Climate Corporate Governance: Europe vs. USA?

Bruno Sabrina
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Bruno Sabrina: Full Professor of Private Comparative Law at University of Calabria (Cosenza, Italy)Italy and Adjunct Professor of Law and Economics (Business and Company Law) at LUISS G.Carli, Rome (Italy)Italy; PhD. University of Florence (Italy); M.Litt. (Oxford University, U.K.); 2019 Visiting Scholar at Stanford Law School (U.S.A.); 2010 Fulbright Visiting Scholar at Harvard Law School (U.S.A.).

European Company and Financial Law Review, 2019, vol. 16, issue 6, 687-723

Abstract: According to economic literature, climate change is a financial factor: this is the logical premise of the European Directive N. 2014/95/EU requiring disclosure on the policies adopted by big corporations on climate change risks and opportunities. Through disclosure, climate change imprints the contents of directors’ duty of skill and care in Europe. On the contrary, in US there is no federal legislation or SEC regulations specifically on climate disclosure. Absent any binding decision yet, the current assessment of directors’ fiduciary duties under state law does not include consideration of climate change risks and opportunities according to American authors, even though fiduciary duties may evolve. The sole effective tool is the Martin Act. Levels of disclosure of US and EU corporations are therefore already significantly different both in terms of climate risks and opportunities. This situation can drive the financial sector to direct capital to Europe. Institutional investors in US have been trying to increase disclosure through shareholders’ proposals under Rule 14a-8 but these efforts have been recently undermined by the micro-management argument used by SEC. The conclusion is that the market cannot govern climate change by itself: because of regulation, European corporations are better positioned to mitigate the “carbon bubble”. What is at stake is the profitability of American corporations.

Date: 2019
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DOI: 10.1515/ecfr-2019-0027

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