Spain: ESG Comparative Guide

1 Legal and enforcement framework

1.1 What regulatory regimes and codes of practice primarily govern environmental, social and governance (ESG) regulation and implementation in your jurisdiction?

There is no standalone ESG framework in Spain. This results in a fragmented and complex landscape, with the applicable provisions dispersed among different statutes.

The ESG framework in Spain, which is still under development, includes both:

• legal obligations set out in a dynamic and growing body of legislation; and
• different sets of recommendations or best practices (see question 1.2).

The Spanish ESG regulatory framework comprises:

• the EU ESG regulatory framework; and
• the domestic ESG regulatory framework.

The European Union has enacted numerous statutes in the different areas of ESG, including:

• the Non-financial Reporting Directive (2014/95/EU) (NFRD);
• the Second Shareholders' Right Directive (2017/828) (SRD2);
• the Sustainable Finance Disclosure Regulation (2019/2088) (SFDR);
• the Taxonomy Regulation (2020/852); and
• different provisions integrating ESG criteria in:
• • the Second Markets in Financial Instruments Directive;
  • the Directive on Undertakings for Collective Investment in Transferable Securities; and
  • the Alternative Investment Fund Managers Directive.

Within the domestic ESG regulatory framework, specific instruments have been issued by Parliament and the central government, ranging from laws to circulars, as well as particular articles or sections included in non-ESG-specific statutes. These are complemented in some cases – particularly in the areas of environment and social – by regulations issued by some regional authorities.

The rules set out in the domestic ESG regulatory framework either address specific ESG angles or implement (or complement) the EU ESG regulatory framework (and in some cases those of international organisations). An example of the former is the creation of so-called 'common interest and benefit companies'; while examples of the second include:

• Law 11/2018, which implemented the NFRD in Spain; and
• Law 5/2021, which implemented the SRD2 in Spain.

The domestic statutes address different issues within the wide-ranging ESG agenda –sometimes with an integrated approach (eg, Law 9/2017 on public sector contracts, which contemplates the incorporation of social and environmental criteria in public procurement); and other times with a particular focus on a specific element of ESG. As such, they can be grouped as follows:

• The statutes relating to the environment, which mainly focus on the energy transition, include:
• • Law 26/2007 on environmental responsibility;
  • Law 22/2011 on waste and contaminated soil;
  • Royal Decree 564/2017 on the certification of energy efficiency in buildings;
  • Royal Decree 617/2017 on alternative energy vehicles;
  • Royal Decree-Law 15/2018 on urgent measures for energy transition and consumer protection; and
  • Law 7/2021 on climate change and the energy transition.
• The statutes relating to social, which mainly focus on equality, non-discrimination and conciliation, include:
• • Royal Decree-Law 6/2019 on urgent measures to guarantee equal treatment and opportunities between women and men in employment and occupation;
  • Royal Decree-Law 28/2020 on remote work;
  • Royal Decree 901/2020 on equality plans and their registration;
  • Royal Decree 902/2020 on equal pay for women and men;
  • Law 10/2021 on remote work;
  • Law 4/2022 on protection of consumers and users regarding situations of social and economic vulnerability; and
  • Organic Law 6/2022 on equal treatment and non-discrimination.
• The statutes relating to governance, which focus on governance and long-term involvement of shareholders, include:
• • Law 11/2018; and
  • Royal Legislative Decree 1/2020 approving the consolidated text of the Companies Law.

1.2 Is the ESG framework in your jurisdiction primarily based on hard (mandatory) law and regulation or soft (eg, 'comply or explain') codes of governance?

As outlined in question 1.1, the ESG framework in Spain is based on a combination of hard regulation and soft codes.

In addition to internal codes of conduct (which are addressed in question 4.1), there are numerous external codes, including codes issued by public and private bodies.

Codes issued by public bodies include:

• codes with supranational reach, such as:
• • the UN Guiding Principles on Business and Human Rights; and
  • the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises; and
• codes with a domestic scope, such as those issued by national supervisors including the Spanish Securities Exchange Commission (CNMV), which issues:
• • general codes, such as the Governance Code of Listed Companies; and
  • specific codes, such as the Code of Good Practices to regulate interest rate rises on residential mortgages.

These public sector initiatives are complemented by efforts in the private sector, where different bodies have issued guidance on specific sectors or products.

The traditional approach to ESG issues in Spain is mainly a soft approach, based on the 'comply or explain' principle. However, there has been a shift to a mandatory approach, whose infringement may constitute not only an administrative infraction but also in some cases a criminal offence.

Finally, in addition to regulation and codes, attention must be paid to contracts, which can constitute a source of additional ESG obligations when they incorporate the application of foreign ESG regulatory regimes and/or codes. In this regard, there is an increasing tendency in the Spanish market to incorporate ethics clauses into agreements.

1.3 Which bodies are responsible for implementing and enforcing the rules and codes that make up the ESG framework? What powers do they have?

There is no specific authority designated for implementing the ESG regulatory framework in Spain (either the EU regime or the domestic regime). Different authorities, within the scope of their powers, are responsible for implementation – usually within a specific area or set of regulations.

These include:

• different ministries, as follows:
• • Environment: The Ministry for Ecological Transition and Demographic Challenge;
  • Social: The Ministry of Labour and Social Economy and the newly created Ministry of Equality and Ministry of Social Rights and 2030 Agenda; and
  • Governance: The Ministry of Economic Affairs and Digital Transition; and
• traditional supervisory bodies, such as:
• • the CNMV;
  • the Bank of Spain (BdE);
  • the Insurance and Pension Funds General Directorate; and
  • the National Markets and Competition Commission.

These are complemented:

• at the central level by specific bodies such as:
• • the State Council on Corporate Social Responsibility (CERSE);
  • the Women's Institute; and
  • the National Centre for Environmental Health; and
• at the regional level by specific institutions in the areas of environment and social.

As regards the implementation of codes, the organisation that issues the relevant code and its members are responsible for its implementation.

Finally, in addition to the different stakeholders (see question 7.1), the ESG regulatory framework is supervised and enforced by the ministries, bodies and institutions referred to above, as there is no specific enforcement structure for ESG issues in addition to the existing structures.

1.4 What is the regulators' general approach to ESG and the enforcement of the ESG framework in your jurisdiction?

The regulators' general approach to ESG aims to promote awareness of the ESG regulatory framework and the obligations arising therefrom. This is done through:

• the provision of information (in most cases through the issuance of guidelines or the creation of specific sections on their webpages); and
• the issuance of reports to assess the current status of the Spanish ESG landscape (which in some cases may serve as a benchmark for best practices). Examples include:
• • policy reports issued by the ministries;
  • ESG-specific reports issued by the CNMV; and
  • annual reports on the comparability and reliability of the information disclosed in ESG reports issued by CERSE.

This approach is complemented by the state by channelling funds (directly or indirectly) towards the purposes of ESG implementation, including through public grants.

As regards enforcement, some supervisors have published their expectations on supervision and enforcement on both a general and specific basis. Examples include:

• the reports issued by the BdE on its expectations regarding climate change; and
• the reports issued by the CNMV on corporate sustainability.

In these reports, the authorities point out that ESG disclosure – including its verification and comparability – has now become a strategic supervisory priority. Examples in this regard include the statement on the application of EU regulations (including the SFDR).

Some authorities have started to exercise their inspection powers, in some cases under the influence of the European Union. However, none of them has yet exercised its sanctioning powers (although we expect this approach to start to tighten in the future).

1.5 What private sector initiatives have been launched in your jurisdiction to complement the ESG framework?

Multiple private sector initiatives have been launched in Spain to complement the ESG framework, including by thinktanks, foundations, universities and particularly associations – both those with international reach (which operate at the European level) and national associations. The latter include not only existing local industry associations in the areas of credit, collective investment undertakings and private funds (which have integrated ESG within their scope), but also associations that have been specifically established for the purpose of addressing ESG at both substantive and executive levels.

The initiatives implemented by the aforementioned organisations vary from institution to institution and include:

• the establishment of specific departments focused on ESG (particularly on sustainability);
• the creation of working groups to promote discussion, raise awareness and promote best practices;
• the carrying out of specific studies or research;
• the provision of guidance to members; and
• the organisation of events.

2 Scope of application

2.1 Which entities are captured by the rules and codes that make up the principal elements of the ESG framework in your jurisdiction?

This ultimately depends on the relevant statute or order being considered. The bulk of the ESG framework applies to:

• public companies;
• large corporations operating in the private sector; and
• regulated entities in the financial markets industry.

'Large corporations' for these purposes are companies considered to be of public interest – that is, companies which either:

• have more than 500 employees and meet one of the following size criteria:
• • over €40 million in turnover; or
  • at least €20 million in total assets; or
• have more than 250 employees, and meet both of the following criteria:
• • above €40 million in turnover; and
  • at least €20 million in total assets.

Regulated entities in the financial markets include the core players in the different segments, such as:

• in the credit markets, credit institutions;
• in the capital markets:
• • listed companies;
  • issuers;
  • investment service providers; and
  • institutional investors (funds, pension funds); and
• in the insurance markets, insurance companies

2.2 How are entities in your jurisdiction that are not subject to specific rules or codes implementing ESG?

There is an increasing trend towards the adoption of ESG strategies in Spain, which goes beyond the entities referred to in question 2.1.

The driver of this trend is in some cases purely voluntary, as ESG is seen as a valued marketing label or competitive differentiator. In other cases, it results from pressure from external stakeholders, requiring companies to respond from either:

• a reputational perspective, where the pressure is exerted by customers; or
• a contractual perspective, as lenders in the credit markets and capital markets step up their ESG demands in financing environments – including the inclusion of ESG key performance indicators in their financing structures – and companies seek to integrate ESG in their value chain, thus requiring ESG compliance by their providers.

2.3 What are the principal ESG issues in your jurisdiction that are either part of the ESG framework or part of the implementation of ESG?

In addition to those issues resulting from the existence of a fragmented framework (please see question 1.1) – in particular, the difficulties in learning of and tracking the applicable obligations – the principal issues in Spain regarding the ESG framework and its implementation include:

• a lack of agreed definitions;
• difficulties in comparing the different verification methods;
• a lack of transparency of verification processes;
• a lack of independent supervision of ESG players (including entities that issue second-party opinions and entities in charge of verification or certification);
• the need to avoid potential cognitive dissonance;
• the need to detect and eradicate 'greenwashing';
• the cost of implementation; and
• the lack of specific ethical standards in the ESG segment for the different actors involved (in order to avoid, among other things, the existence of undisclosed legal, commercial or data conflicts of interest).

3 Disclosure and transparency

3.1 What primary disclosure obligations relating to ESG apply in your jurisdiction?

A distinction should be drawn between:

• sector-specific disclosures, which apply only to entities operating in the relevant sector; and
• general compulsory non-financial disclosure obligations.

General ESG disclosure obligations (which break from the traditional approach to disclosure, focused on financial issues) derive mainly from the EU ESG regulatory framework (as complemented by specific local statutes). These include:

• the Non-financial Reporting Directive;
• tthe Sustainable Finance Disclosure Regulation (SFDR);
• the Second Shareholders' Right Directive;
• the Taxonomy Regulation; and
• the Delegated Act Supplementing Article 8 of the Taxonomy Regulation.

The focus of this disclosure, which is addressed mainly to stakeholders, runs from environmental to social matters, including:

• the treatment of employees;
• respect for human rights;
• the diversity of company boards; and
• anti-corruption and bribery.

In addition, due to the applicable sector-specific rules, entities operating in the financial markets industry are subject to further non-financial disclosure. The focus of this disclosure – which is addressed mainly to supervisors – runs from:

• ESG risks for capital requirements purposes in the credit market segment; to
• detailed obligations in the capital markets area, where institutional investors (eg, funds, insurance companies and pension funds) must:
• • publicly disclose their policies on environmental and social impact, and in some cases their investments (on a qualitative analysis by sector and company);
  • make periodic assessment reports; and
  • include information in their annual accounts.

These sector-specific ESG disclosure obligations are complemented by specific financial-products related disclosure under the SFDR.

3.2 What voluntary ESG disclosures are also commonly made in your jurisdiction?

Entities, including those referred to in question 2.1, commonly make voluntary ESG disclosures in Spain.

Although these disclosures are frequently marketing driven, they are rarely neutral from a liability perspective, as in addition to potential reputational or litigation risk, compliance with different applicable laws may need to be taken into account, including those relating to consumer protection, advertising and/or competition.

Disclosures are made in different formats – from webpages to specific reports and annual accounts – and may include a wide arrange of ESG topics, such as the following:

• Environment:
• • sustainability, decarbonisation and circular economy issues;
  • increased use of renewable energy;
  • waste reduction; and
  • a general assessment of environmental impact.
• Social:
• • respect for human rights;
  • respect for diversity and no discrimination;
  • equal treatment of employees; and
  • a general assessment of social impact.
• Governance:
• • corruption and bribery.

ESG disclosure policies are based on a variety of (sometimes voluntary) standards, which are not coordinated, 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+.

3.3 What role is played in this regard by (a) the board and (b) other corporate bodies and/or officers?

Spain does not operate a two-tier system.

With regard to disclosure, the board of directors has ultimate responsibility for oversight at the company level, and thus for the accuracy and completeness of the disclosures made by the company.

Given the cross-cutting impact of ESG within any organisation, ESG disclosure responsibilities are spread across a number of functional areas, which usually 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 the execution of disclosure (covering data collection for the purposes of disclosure, monitoring of progress, drafting of the relevant reports and even the assumption of a certain degree of responsibility for external disclosure) is usually done through a delegated mechanism, with different structures and individuals reporting to the board. The resulting structures may include:

• the establishment of a single ESG committee (which is sometimes an extension of the existing corporate social responsibility committee);
• the creation of different specialised commissions or committees (eg, sustainability commissions) or departments (eg, sustainability transition departments); and
• the appointment of specific individuals within the C-suite, which in some companies has even led to the creation of the role of chief ESG officer.

3.4 What best practices should be considered in relation to ESG reporting and disclosure?

There are no general rules in this regard, as they vary from organisation to organisation and from sector to sector. Best practices include that information reported and disclosed:

• be aligned with stakeholders' expectations;
• be coherent with the organisation's ESG policy;
• where relevant, be benchmarked against market standards in the relevant sector;
• be complete;
• be accurate (any type of misinterpretation must be avoided);
• be presented in a clear manner (ie, not misleading);
• include definitions of terms;
• be based on available and accessible data;
• be supervised both internally and, where required or possible, externally (disclosing in any such case the method of verification);
• be monitored (in order to ensure compliance with the disclosures made); and
• be updated.

4 Strategy and governance

4.1 How is ESG strategy typically designed and implemented in companies in your jurisdiction?

ESG strategy is usually designed and implemented taking into account the two dimensions of ESG:

• ESG as a risk, where legal and reputational issues are addressed; and
• ESG as an opportunity, in which marketing plays a central role (please see question 3.2).

ESG strategy – which is increasingly seen as part of a company's strategy – is sometimes built on the company's existing corporate social responsibility strategy (and is even seen as an important element thereof) and is ordinarily structured around a ESG policy. The ESG policy is usually:

• designed so that it can be aligned with the corporate culture of the company;
• coordinated with the company's values; and
• ultimately integrated with the value proposal of the company and in its corporate strategy.

As regards implementation, efforts are primarily focused on the formal perspective, including:

• addressing ESG in bylaws, which in some cases regulate the social interest and social dividend;
• integrating ESG in existing codes of conduct/ethics;
• establishing ESG commitments (including objectives);
• monitoring compliance with the commitments;
• carrying out audits; and
• publishing information.

4.2 What role is played in this regard by (a) the board and (b) other corporate bodies and/or officers?

The board of directors is ultimately responsible for:

• the design of the ESG strategy and ESG policy;
• the establishment of ESG objectives;
• the development of internal codes of conduct;
• communication of the above both internally and externally;
• the provision of information on the development, results and status of the company, and the impacts of its activity with respect to ESG (eg, pollution, resources, circular economy, climate change); and
• the design of the relevant internal structure needed for the purposes of data collection.

Given the cross-cutting impact of ESG within any organisation, a number of functional areas of the organisation are involved in the development of the aforementioned points, which usually include:

• compliance;
• legal;
• risk;
• institutional relations;
• shareholder relations;
• audit;
• finance; and
• business.

The ESG strategy is developed through the different structures that may have been developed for ESG purposes at the relevant company (please see question 3.3).

4.3 What mechanisms are typically utilised to monitor the implementation of ESG strategy in your jurisdiction?

There is no standard mechanism or approach for monitoring the implementation of ESG strategy in Spain. Mechanisms that are frequently used include ongoing internal mechanisms and periodic external monitoring.

Internal monitoring is conducted through periodic assessment 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.

External monitoring usually takes the form of an audit, which is benchmarked against certain standards or ratings and which involves external providers.

The results of the monitoring process usually take 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.

4.4 What role is played in this regard by (a) the board and (b) other corporate bodies and/or officers?

The board of directors is ultimately responsible for:

• the supervision of ESG strategy and ESG policy;
• monitoring; and
• the design of the relevant internal structure required for the above purposes.

Given the cross-cutting impact of ESG within any organisation, a number of functional areas of the organisation are involved in the development of the aforementioned points, which usually include:

• compliance;
• legal;
• risk;
• institutional relations;
• shareholder relations;
• audit;
• finance; and
• business.

The ESG strategy is developed through the different structures that may have been developed for ESG purposes at the relevant company (please see question 3.3).

4.5 How is executive compensation typically aligned with ESG strategy in your jurisdiction?

Executive compensation is still tied to a large extent to financial metrics. However, in order to incentivise actions aligned with ESG objectives (and to develop a more internal approach to ESG), executive compensation is starting to take greater account of ESG.

This is done through the incorporation of ESG metrics into short and long-term executive compensation plans (usually linked to sustainability KPIs). However, this presents significant challenges, including:

• the difficulty in defining adequate performance goals; and
• the difficulty in aligning the interests of the company with those of the executives (as ESG objectives are long term and can exceed the usual tenure of executives and directors).

4.6 What best practices should be considered in relation to the design and implementation of ESG strategy?

There are no general rules in this regard, as they may vary from organisation to organisation and from sector to sector. Best practices may include, in sequential order:

• listening to stakeholders (please see question 7.1 for an elaboration of the concept of 'stakeholders' in this context);
• analysing the current state of the business to identify what exists at an organisational level and leverage it accordingly;
• setting objectives (as measurable ESG KPIs wherever possible);
• summarising the objectives in an ESG roadmap;
• prioritising the objectives;
• defining actions based on the roadmap and priorities;
• measuring performance of these actions against the ESG KPIs;
• collecting ESG data and managing it effectively;
• communicating the ESG strategy (including the ESG roadmap) to management and employees;
• training management and employees on ESG obligations; and
• coordinating the ESG strategy across the different functional areas

5 Financing

5.1 What is the general approach of lenders towards ESG in your jurisdiction? What internal and external information regarding a prospective borrower will they typically consider in this regard?

The financial markets are one of the main ESG vectors, as increasingly lending is no longer based purely on interest rates and the borrower's credit rating.

Although there is no uniform approach in this regard, ESG is becoming increasingly prominent in the credit markets and is being integrated into lending transactions. This is done by requiring, in transactions above certain amounts, ESG information from the borrower in the form of reports on environment or social responsibility, which may address environmental issues (eg, emissions), social criteria (eg, equality) and governance issues (eg, the quality of management). In addition, lenders may provide a spread bonification where the borrower has an ESG rating and meets certain KPIs (usually linked to sustainability). The terms of financing usually include KPIs linked to sustainability.

This trend is also evident in:

• the capital markets, where investors are starting to apply ESG investment policies (including in private banking); and
• investment management, where different market categories have emerged (from light green to dark green funds).

5.2 Are bonds/loans that are marketed as green bonds/loans, social bonds/loans, sustainability bonds/loans or similar a feature of the markets in your jurisdiction?

ESG-labelled loans and bonds have recently emerged on the Spanish market. To date, there have been several different issuances of green and social bonds in Spain – not only by different private companies, but also by the state.

In the credit markets segment, and driven by demand from lenders, 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, and 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.

5.3 What key developments have taken place in the structuring of these instruments in your jurisdiction?

ESG-labelled financing instruments have become a common feature in the Spanish market. Key to this has been the development of market standards, guidelines and recommended best practices by international industry associations.

The main initiatives in the credit markets segment have been spearheaded by the Loan Market Association, including its:

• Green Loan Principles;
• Social Loan Principles; and
• Sustainability Linked Loan Principles.

In turn, the main initiatives in the capital markets segment have been spearheaded by the International Capital Markets Association, including:

• the Green Bond Principles;
• the Social Bonds Principles; and
• the Sustainability Bond Guidelines.

It is envisaged that the EU Green Bond Standard will play a role in the final configuration of the market.

The standardisation of KPIs is also starting to play an important role. KPIs regarding emissions reductions, renewable energy, waste management, waste reduction and recycling are beginning to constitute core 'green KPIs'; while those dealing with equality, labour accidents and inclusion of disabled people are considered the main 'social KPIs'. To them, certain KPIs regarding shareholders or sectoral KPIs (in specific sectors such as pharma or automotive) are frequently added.

5.4 What best practices should be considered in relation to ESG in the financing context?

There are no general rules in this regard, as they vary from sector to sector and product to product. Best practices may include:

• the identification of market standards which may be relevant;
• the evaluation of the convenience of the application of market standards and alignment with them;
• the standardisation of documentation (so that a secondary market can develop);
• the establishment of relevant measures to avoid greenwashing;
• careful structuring of KPIs;
• objective and close monitoring of compliance with KPIs;
• use of reliable data (instead of estimates);
• verification by independent third parties or following ESG ratings on the instrument or on the issuer (with the basis for the ratings always highlighted); and
• consideration of the fiduciary duties of ultimate lenders or investors, with particular attention paid to origination and distribution structures.

6 ESG activism

6.1 What role do institutional investors and other activist shareholders play in shaping ESG in your jurisdiction?

Institutional investors are increasingly playing a role in the design and monitoring of ESG in Spain, as they continue to integrate ESG issues into their investment strategies and investment policies (including asset selection).

However, the path for doing so is not uniform and will ultimately depend on the particular ESG strategy, which may include:

• ESG integration;
• exclusions;
• norms-based screening;
• impact investing;
• engagement and voting;
• sustainability themes; or
• 'best in class'.

6.2 How do activist shareholders typically seek to exert influence on corporations in your jurisdiction in relation to ESG?

Activist shareholders seek to exert influence on corporations in Spain at different levels, from both an internal and external perspective.

Internal actions tend to focus on the shareholders' general meeting through the exercise of voting rights, and sometimes take the form of influence through proxy advisers and on the board of directors.

External actions may be more diverse, ranging from soft approaches (eg, sending letters of demands to the board of directors) to harder measures (eg, launching activist campaigns and, where legal obligations exist, participating in disputes or the funding of litigation).

6.3 Which areas of ESG are shareholders currently focused on?

Traditionally, shareholders have focused primarily on the area of governance (as this is the area on which corporate social responsibility has traditionally focused); but this is increasingly shifting to environment and sustainability.

6.4 Have there been any high-profile instances of ESG activism in recent years?

Some cases have affected some of the biggest Spanish companies in the area of governance, but there is no significant case law on this topic as yet.

With environment and social, certain cases have been brought abroad involving Spanish companies (including in relation to the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises).

6.5 Is ESG activism increasing or decreasing in your jurisdiction? How and why?

We expect ESG activism to increase in the coming years, due to:

• greater awareness of this topic;
• the regulatory developments taking place (and the complexity thereof); and
• the increasing shift from a 'comply or explain' approach to a hard approach in ESG.

7 Other stakeholders and rights holders

7.1 What role do stakeholders or rights holders (eg, employees, pensioners, creditors, customers, suppliers, and Indigenous communities) play in shaping ESG in your jurisdiction? What influence can they exert on a company?

As outlined in question 4.6, stakeholders are playing an increasing role in the design and monitoring of ESG strategy, by influencing and controlling it.

Stakeholders active in ESG include:

• internal stakeholders, such as employees, unions, managers and owners;
• external stakeholders, such as customers, suppliers (direct and indirect), creditors, investors, insurers, government and society in general; and
• the classic stakeholder groups, such as regulatory bodies, competitors, advocacy groups, activists, certifying agencies, industry associations, academic institutions and non-governmental organisations.

8 Trends and predictions

8.1 How would you describe the current ESG landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The Spanish ESG landscape is continuously evolving. In addition to the initiatives taking place at international and EU level, and the laws implementing these in Spain, several initiatives focused on environment and social issues have reached different stages of the legislative process, including:

• the amendment of the Securities Market Law, which aims to further regulate ESG issues in relation to reporting, governance and remuneration for listed companies and investment companies;
• a proposal to introduce temporary taxes in the energy and credit sector;
• a proposal for an integral law on social and solidary economy;
• an organic law against racism;
• a proposal on family law; and
• a proposal on a law for the protection of human rights, sustainability and due diligence in transnational business activities

9 Tips and traps

9.1 What are your top tips for effective ESG implementation in your jurisdiction and what potential sticking points would you highlight?

Our top tips for effective ESG implementation at the company level include the following:

• Align implementation with demands from internal and external stakeholders;
• Align implementation, where possible and relevant to the organisation, with market practices;
• Leverage data and technology;
• Use ESG as a source of long-term value, moving beyond treating ESG just as a marketing tool;
• Integrate effectively and comprehensively within the company;
• Take a holistic approach, integrating the different elements of ESG and not treating them in an isolated manner (eg, environment and social should be joined together); and
• Conduct periodic evaluations.

Beyond the company, the following tips are useful:

• Ensure supervision of the different players;
• Avoid conflicts of interest between players (not only from a legal perspective, but also from a commercial and data perspective);
• Adopt a clear approach of what occurs to what is not ESG (but necessary from a economy or state perspective)
• Adopt 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); and
• Promote open dialogue between all organisations involved in ESG (not only economic organisations).

As regards potential sticking points – and in addition to the best practices addressed in questions 3.4, 4.6 and 5.4 (which may become sticking points if not observed) – the following may be highlighted:

• the lack of transparency;
• poor data quality;
• the lack of homogeneous standards;
• the lack of comparability in reporting;
• the lack of comparability in ESG certifications; and
• the lack of an effective enforcement structure

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.