is that it's the whole supply chain that's affected.
It's catching some companies by surprise because, so I do this a monthly update that people
can subscribe to for what's coming with the sustainable finance rules, the corporate responsibility
(09:51):
rules, the reporting rules, especially since the next reporting deadline is coming up,
is one of the things I outline, which a lot of companies don't comprehend, is what the
supply chain really means and the EU calls it the supply chain, value chain.
So it could be a company, there is a particular automotive company, EU automotive company,
(10:16):
they have production in the US, and I think it's Detroit, they'll manufacture a lot of
their parts, the components for the vehicles.
All that gets shipped to Mexico, where they all get assembled, the vehicles get assembled.
Those vehicles are shipped to primarily Brazil, South America, and then back, this is not
(10:39):
efficient by the way, right?
How well all the energy we're wasting.
They ship them back to the US and sell them in the US, sell them in North America.
Those products never touch the European Union, but the profits accrue to an EU company.
(11:00):
They have to, what they're supposed to start doing is, because there's yet another directive
called the due diligence in supply chains directive that makes this all even more detailed.
So this automotive company is supposed to report on everything.
So it's the parts manufacturer, which I might be making this up, I think it's in Detroit.
(11:23):
By saying that they have to report, they actually would have to then know, have a record of
where their stuff goes.
They have to collect from the factories.
What's your water usage every year, every quarter?
What pollution are you producing?
What are you putting into the waste stream?
What are your calculated greenhouse gas emissions?
(11:45):
And that's going to be the factories in the US, the shipping systems that port these vehicles
here and there and everywhere.
And also the production facilities in Mexico and potentially down in South America where
they're shipping them and they're selling them.
It's super, super complex.
It does sound complex.
(12:06):
It's super complex.
And I think that the sort of pervasive short-term thinking of US companies is that a lot of
them, at least ones I talked to, people who work for some of these companies, they just
don't believe this will be enforced.
They say things like, I'm so big.
(12:27):
Right.
So that's actually my next question.
I'm so big.
Like why, if I am a big company and I'm used to getting slaps on the wrist at like a $20,000
fee or something, why should I care?
Why should I put in this much detail and I'll just pay the fine when I get it?
Right.
Excellent question.
At some point we talked about this.
(12:47):
I think you mentioned a story about...
Yeah.
Yeah, this is funny.
I was in Europe last summer, I was presenting on this topic at a bunch of conferences and
I was on a train to Frankfurt, Germany and I sat down next to a gentleman, I'm chatting
with him and he was American.
(13:08):
And so he was very funny.
He was very coy about where he worked.
People who work for...
It was Google, but they like to be very secretive.
Who do you work for?
I can't tell you and if I told you, I'd have to kill you.
You know, it's that kind of thing.
So we're chatting and I was talking about...
That sounds like a pickup line.
Yeah, I guess.
(13:28):
And so I was talking about why I was there and so, yeah, so what do you do?
And he tells me, so I advise a large technology firm on European Union regulation.
I said, oh really?
Wow.
Big coincidence.
(13:49):
We have a lot in common in what we do.
Who do you work for?
I'm really curious because recently a lot of big technology firms have been fined a
whole lot of money for violating the EU competition law.
They have very strict rules about competition, not violating other companies' ability to
(14:12):
sell across borders, et cetera.
And so I said, so which one do you work for?
And he said, Google.
And I laughed and I said, oh, that's fantastic because the European Court of Justice just
imposed an enormous fine on you people.
And I said to him, it was like $65 billion.
Right?
(14:33):
Right.
That's no slap on the wrist.
Right.
And this is it.
I think they're so accustomed.
And in fact, a woman who consults to a lot of, who I met a while ago, consults to a lot
of financial institutions said, well, you know, the banks and the big companies, they're
all waiting to see if it's really meaningful because in the US, their fine will be something
(14:58):
ridiculous.
Like, oh, $100,000.
Oh gosh, I'll never do it again.
Right?
Right.
Whatever the amount is.
And in the European Court of Justice, which is where any challenges to the law or a case
against a company like Google is heard, the fines can be, especially for the competition
(15:19):
law violations, can be up to 10% of global revenues.
Wow.
Non-profits.
Right?
Wow.
Right?
And so that's happened to Google.
I think it was Google, Microsoft, Amazon.
Apple's getting fined as well.
So I asked this gentleman, did you not tell the grand poobas at Google that this would
(15:45):
happen?
And he said, oh yes.
I told them.
And I said, well, what was their response?
American corporate arrogance.
He said, oh, are you kidding?
We're at Google.
They're not going to fine us because they want our business.
And you know what happened was, so they did their Google thing.
Oh, we don't think we want to pay the fine.
(16:07):
And the European Court of Justice said, well, that's fine.
We can revoke your license to operate in the European Union.
And they said, oh, golly, did we say won't pay the fine?
No, the wire transfers on its way.
Right?
Because they're very serious about it.
The check is in the mail.
Yeah, they're very serious.
(16:28):
The other thing is, in the US, companies can play this whole court shopping game.
Where's the case being heard?
Who can we influence?
Whatever.
But in the European Union, there's a national court.
Somebody files a case.
Google's violating the competition rules here in France and the Netherlands, et cetera.
(16:51):
It works its way up.
When it gets to the European Court of Justice, there's one court.
And then they have what they call an appeals court.
But as I understand it, it's basically the same court.
So in the case of, I think it was Google.
It might have been Microsoft.
So they got their fine imposed.
(17:11):
They appealed it.
And the appeals court said, this was just comical.
They said, you know, we have decided there is some rationale to your appeal.
And therefore, we are reducing your fine by, it was like, by $200,000.
So they're super serious about it.
(17:33):
And so there are going to be...
Which they probably would have spent in just legal fees.
Exactly.
Exactly.
I'm thinking, so instead of maybe instead of paying this guy I sat on the train next
to who you're not listening to anyway, just, you know, start following the rules and don't
challenge them.
I mean, that's just silly.
It's costing you a lot of money.
(17:54):
So that's the example I like to cite for people because there's already large BNP, the big
French and financial institution.
There's a pending case against them, I believe, for violating greenwashing laws.
So this is part of the thing.
So this environmental, social and governance moniker gets sort of tossed around in the
(18:20):
US, just like an acronym.
I mean, you could throw a penny out the window and you'd probably hit like 100 ESG experts,
right?
Right?
I know the acronym.
I can spell it out, but it's actually huge.
Yeah.
Because really, and this is why I, even when I was working for Cash Rangan, doing research
(18:46):
and publishing and stuff, it was the role of business in society.
So it encompasses US firms, firms around the world really needs to understanding it's not
just about I issue my, you know, used to be CSR report, now they call it an ESG report,
(19:06):
whatever.
It's the same stuff, right?
My company's green, my company's not green.
But in the European Union and certain US states are now following EU law, like the state of
California, in the EU, there's a whole set of anti-greenwashing laws, rules about if
(19:26):
I'm a financial institution and I want to market my green fund, because this is popular,
right?
Oh, look, invest your money in your renewable energy fund and we're going to call it a save
the planet and solve climate change fund, because it's really sexy, right?
(19:47):
But in the European Union, they say, if you use these terms to describe your fund and
you don't have the data to support it, that says, okay, this is the greenhouse gas emissions
that my wind farms produce or have reduced, et cetera.
If you have no data, you're going to get a fine for greenwashing and for misusing terms
(20:13):
in your financial investment vehicle description.
So in the US, interestingly, the state of California announced a climate disclosure
rule which directly references the EU laws.
It's directly borrowed from it.
(20:33):
It's now being challenged by, I don't know, Chamber of Commerce or whoever likes to sue
states for having the audacity to impose environmental regulation.
California usually prevails though, because they're the biggest economy.
It's surprising that your marketing team could potentially get you in trouble with the EU.
Fantastic, isn't it?
(20:54):
For me, this is my hope for the progression of US corporate behavior, financial institution
behavior, because what has happened for a long time, or at least the last decade in
the US, is essentially in the absence of the federal government taking leadership on a
(21:20):
whole host of issues like maybe labor law, environmental policy, real meaningful leadership.
Individual states and cities have looked to the European Union.
There's an academic at Columbia University, Anu Bradford, I think that's her name, and
(21:40):
she coined this term called the Brussels Effect a while ago, which essentially is if a government,
like say the US government, abdicates responsibility for certain issue areas, then institutions,
state governments, et cetera, will look to leadership to essentially the highest common
(22:02):
denominator, which in the world today is the European Union for social policy, environmental
policy, labor policy.
The state of California has for quite some time directly consulted with the European
Commission to advise them on environmental policy and other issues.
And the state of New York has, they were debating a similar climate disclosure law, it hasn't
(22:29):
been approved, but that's what's happening.
So if companies think or banks think, oh, fine, I don't operate in the EU, I don't have
a supply chain, it's going to affect them anyway.
Because once the state of California establishes, and their climate disclosure rule is essentially
(22:49):
just like, it's the same concept as the EU, it says if you do a certain amount of business
in the state of California, if you're a company of a certain size, you must report annually
on your environmental impacts, your climate, scope one, two, and three, which is various
levels of greenhouse gas emissions.
(23:13):
Once they prevail, once this all works its way through the courts, and presumably it'll
end up in the Supreme Court, but the government of the state of California has been fairly
clear, right?
So if you try to negate our laws, well, we're the state of California, so we may just do
(23:35):
it anyway, right?
Other states are going to follow that.
I mean, that's what happened with tailpipe emissions, vehicle tailpipe emissions, all
these things.
So it's essentially a domino effect.
It started across the Atlantic, but the domino is going to continue.
Even in Southeast Asia, there's a number of governments, Indonesia, Bangladesh, and Vietnam,
(24:00):
I think, and some others are poised to do the same thing.
They are adopting the European Union corporate and financial disclosure rules to attract
EU business, because they know, let's say I'm that auto manufacturer that's based in
(24:20):
a certain EU country, and maybe I'm looking for production facilities, and I don't want
to go to China anymore because the economy is unstable, and I know I can't be very confident
if I have a factory in China that the data I'm going to get from them, the figures on
greenhouse gas emissions and water, et cetera.
(24:41):
That's why other governments have said, hey, we want to attract business, and what we're
going to do is we're going to align with you, European Union, European Commission, so that
your companies will want to do business with our factories, with our businesses, because
(25:03):
they'll know when they have to do their environmental and social reporting every year, they will
have reliable, credible data, and they therefore will not get fined.
So a lot of companies out there, like you just said that there's a lot of people that
probably don't know or have a ton of experience in this area, but you do.
(25:23):
I'm imagining there's a lot of brand new lawyers who are now going to be tasked to understand
this, advisor companies, but they don't know.
So what you do is you consult, you help these people.
It sounds like you would be very busy.
Yeah.
So this was sort of surprising to me because I moved to the DC area about six months ago
(25:48):
to be in the milieu of, oh my gosh, policymaking and the international community that's so
vibrant here.
And I'm a little naive, but I thought, oh, the big law firms will all be experts on this
already.
Right?
Because they're big law firms.
Actually, turning to my co-host here, is this something that they would have taught in law
(26:12):
school?
No, actually one of my questions was going to be if I were a law student and I would
like to practice in this field, what should I do?
So when I was looking for European Union law programs, I wanted to focus solely on EU law.
I looked in the US and there were only two universities, University of Southern California
(26:33):
and maybe Harvard that offered European Union law programs.
That's shocking.
Right?
The others have-
Because we do business with the EU all the time.
Right, right.
That's crazy.
Exactly.
So law programs have, I actually have talked to attorneys who would say, well, we had a
(26:57):
class on what is the European Union?
I mean, I'm surprised that law schools would be this narrowly focused, but maybe they figure
I'm educating people in US law.
If you want to learn about EU law, I don't know, go read a book.
So my advice would be if you want to study EU law, go abroad.
(27:24):
I mean, King's College London has a fantastic program.
Heidelberg University in Germany has a fantastic program.
Those are the two I was looking at.
And they both, I think Heidelberg also does part-time residencies.
You go there, study, come back to your reading because it's a ton of reading.
I'm sure that's a great avenue, but you just said that it's possible that a company in
(27:50):
the US could be affected by this.
And there's no way that they would be prepared.
In which case that means that they need to consult, educate themselves right away before
January.
Yes, they could use someone like that to explain to them.
That would be better.
Right.
Because I do know law firms who, they're big law firms and they don't have this competency
(28:11):
yet, maybe because it's new-ish.
The sustainable finance rules are about two years old.
But the thing about all of the EU laws is written into the law, and this is what I love
about EU law, is the requirement that it be updated in two to three years.
(28:33):
So right now, the European Parliament is going to be debating on the updates to the sustainable
finance disclosure regulations.
So it's going to be new again coming up in 2025.
And this is what I like so much about EU law, it's constantly evolving.
(28:55):
That's a requirement of all areas of law.
And so that's why I do this monthly update of what's happening, because it is constantly
changing.
And maybe US law firms who focus primarily on US law are not accustomed to that.
(29:16):
The other thing I've noticed, I go to events where attorneys from big name law firms are
talking about sanctions, sanctions, sanctions.
It's a big theme right now, of course.
And what I've noticed is, if you are indeed going to be useful to the companies, to the
(29:36):
companies, the investors who you advise, you need to understand how broad this is.
So I've been to events where they're talking about sanctions and they are very narrow.
They talk about how you trace, how you try to prevent Russian companies getting around
sanctions, right?
Following where they try to hide money, where they try to root their products, etc.
(30:00):
And so all they think about is, okay, what are the EU sanctions rules?
And they don't follow the web.
They don't follow the trail to understand, okay, it's not just about, did you do business
with this sanctioned Russian oligarch?
But where is your whole supply chain?
(30:24):
And what is your supply chain doing?
What are all the components of your portfolio doing?
What's the entire path of those supply chains?
They're not just, okay, I'm this multinational company.
This year, did I issue a purchase order to the oligarch?
No, I'll check a box and say no.
(30:46):
And then I'm clear.
But you're not clear.
Because another thing that the European Union has started regulating, regulate stuff, which
I love.
If you love the law, the European Union is like Nirvana.
So they've also started regulating all those ESG advisors that issue ratings for funds
(31:14):
for products.
Because they'll do this.
You could throw a penny out the window and there's a bunch of them.
So they'll say, oh, I'm an ESG ratings consultant or whatever.
And they'll actually do this.
Kind of talk to financial institutions, so I'm helping in the EU, who will tell me, oh
(31:34):
yeah, we have an ESG advisor who will come in and give our fund and whatever it is, ESG
gold rating, platinum rating, whatever silliness they make up.
And so-
It's kind of like for law firms, they give out all these awards, top thing.
That's basically, that's how I picture it.
You're the top 20 on this block.
(31:56):
Exactly.
And the European Commission, because the European Commission and the European Union governance
system is, it's enormous.
And they are watching.
They are always watching.
And so they said, okay-
Beware.
Exactly.
That sounds terrifying.
They said, but if your focus is the law, it's fantastic.
(32:19):
But they said, okay, we've had enough of the, ooh, you have a platinum rating for your portfolio,
so sure, you're in compliance.
They said, no, no, no, no, no, no.
In fact, they now require ESG rating advisor firms to be licensed and credentialed.
(32:39):
And now they're watching them.
I try to explain this to companies here.
I try to talk to law firms about it, and they don't always believe it.
You really need to move beyond the very popular American glossing, right?
Because a lot of this is glossing for US companies.
(33:01):
It's voluntary.
A lot of it's just marketing.
Hey, look, I mean, there are companies in this country who blow the tops off of mountains
to get coal, and they call themselves a sustainable company.
And so they're so accustomed to being able to do this in the US that they simply can't
(33:28):
comprehend that there might be another set of rules they have to follow.
Right?
So we've talked about sanctions, we've talked about fees, we talk about the negatives of
not complying with.
But are there any benefits of complying with ESG for companies?
Maybe to sell this in a positive way will be easier whenever you talk to investors or
(33:50):
to companies or to law firms.
If you comply, you're going to have this benefit.
Right.
So I'm glad you asked that question.
So especially for companies of all sizes, because eventually the accountability rules
will apply to certain small and medium sized enterprises, which is the biggest piece of
(34:11):
the economy in the EU.
The biggest reason for companies to comply is because it attracts investment.
So this is one of the areas I look at how this affects companies in the EU enlargement
zone, all those countries that are candidates to join the European Union, including Ukraine.
(34:36):
Ukraine is a fascinating example right now because they are a candidate for EU membership.
They're simultaneously trying to get the invaders out of their country and complying with EU
law to become a member.
(34:57):
Because the way the process works in the EU is, so you negotiate with the European Commission,
they say yes, you can be a candidate.
But in order to get a vote to be a member, you have to demonstrate that you are following
already EU law.
(35:17):
So that means for big companies and the banks and so forth in Ukraine, they have to start
implementing accounting rules and financials, et cetera, but also all of these sustainable
finance rules.
So it's already, I mean, I read the reports because I'm geeky and I like to read regulations
(35:41):
and stuff.
So I read the annual-
She actually does.
I know!
She loves it.
It's like a bedtime reading.
It's a great way to really spark a conversation at a networking event.
So I read EU regulations.
The annual report from the Commission on Ukraine's status, because they report on every country
in the union, and Ukraine actually got better marks for compliance with EU law on certain
(36:09):
areas, especially the ones that I look at, the sustainable finance rules and the corporate
accountability rules, than some countries who have been candidates for several years.
It's super fascinating because, and this is, I'm sure, part of the reason that Ukrainian
companies are working with the government to comply, they will attract investment from
(36:34):
private investment firms in the EU.
The central banks have signaled that they will also be following the same sustainable
finance rules when they make investments outside of the EU, including places like Ukraine.
(36:55):
So even for companies in the US, companies in the enlargement zone, if they start creating
systems to collect all this data, collect all the environmental data, calculate their
greenhouse gas emissions, et cetera, they're going to have a far better chance of getting
(37:16):
investment.
Because there's a ton of EU investment in the US, for example, right?
Many invest in factories, there's a ton of investment in Northern Virginia.
And so if those suppliers, those small and medium-sized enterprises in the US, want to
(37:36):
get EU business, or they want to get investment from a financial institution in the EU, that's
pretty smart, right?
Get the money.
Oops, don't get the money.
I spoke to a gentleman at that same...
We all want to get the money.
I spoke to a gentleman at that same networking event where we met, who does impact investing,
(38:00):
which I also worked on at Harvard.
And he mentioned that he had this fund, and he was trying to persuade an EU entity to
put money into his fund.
And the first question they asked was, can you comply with the sustainable finance rules?
(38:21):
Will you be able to collect all this information?
Because if we invest in you, you're one of our investments, we have to report it every
year.
He said, what the heck is that?
And so they didn't invest.
Not the best response.
It was probably more tactful than that.
As a little girl, is this the kind of thing that you're like, this is what I want to spend
(38:45):
my future on?
Was this around?
I don't even know how you get into this area.
I'm like the wandering path.
My undergraduate degree is in music.
That's so cool.
Really?
Damn.
And so this is...
Where was your undergrad?
Like what city?
University of Oregon.
Go Ducks.
(39:06):
I have to do that.
Best football mascot ever.
Looks just like Donald Duck, which means they had like a whole copyright infringement lawsuit
from Disney, the whole thing.
Were you focusing on like the classics or jazz or something?
Yeah, it was mostly a classical program.
I was doing voice and piano and literature.
(39:26):
That was my minor.
I heard all the jokes about liberal arts students.
A discipline like music is actually one of the ideal setups for something like studying
the law or international relations, which is what I studied at Harvard, because it has
a particular structure to it.
(39:48):
And if you're analyzing music, which is part of what you have to do if you're studying
for music tricky.
So let's say you're listening to a piece of music, like the one in the intro, right?
Sometimes it would be an orchestral piece or our intro music, the cool Latin intro.
We all want to go dancing now, right?
(40:10):
So when you're doing that, you have to, on the one hand, listen to the whole.
So you have to do things like, then we were transcribing by hand.
You had to write out the notation.
So what key is it in?
But then you had to identify every element.
So if it was an orchestral piece of music, you'd have to notate like the string sections,
(40:36):
first violin, second violin, the percussion, et cetera.
So what it teaches you is how to recognize connections.
That's how I put it.
So to be able to understand concepts, like the role of business in global society, and
then understand all the pieces that make it up and recognize connections.
(41:01):
One of the areas that's sort of my specialty areas, because I also worked on urban design
research and writing at the design school at Harvard, is how the intersection of environmental
law, energy efficiency rules for buildings, and for urban development intersect with the
(41:26):
sustainable finance rules, the corporate responsibility rules.
So for example, an investment firm that is investing in real estate, and they want to
invest in buildings that are improving their environmental performance, that intersection
is super interesting, because real estate developers want to get money, so they have
(41:46):
to demonstrate their environmental.
Going back to what you're saying about music, I find that a great way to explain it, because
maybe I haven't thought about it until now, but I used to play the third trombone, fourth
trombone at some point, and it didn't really make sense.
I could never play the orchestra by myself, and I wasn't playing the melody, I was playing
(42:08):
a back note, but all of those pieces are necessary to create what you are hearing.
Even in music today, Western music, even a pop song, you won't hear the little triangle
or the little special effect here and there, and you're wondering why is that even necessary,
but when you take it out, you realize, oh, something's really off about this, and that's
(42:29):
a great jumping point to what you do today.
I relate to that because I see that important, especially at law firms, I understand why
a paralegal is very important, a legal secretary, going through certain research, knowing equipment,
technology, because why is that all important?
When you're doing something like the law or research or presentations, knowing other things
(42:53):
is very useful, but you don't realize that you learn so much of it because of music,
learning musical composition, understanding harmony, and also understanding working together,
training 50 people to be in an orchestra, and all working at the same pace with one
director is very difficult, and you learn so much.
(43:16):
Then after that, but then why did you decide to give up music and then decide on a different
route?
I started out teaching music, and I was teaching music in a private Catholic girls' high school,
which was crazy because they thought I was one of the students.
I have no religious foundation, so it was all a mystery to me.
(43:40):
I loved teaching music.
I was really good at teaching music.
I was not good at classroom management and dance.
Somebody told me early on, the worst mistake you can make is if you laugh at their jokes
and, I mean, they would make jokes about the nuns and they were funny.
But I started my consulting business 15 years ago, I think, and I had been doing some work.
(44:04):
I worked in high tech for a while too because there are striking similarities between-
Consulting in music?
No, I wrote software for a while because it was fun.
It was like, it was when people had-
There were so many musicians in software.
You would not believe the parallels between writing software and Western music because
(44:30):
they're both structured.
I believe you.
It's very mathematical.
It's very structural.
Oh, it's not really, I can barely count to 32, right, if it's a complex time signature.
But it's a lot of like, if then type of work.
Yeah, yeah, and there's a structure you have to follow.
You can be sort of creative within that.
And where I worked, I won't name them because they were acquired by an enormous corporation
(44:52):
that I just don't care for.
But the software company I started with had so many musicians because of the analytic
thinking that involved.
And also for musicians, it was the closest thing to a sort of corporate job they could
tolerate, right?
(45:13):
It was very sort of fluid and yeah, kind of creative.
So when I started my consulting business, I wanted to focus back on writing and research
because I love research and learning.
And so I decided to do a master's program.
(45:34):
And I liked the idea of international relations because I wanted to understand how the global
systems work, right?
The economic systems, the political systems, the influence of the cultural systems.
And again, I don't think I realized until I was studying international relations, the
(45:56):
influence of my musical education.
What you understand is essentially all the patterns.
It's the same patterns in the Asian financial crisis, various US financial crises, the Dutch
bulb crisis, they all follow the same patterns, right?
And the way politics in any country influences the economy, cultural influences, drive political
(46:25):
change, drive economic change, et cetera, they're all patterns.
And they all connect to each other.
And that's really what to me international relations was about.
And like you said, understanding that we're all part of this community, if it's business,
if it's culture, if it's just basic communication.
(46:47):
And I was really excited about discovering this whole concept of the role of business
in a global society.
But it's funny, I considered doing consulting work after my research contract ended.
And I thought at the time, I don't know if I ever want to go back to corporate social
(47:12):
responsibility because it's all voluntary.
My gosh, I think it's meaningless.
So I was doing consulting on advising developers on making their buildings more resource efficient,
energy efficient to qualify for tax credits, that kind of thing.
And then when I discovered that the issue area I was so interested in at Harvard was
(47:36):
now being regulated, I was over the moon.
A lot of law students, especially in the US, are always given this task to decide what
they want to do for the rest of their lives and then pick an area of law.
Yeah, this one seems to be one that needs a lot of people to be experts in.
It does, and especially in the US right now, because businesses are really ready for, probably
(48:02):
the big multinationals are, but even the ones like Google who have lots of legal advice
don't necessarily listen.
So they're going to need a lot of expertise, absolutely.
So the other weird thing, if somebody's thinking, I want to study EU law, but I would like to
be licensed in the US to be a practicing attorney.
(48:25):
So there's this weird exception.
In the state of New York and California, you can have a foreign law degree and sit for
the California bar exam or the New York bar exam.
I mean, presumably that means you would then have to learn about US law so you could pass
the bar exam.
Pass the bar.
Right, right, right.
(48:46):
So you could be a licensed attorney or you could be licensed in the country where you
get your law degree.
But that's the thing.
I mean, there's so many paths.
There's many areas of law that have popped up in the last five, 10 years.
There's a greater need because a lot of the law schools in the US don't teach it.
And as a result, anyone who is thinking about this or this sounds like a sexy field, you
(49:12):
may be successful in it because you're going to be needed.
That's a good, that's a very good point.
Very good point.
Yeah.
And it is, I mean, again, I don't practice US law, but it seems a lot sexier than like
tax law or something.
I don't know.
I mean, I don't know.
Maybe not.
I don't practice tax law.
We'll have to get an equally passionate tax law expert.
(49:35):
Yes, you should because I will learn so much and I will say, oh my God, that's fascinating.
Yeah.
There's so many people who've been so passionate about their profession, their industry.
And I've loved, that's one of the reasons I've loved this podcast is to find those people.
So I'm really, really, I'm glad that you came in to talk to us.
Thank you very much for coming on the show and educating us.
(49:59):
Sure.
Definitely.
On these topics and the importance of it.
And hopefully anyone who is listening and thinking about a career in law can consider
this, but also anyone who is helping to run a company and you're thinking, oh my gosh,
I should be thinking about these issues.
I will post on the podcast your information if they need to reach out to you.
(50:21):
Cool.
Yeah.
You can find me on LinkedIn.
Wonderful.
It's just Luckyfish Research and Communications.
You can read all my fascinating posts about you law.
And subscribe to your newsletter.
And subscribe to my newsletter if you like.
Thank you very much for coming on the show.
Thank you.
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