FINDING A CORE OF SUSTAINABILITY IN DIRECTORS' AND OFFICERS' FIDUCIARY DUTIES. (2024)

TABLE OF CONTENTSI. INTRODUCTION 52II. DIRECTORS' AND OFFICERS' FIDUCIARY DUTIES AND ESG RISKS 57 A. Directors' and Officers' Fiduciary Duties and Climate 57 Risks (1) The Commonwealth Climate and Law Initiative Report 57 (2) shareholder Wealth Maximization and underpricing 61 Climate Risks: Theoretical Sources of Sustainability B. ESG Risks as a Foreseeable Category of Risks 64 C. Duties to Shareholders with a Long-Term Investment 66 HorizonIII. DEFINING SUSTAINABILITY 69 A. Defining Sustainability: The Core and the Periphery 70 B. Illustrations: Time Horizon, Risk Monitoring Systems, and 73 Stakeholder Engagement (1) Time Horizon 73 (2) Risk monitoring systems 75 (3) Stakeholder Engagement 77IV. ENVISIONING SUSTAINABILITY IN ACTION 79 A. The Sustainability Core and Possible Litigation 79 B. In the Shadow of Possible Litigation: Lawyers' Advice and 84 Mainstreaming Long-Term Outlooks in the Sustainability PeripheryV. PUSHING SUSTAINABILITY FURTHER: STRATEGIES, PROPOSALS, AND 84 NORMATIVE JUSTIFICATIONSVI. CONCLUSION 88

I. INTRODUCTION

Humanity faces an existential threat posed by the ongoing climate emergency. (1) Corporations similarly face significant financial risks and the effects of systemic risks posed by the ongoing climate emergency. (2) Yet, the climate crisis is only one component of the deeply interconnected "polycrisis" (3) humanity faces. This polycrisis is made of other social and environmental crises which similarly pose widespread systemic risks, including biodiversity loss, ecosystem collapse, food and water insecurity, inequality and social breakdown, large scale involuntary migration, and other risks. (4) These social and environmental risks are all interconnected. (5) Therefore, climate change risks are one significant but incomplete category of risks within the wider set of environmental and social risks faced by all existing human and living systems, including corporations.

Depending on a corporation's business model, environmental, social, and governance ("ESG")-related risks (6) can manifest in short-, medium- or long-term investment horizons. (7) Given the interconnectedness of the large-scale environmental and social risks described above, every corporation will likely face significant financial and systemic ESG-related risks within a long-term investment horizon. (8) Directors and officers, (9) who owe a fiduciary duty to act in the best interests of corporations and its shareholders, (10) have a duty to manage and minimize the impacts of these ESG risks. Particularly, directors and officers must manage the impacts of these ESG risks as they affect the value of a corporation, including its long-term value. (11)

Increasingly, corporate decision-makers use the concept of "sustainability," as it applies to business activity, as an organizing lens for business strategy decisions, including risk management. (12) This paper begins with an instinctive sense that sustainability is already embedded in corporate law, particularly in directors' and officers' corporate fiduciary duties. sustainability connotes notions of longevity, care, and stewardship, (13) which have a conceptual resonance with the fiduciary duty. (14) Following this instinctive starting point, this paper seeks to investigate whether there are aspects of sustainability already embedded in directors' and officers' fiduciary duties today, particularly under Delaware law. (15)

In investigating this hypothesis, this paper finds that there is a minimum "core" of sustainability that can be found in directors' and officers' fiduciary duties. This paper's central thesis is that directors and officers must, in discharging their fiduciary duties to the corporation and its shareholders, minimally implement a "core" of sustainability. Part III defines, with illustrative examples, the "core" of sustainability. The "core" of sustainability ("Sustainability Core"), which has both substantive and process components, represent the minimum actions which directors need to take to discharge their fiduciary duties to the corporation and its shareholders. Directors who fail to implement the Sustainability Core will likely face legal liability for breaches of their fiduciary duties. (16)

Sustainability also contains a "periphery" ("Sustainability Periphery"), where directors and officers have considerable discretion in how to implement sustainability practices within a corporation and across its business activities. Actions comprising the Sustainability Periphery can give rise to significant benefits to the corporation. They may help corporations avoid litigation (as distinct from avoiding liability), protect their reputation, promote prudent good governance, and promote best practices and business excellence. (17) This is sometimes called the "business case" for sustainability, or "doing well by doing good." (18) Actions and decisions that exist within the Sustainability Periphery closely relate to the Sustainability Core because they can benefit the corporation and promote its best interests. Yet, actions in the periphery cannot be strictly considered as falling within the Sustainability Core because the directors' and officers' failure to take these actions are not likely to give rise to legal liability. This is especially true where they can make the case that there were costs or trade-offs that justified not taking these actions. (19) Thus, the Sustainability Periphery informs and contextualizes the Sustainability Core, even as it remains conceptually distinct.

This paper is written for an audience that wants to understand the scope of directors' and officers' fiduciary duties in the context of climate change, as well as the wider "polycrisis" humanity faces. The desire to understand the scope of these duties may arise from a legal risk management standpoint, but it may also arise from the desire to encourage corporations to transition to more sustainable business activities. The latter not only better protects a corporation's shareholders; it also protects a corporation's stakeholders and, in the broadest possible sense, it protects people and the planet too.

Sustainability, as a concept, evokes stewardship and longevity. It is virtually impossible to predict or plan for what will happen in a hundred years; there is too much uncertainty. We can, however, plan for the next one or two generations. We can strive to leave the next generations with enough options (20) to live good lives while planning ahead for the next one to two generations, and so on. This paper's main argument, which focuses on the Sustainability Core, highlights a legal avenue for greater director and officer accountability which could help drive that change. Insofar as directors, officers, and lawyers advising them read this paper, I hope to draw attention to this accountability mechanism. But a legal avenue for accountability, in itself, is insufficient to drive businesses towards truly sustainable practices. This is why the Sustainability Periphery is so important. Activists and ordinary people interested in driving the shift towards sustainable business practices should draw on the treasure trove of resources, tools, and best practices often found within the Sustainability Periphery, to push sustainability further, and perhaps even shape the Sustainability Core. Part V of this paper provides a few suggestions on how to push sustainability further.

This paper will unfold as follows. Part II starts by investigating the scope and contours of directors' and officers' fiduciary duty, particularly as it relates to climate change-related risks and, possibly, even some ESG risks. This Part will draw on existing literature which analyzes how climate change presents foreseeable and financially material risks to the corporation, and why directors' and officers' fiduciary duties require them to consider how these risks will surface in short-, medium-, and long-term investment horizons. It will then make the case that this climate change analysis may be extended to ESG risks, since at least some ESG risks, like climate change risks, are foreseeable. Fiduciary duties are litigable and legally-enforceable. Therefore, the notion of a litigable, legally-enforceable Sustainability Core must spring forth from directors' and officers' more doctrinally established fiduciary duties. Following from the analysis in Part II, Part III of this paper will define the concept of the Sustainability Core and the Sustainability Periphery, along three themes: time horizon, risk monitoring systems, and stakeholder engagement. Part IV will provide an illustration of sustainability in action. In particular, it will focus on demonstrating how, and under what circ*mstances, the Sustainability Core is litigable, and by whom. A working familiarity with the landscape of legal risk will, hopefully, empower and encourage directors and officers to assess how the consideration of sustainability risks should be "mainstreamed" via structural or organizational changes. One possible approach is linking executive pay to ESG factors. Finally, reflecting on the important but inadequate role played by the Sustainability Core in today's fiduciary duties, Part V will consider how all of us--directors, officers, lawyers advising them, governments, regulators, environmentalists, human rights advocates, activists, and ordinary people who believe in sustainability--can push sustainability further. This involves drawing from the resources, tools, and best practices found in the Sustainability Periphery to implement sustainability, and even possibly transform the Sustainability Core. Part VI concludes.

II. DIRECTORS' AND OFFICERS' FIDUCIARY DUTIES AND ESG RISKS

A. Directors' and Officers' Fiduciary Duties and Climate Risks

This section argues that directors and officers have a fiduciary duty under Delaware law to consider climate change risks.

(1) The Commonwealth Climate and Law Initiative Report

This section relies largely on well-developed scholarly arguments on this topic, most significantly on a report by the Commonwealth Climate and Law Initiative ("CCLI") titled Fiduciary Duties and Climate Change in the United States (21) (the "CCLI US Report"). CCLI is based at Oxford University and partners with legal academics and law firms to issue reports prepared or commissioned in commonwealth jurisdictions with significant financial activity or carbon emissions. These jurisdictions include the United Kingdom, Australia, Canada, South Africa, India, Singapore, and Hong Kong.

The CCLI US Report explores the question of whether fiduciary duties in the U.S., specifically under Delaware law, require consideration of climate change risks. It focuses on physical risks, economic transition risks, and litigation and liability risks. The report deliberately "takes a 'first principles' approach to fiduciary law, applying those principles on a general basis, rather than seeking to interrogate or comment upon existing claims." (22) This feature facilitates deliberation on whether the reasoning used in the CCLI US Report may be extended to apply to ESG risks that may go beyond climate risks.

The key points of the CCLI US Report are as follows. The report starts by observing that climate change presents "foreseeable financial and systemic risks (and opportunities)" (23) for short-, medium- and long-term investment horizons. These risks include physical, economic transition, and legal and liability risks. (24) The CCLI US Report then focuses on two primary fiduciary duties of directors and officers: the duty of loyalty and the duty of care. (25) The report also focuses on the potential effect of the Business Judgment Rule under Delaware law, since commentors have observed that its wide scope of discretion effectively undercuts the duty of care. (26) The report attempts to flesh out the limits of, and exceptions to, the Business Judgment Rule--including conflicts of interest, (27) gross negligence, (28) unlawful decisions, (29) bad faith (30) and, most significantly, situations where there is "no business decision to protect." (31) The Business Judgement Rule refers to a judicial policy or approach of not second-guessing a corporate decision made by corporate directors and officers, so long as a minimum level of care is used. (32) In practice, this affords directors and officers with a wide scope of discretion and protection in corporate decision-making. (33)

In analyzing the duty of loyalty, the CCLI US Report focuses on directors' and officers' duties to provide oversight, in good faith, over a corporation's operations. (34) The report analyzes the evolution of the case law relating to the duty of oversight, starting from the landmark decision of In re Caremark International Inc. Derivative Litigation (35) ("Caremark") and ending with Marchand v. Barnhill. (36) The report highlighted that, to date, Caremark claims tended to involve failures to monitor for legal compliance. However, the cases were open to applying the duty to "business risks" as well. (37) An alleged breach of the duty of loyalty, which includes the nesting duty of oversight, is "not protected by the Business Judgment Rule, cannot be exculpated by corporate bylaw provisions, and cannot be indemnified through corporate policy." (38)

The above analysis leads to the conclusion that directors and officers should, at a minimum, take the following actions to avoid liability:

Oversee the implementation of climate-related legal risk controls; Monitor "mission critical" (39) regulatory compliance; Monitor climate-related "mission critical" business risks (although the CCLI US Report notes that there are currently no Delaware cases which specifically imposed liability for failure to monitor business risks). (40)

The CCLI US Report contains a largely similar analysis and conclusion in relation to the duty of care, although this duty is largely muted by the Business Judgment Rule. (41) A significant point is how the Business Judgment Rule does not protect "unconsidered inaction." (42) Put another way, the Business Judgment Rule protects decisions, but not non-decisions. (43) This leads to largely similar conclusions on the bare minimum requirements for directors and officers to escape potential liability:

(a) oversee implementation of a governance strategy for climate-related risks;

(b) Remain adequately informed of climate-related risks;

(c) obtain independent expert advice (internally or externally); and

(d) Apply a degree of critical analysis.

The CCLI US Report also discusses the effect of ubiquitous exculpation clauses in Delaware incorporation documents, and the limits of their application--they do not apply to injunctive relief claims, do not bar claims alleging a breach of the duty of loyalty (including the duty of good faith), and do not prevent claims against officers of a corporation. (44)

Most relevant to the search for the Sustainability Core is the report's diagram on a "Hierarchy of personal exposure for US directors on climate issues," which is reproduced here for reference:

This hierarchy can be applied to the Sustainability Core and Sustainability Periphery: the bottom two rows fall within the Sustainability Core, and the top four rows fall within the Sustainability Periphery. To recap, while brief definitions of the Sustainability Core and Sustainability Periphery were provided in the Introduction above, these concepts will be defined in much greater detail at Part III below. While the CCLI US Report is unclear on this, I interpreted the third row from the bottom ("Standard to avoid litigation") as capturing litigation claims which are likely to survive a motion to dismiss, but are not likely to give rise to judicial decisions which impose legal liability. This illustrates how, even when attempting to filter a "core" of sustainability, there are soft edges between the core and the periphery of sustainability. (45) That said, this attempt does help to further clarify and harden the edges of the Sustainability Core.

Another significant aspect of the CCLI US Report is its emphasis on the foreseeability of climate risks. (46) This foreseeability arises in large part because of the large number of risk analyses, commentaries, and statements from prominent business players (like Blackrock (47)) that have emerged. The rise of climate change-related litigation and shareholder proxy battles (such as Engine No. 1's success in replacing three directors on Exxon's board) also increases foreseeability. (48) This emphasis on foreseeability serves as a touch point to extrapolate and possibly distinguish the climate risk analysis from the wider sustainability analysis. I will discuss this in greater detail in Section B below. There, I suggest that leading ESG reporting standards and process-based frameworks have arguably widened the scope of foreseeable risks from climate risks to ESG risks generally, Of course, some ESG risks are more foreseeable than others, and a materiality assessment on ESG factors plays a critical role in filtering and prioritizing these risks.

(2) Shareholder Wealth Maximization and Underpricing Climate Risks: Theoretical Sources of Sustainability

Much of the analysis in the CCLI US Report also mirrors the analysis in another significant article on this topic, Professor Lisa Benjamin's The Road to Paris Runs Through Delaware: Climate Litigation and Directors' Duties. (4) One notable addition that Benjamin's analysis brings is her theoretical discussion, particularly her observations on the "shareholder wealth maximization norm." She reminds us how, despite a prevailing perception of the shareholder wealth maximization ("SWM") norm as an obstacle to climate action, the SWM norm is primarily focused on corporations' long-term profitability. (50) This is significant because norms are powerful forces in corporate law, influencing corporate culture and corporate actors. (51) Norms also help shape the judicial expression of corporate law through the prevalence of standards rather than rules. (52)

Benjamin contrasts the contractarian theory (53) against the property model of the corporation, where the aim of corporate law is to increase the total long-run market value of the firm, which achieves the best results for shareholders. (54) Benjamin describes how Delaware law has embraced the property model, while incorporating SWM in a manner which "emphasizes long-term wealth maximization" by strengthening some of the powers of directors. (55)

Benjamin then highlights a significant problem: descriptions of SWM tend to conflate shareholder value with share price. (56) In practice, decision-makers often rely solely on share price as a metric for shareholder value. This practice is based on the fiction of the efficient market, that is, the notion that markets absorb and process all relevant information concerning corporations in real time, promptly, efficiently, and accurately. (57) The use of share price as the sole metric for planning and decision-making may encourage short-term decision-making, especially considering how markets tend to poorly assess and incorporate long-term systemic risk. (58)

Professor Madison Condon writes especially pertinent works on the persistent, system-wide underpricing of climate risk. In her article, "Market Myopia's Climate Bubble," (59) Condon provides an insightful analysis on all the ways in which markets fail to accurately incorporate climate change-related risks into asset prices. These include five factors. First, analysts and shareholders lack asset-level data at the level of granularity necessary to make adequate climate-risk assessments, including the location of business operations, supply chain origins and routes, and sources and amounts of required natural resources like energy and water. Corporations typically do not disclose these data points in financial reports. (60) Second, corporations reporting on climate risks tend to use outdated means of risk assessment such as over-reliance on historical data to project future risks, which fail to account for extreme, unprecedented events, fail to account for the correlation of extreme climate events, and is ignorant of latent risks. (61) Third, management officers lack personal incentives to adequately seek out and price climate risk, leading to equity overvaluation. (62) Fourth, market structures limit shareholders' demand for adequate risk assessment. (63) Specifically, "[e]ven if institutional investors are able to promote long-termism through governance measures and oversight of management, it is still active investors trading on the margins that determine share price." (64) Fifth, there is misinformation and doubt fueled by fossil-fuel companies' decades-long misinformation campaign about climate change and its impacts, (65) as well as persistent cognitive biases such as the status quo bias and the availability heuristic. These tend to cause the possibility of "black swan" events to be discounted. (66) In her article, Condon strongly demonstrates how market forces, driven in part by analysts' ratings and assessments on incomplete data and widespread biases, fail to adequately price climate change-related risks. This analysis can arguably be extended to some ESG risks as well.

Lisa Benjamin's discussion on the SWM norm in Delaware law and Madison Condon's analysis of the underpricing of climate risks together provide a strong theoretical backing to the conclusions reached by the CCLI US Report--namely, that directors and officers, in discharging their fiduciary duties to the corporation and its shareholders, must minimally consider foreseeable climate change risks. This "consideration" entails, as a bare minimum to avoid liability, implementing a monitoring and assessment system, to monitor for climate change-related laws and liabilities and "mission critical" (67) business risks linked to climate change.

Benjamin's theoretical discussion of the SWM norm and its focus on long-term value creation provides further basis for the extension of the climate risk analysis to a broader notion of "sustainability." The following section will explore how much further the climate risk analysis can be pushed.

B. ESG Risks as a Foreseeable Category of Risks

Section A discussed how recent developments (in industry practices and climate change litigation) have made climate change-related risks foreseeable, and therefore, material. Accordingly, specific climate change risks need to be identified by a thoughtful materiality assessment. Moreover, directors and officers must actively oversee such monitoring as a bare minimum to avoid liability.

The foreseeability of climate change risks invites the question: what about other ESG risks? This is because leading sustainability reporting standards like the Sustainability Accounting Standards Board ("SASB") standards and the International Sustainability Standards Board's ("ISSB") International Financial Reporting Standards ("IFRS"), appear to encourage corporations to assess climate change-related risks within the context of a broader set of ESG risks. (68) This section attempts to explore the role of broader ESG risks (beyond climate risks), building upon the theoretical ideas set out in Benjamin's and Condon's analysis in the above section and the doctrinal and risk analysis set out in the CCLI US Report which focuses on the foreseeability of climate risks. I would caveat this section by suggesting that even if readers disagree with the arguments made in this section, this paper can still be read as applicable to climate change-related risks.

Some ESG risks are even more foreseeable than climate change risks. For example, many corporations today face the risk of human rights abuses happening within their supply chains. (69) These risks may give rise to significant reputational, legal, and other financially material consequences. (70) Other ESG risks are less foreseeable than most risks related to climate change. For example, a corporation may not, in the short or even medium term, face financially significant negative impacts from its business activities that cause deforestation, biodiversity loss, or marine plastic pollution. It also may not face regulatory or litigation pressure to reduce these impacts in the short or even medium term as compared to, say, greenhouse gas emissions reductions. However, ESG risks like these may become financially material within a long-term investment horizon. Furthermore, deforestation and biodiversity loss are closely linked to the climate crisis, (71) and may also be viewed as a form of climate change risk. Therefore, any analysis which applies to climate risks may extend to certain types of ESG risks, depending on how they may foreseeably affect a corporation financially (including its risk exposures) in short-, medium-, and long-term investment horizons.

Furthermore, considering how ESG reporting is becoming increasingly common and mainstream, (72) directors and officers may soon no longer be able to ignore ESG risks that go beyond climate risks. While directors and officers may be able to argue that specific ESG risks may not have been foreseeable following a good faith materiality assessment, their fiduciary duties of loyalty and care require them to at least conduct such a materiality assessment. In this way, like climate risks, at least some ESG risks are foreseeable. Therefore, like climate risks, ESG risks should be systematically considered, drawing on available industry tools and frameworks (such as ESG reporting standards) for risk analysis and management.

Given the long-term outlook of the SWM norm and the long-term focus of sustainability, (73) it is a logical conclusion that ESG risk considerations (including climate change-related risks) should be integrated into corporate decision-making, as overseen by directors and officers in the discharge of their fiduciary duties. As discussed in Section A, using share price as the sole proxy for shareholder value can lead to a failure to incorporate systemic risk considerations (including climate change risks) into strategic planning and decision-making. It also fails to adequately account for the shareholders who prefer that directors and officers plan for long-term value creation. This problem is especially pronounced where directors, officers, and high-ranking executives are personally incentivized to favor short-term strategies, such as where their salaries, bonuses, and promotions are linked to "business as usual" metrics or metrics that fail to incorporate longer-term, systems-level risks (such as share price, or annual profits). (74)

In the following section, I will flesh out this last point by considering whether directors and officers owe specific duties to shareholders with long-term investment horizons, what these duties may entail (in trying to find a "core" of these legally-enforceable duties), and how potential conflicts may be resolved between this category of shareholders and other categories of shareholders.

C. Duties to Shareholders with a Long-Term Investment Horizon

Consider a scenario where directors and officers are deciding whether or not to make a significant shift in a corporation's business model to one which would sacrifice short-term profitability for long-term gains. Such a decision would likely be controversial and divide shareholder factions. In effect, directors and officers would be deciding between two options: first, continuing with "business as usual" to maximize short-term shareholder profits; or second, transitioning to a business model and strategy which may sacrifice short-term profitability in favor of benefits which may only arise in a long-term horizon (for example, twenty years later). This is a decision facing many coal, gas, and oil corporations today, as they decide how quickly to transition to renewables, including whether to continue expanding mining and exploration for fossil fuels in the short to medium terms.

In such a scenario, what is the duty, if any duty exists at all, of the directors and officers of such a company to shareholders who may have a long-term investment horizon? How could these duties be balanced against their duties to shareholders who have a short-term investment horizon?

Courts have long drawn an analogy between trustees' duties and directors' and officers' fiduciary duties. Directors and officers of a corporation owe fiduciary duties to individual shareholders. (75) Courts have also held that a director is a trustee for an individual shareholder. (76) While directors are not "trustees" in the strict sense of the term, (77) one leading treatise explains that directors are practically trustees, with the entire body of shareholders acting as a beneficiary. (78) There are also cases which refer to directors and managing officers of a corporation as "trustees or quasi trustees." (79)

The duty of loyalty is also well-established under Delaware corporation law. Under trust law, the duty of impartiality is an extension of the duty of loyalty. (80) While the perfectly equal treatment of beneficiaries is not required, a trustee cannot ignore or sideline some beneficiaries through neglect or lack of oversight, simply because other beneficiaries have more access, or are more relentless or aggressive. (81) Professor Susan Gary has emphasized the particular importance of the duty of impartiality in the context of fiduciary situations where funds are held for multiple generations, such as pension plans. In the context of such multi-generational trusts, (82) though the fiduciary duties of directors and officers to shareholders arise in a different context, I propose that those duties still require that directors and officers consider the needs, interests, and preferences of all categories of shareholders, including shareholders with a long-term investment horizon.

What does this consideration entail in practice? At the minimum, directors and officers should plan and prepare for long-term risks faced by the corporation, particularly where those risks are foreseeable. Section B above discussed how climate change-related risks and some ESG risks are foreseeable, and so directors and shareholders should have a plan to monitor how such risks may affect the corporations they control. In Part III below, I will describe the "Sustainability Core" and argue that, with respect to the "time horizon" aspect, this type of active risk monitoring forms part of the "Sustainability Core." This forms a process-based component of the Sustainability Core and should be the bare minimum for directors to discharge their fiduciary duties of loyalty and impartiality to long-term investors.

We now return to the hypothetical corporation and the difficult decision posed to it described at the start of this section. The corporation's directors and shareholders would have the broad discretion to make either decision, provided that their decision is well-considered, made in good faith, and made with due consideration of all the financially material risks faced by the corporation in the short-, medium-, and long-term investment horizons. (83) Such a decision would be protected by the Business Judgment Rule. (84) If the directors and officers decide to stick to the status quo or provide a transition model which is too slow, shareholders who prefer a long-term investment horizon may find such a decision too risky. These shareholders should be empowered to divest. This is why ESG risk assessment and disclosures are so important, particularly in today's world, where we are faced with a polycrisis of climate change, biodiversity loss, ecosystem collapse, and many other environmental and social risks which may present significant financial risks and systemic risks. (85) This should be the bare minimum.

From a broader policy perspective, this bare minimum--comprising the Sustainability Core--is probably not sufficient to push businesses to implement sustainable business practices quickly enough. This is because there will still be many shareholders who seek short- or medium-term gains, and who may not see the need to divest. This is why the Sustainability Periphery is so important. Activists and ordinary people interested in encouraging corporations to shift towards sustainable business practices should draw on the wealth of tools, resources, and best practices, often found within the Sustainability Periphery, to push sustainability further, and perhaps even shape the Sustainability Core. This paper will provide such suggestions in Part v.

In the meantime, this paper focuses on the Sustainability Core. This paper hopes to highlight the existence of a possible Sustainability Core which springs forth from the directors' and officers' fiduciary duties. This Section highlighted the distinction between the Sustainability Core and Sustainability Periphery, and the distinct practical roles played by each. Thus, we are now ready to attempt to define, with greater precision, the concept of "sustainability" and what its legally-enforceable "core" and broader, discretionary "periphery" entail.

III. DEFINING SUSTAINABILITY

In the preceding Part, I suggested the possible theoretical and doctrinal sources of "sustainability" that might arise from directors' and officers' fiduciary duties. These sources included, in particular, the long-term outlook of the shareholder wealth maximization norm (as theorized by Lisa Benjamin), the financial relevance of climate change-related risks (as described by Madison Condon), and the specific fiduciary duties owed to shareholders with a long-term outlook. These theoretical and doctrinal ideas will ground this Part, which defines sustainability in its "core" and "periphery" with additional detail.

For now, it is helpful to start this Part's discussion by drawing from history--specifically, the history of the concept of "sustainable development"--and how this concept has arguably informed and shaped what many understand as "sustainability" today, which in turn contains clues about what we mean when we think of "sustainability." This comparison will help ensure that, while we remain open to possible sources of "sustainability" from a fiduciary perspective, we are not too removed from a broader societal understanding of "sustainability," which has historical geopolitical roots.

A. Defining Sustainability: The Core and the Periphery

Many have linked the concept of "sustainability" to that of "sustainable development." (86) The classic definition of "sustainable development" emerged from a 1987 report by the World Commission on Environment and Development titled Our Common Future (commonly known as the Brundtland Report). (981) The Brundtland Report defined "sustainable development" as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." (88) It is important to note that embedded in this definition is an elegant diplomatic compromise--between countries in the Global South who wanted to emphasize their right to development in international law and countries in the Global North who wanted to ensure that this development does not harm the ability of future generations to meet their own needs. (89) The term "sustainability" leaves out the concept of "development," and all the historical associations, negotiated tensions, and international diplomacy captured in this loaded term. Does something fill this vacuum? A clue may lie in the values and goals the original Brundtland Report tried to capture.

The Brundtland Report itself highlights that its definition of "sustainable development" captures and balances two key concepts. The first concept includes needs--and particularly the "essential needs of the world's poor," (90) which the Brundtland Report specifically emphasized. (91) The second concept includes limitations on the environment's ability to meet these present and future needs, given the current state of technology and social organization. (92)

When we replace the term "sustainable development" with the term "sustainability" and apply it to business activities, the concept of society's needs, particularly the essential needs of today's poor, falls away. In the vacuum left in its wake, an implied assumption enters: the idea that business activity is either good (in the sense of meeting society's needs or producing a net, present social good), (93) necessary, or inevitable. Yet all these conclusions may be contested. It is beyond this paper's scope to enter these debates past merely pointing out this implied assumption.

If, for now, we simply assume that there is a baseline of business activity that is desirable or necessary, then the concept of "sustainability" emphasizes how that business activity should nevertheless consider the limitations that should apply across present and future needs. Meeting present needs should not compromise business stakeholders' ability to meet future needs. But: whose needs? And whose ability to meet these needs? Putting aside these questions for a moment, we can at least isolate a key concept of "sustainability"--its forward-looking, temporal element. This aligns with a key idea in Myers's and Czarnezki's description of sustainability as relating to time, and business sustainability as "shifting the business's focus to the future." (94)

The uncertainty inherent in the above questions is further illustrated by examining the more business-centric variation of the Brundtland definition, which was put forth by the International Institute for Sustainable Development ("IISD"). (95) IISD defines sustainable development as the "[adoption of] business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining and enhancing the human and natural resources that will be needed in the future." (96) This definition centers the focus on the needs of the enterprise and its stakeholders in the present, but widens that focus to broader human and natural resources "that will be needed" in the future. This definition also does not directly address the question of whose needs in the future. Meanwhile, in the present, there is a focus on stakeholders in addition to the enterprise itself--thus potentially widening the scope of sustainability to all stakeholders of the enterprise, an open-ended concept.

Turning back to Myers's and Czarnezki's description of "sustainability," we find a similar degree of open-endedness. After emphasizing the temporal and future-looking elements of sustainability, they adopt Cramer-Montes's description of sustainability "as a business strategy that creates long-term stakeholder value by addressing social, economic, and environmental opportunities and risks material to a company." (97) Here, there is again a focus on the open-ended concepts of "stakeholder value" and ESG "opportunities and risks," while anchoring these open-ended concepts in "materiality" as a potentially controlling or limiting feature. Therefore, "sustainability" minimally carries a temporal and future-looking element. Further, it can potentially capture any social, economic, and environmental factors that were judged by a corporation's decisionmakers to be "material" to the corporation itself.

Accordingly, the edges of "sustainability" are open-ended, fuzzy, and context dependent. This paper proposes a specific context for defining sustainability: the legal obligation of directors and officers to consider ESG risks and opportunities (especially climate change-related risks) as part of discharging their fiduciary duties. Since the definition and scope of sustainability is context dependent, I propose the following definition.

"Sustainability," in the context of decision-making by directors and officers of a corporation exercising their fiduciary duties, can be defined as follows:Sustainability contains substantive and process components, each of which has an irreducible mandatory "core" and a discretionary "periphery."Sustainability's substantive component includes the goal of creating long-term value for the corporation and its shareholders. In a for-profit corporation that is not a benefit corporation, "value" refers to financial value.Sustainability's process component involves materiality assessments to consider, rank, and prioritize questions falling within the discretionary "periphery" of its substantive components, such as: should short-, medium- or long-term goals be prioritized? How should stakeholders be engaged? Which stakeholder interests should be prioritized? This process identifies and ranks ESG risks, and formulates a corporate strategy towards mitigating ESG risks and taking advantage of strategic ESG opportunities. Specific ESG risks and opportunities may be financially material (98) because they may foreseeably affect the corporation's long-term financial value (e.g., climate change physical risks may affect short-, medium-, and long-term profit generation).

This definition of sustainability intentionally focuses on shareholders because of its specific context--decision-making by directors and officers of a corporation exercising their fiduciary duties. Doctrinally, directors' and officers' fiduciary duties are owed to the corporation and its shareholders. (99) In practice, litigation alleging breaches of fiduciary duties is frequently brought by affected shareholders relying on shareholder class action lawsuits or derivative actions, which illustrates how these duties may be enforced. (100)

B. Illustrations: Time Horizon, Risk Monitoring Systems, and Stakeholder Engagement

This section will now illustrate the Sustainability Core alongside the Sustainability Periphery through the use of three decision-making themes: time horizon, risk monitoring systems, and stakeholder engagement. The theoretical and doctrinal basis of what comprises the Sustainability Core was discussed in Part II above.

(1) Time Horizon

Sustainability Core: The Sustainability Core requires planning for short-, medium-, and long-term investment horizons, based in part on the SWM norm of long-term value creation under Delaware law. (101) The duty of loyalty requires that long-term risks, including climate risks and other foreseeable ESG risks which may be financially material in the long-term, be systematically identified, monitored, and managed. (102) In particular, the duty of impartiality, which forms part of the duty of loyalty, (103) requires that the preferences and concerns of shareholders who adopt a long-term investment horizon should be accommodated. (104) At a minimum, long-term ESG risks should be identified, monitored, and reported on, and a plan for mitigating such risks should be formed. (105) Long-term investors should be empowered to make investment decisions through measurement and disclosure of ESG risks which arise on a long-term investment horizon. (106)

Sustainability Periphery: The Sustainability Periphery preserves discretion in how differences between categories of investors along the temporal axis are resolved. Directors and officers need not treat every type of investor equally, (107) but they should fairly and impartially consider the interests of all categories of shareholders, including long-term investors. (108) This may be done via a proactive stakeholder engagement process. (109)

For example, in the above example of the hypothetical corporation deciding between two strategic options (i.e. whether to stick to the current business model for continued short-term profits, or whether to transition to a new business model which sacrifices short-term profits to better manage longer-term risks), (110) the Business Judgment Rule would preserve a safe harbor in decision-making, and protect directors and officers in whichever decision they fairly and impartially make in good faith. (111)

The Sustainability Periphery also allows directors and officers to retain discretion regarding what internal sustainability processes to implement along the time horizon theme--that is, to implement a strategic and planning view that accounts for short-, medium-, and long-term investment horizons. For instance, directors and officers must decide on what metric to base executive remuneration. (112) If it is tied to share price, this may incentivize short-term strategic planning. If directors and officers are planning for a long-term horizon, a good strategy is to structure executive pay in a way which incentivizes long-term planning by using alternative ESG metrics. (113)

In general, the Sustainability Periphery also preserves director and officer discretion on the exact duration of "long term." Directors and officers should still consider industry norms and expectations, including any sector-specific norms. A long-term investment horizon is typically twenty years or longer. (114) Where investors include institutional investors like pension funds, the long-term investment horizon may track the life expectancy of its youngest beneficiary.

(2) Risk monitoring systems

Sustainability Core: The Sustainability Core requires directors and officers to consider ESG-related risks in the strategic planning of business operations. At a minimum, directors and officers must implement and oversee a systematic approach that periodically identifies foreseeable and financially-material ESG risks. These include systemic or "economic cross-sectoral risks," and financial system risks or "systemic contagion risks." (115) These should minimally consider climate-change related risks, but should also consider other foreseeable ESG risks as well. (116) This is also because there are many interconnections between climate change related-risks and other ESG-related risks. (117)

ESG reporting standards can serve as useful starting points for a materiality assessment process. I suggest that the Sustainability Core requires the use of at least one established ESG reporting standard, since they represent a systematic, process-based approach towards identifying ESG-related risks. Without this process, directors and officers may run into the "we don't know what we don't know" problem; ESG reporting standards help prompt consideration of risks that are (at least arguably) objectively foreseeable. The SASB standards and the IFRS are leading sets of standards based on financial materiality, while the Global Reporting Initiative ("GRI") standards are a leading set of standards based on an impact-based approach. (118)

This is one area where there is a softer differentiation between what falls in the Sustainability Core and what falls within the Sustainability Periphery, because the materiality assessment process often affects what is or is not foreseeable. Moreover, there is a significant degree of discretion built into materiality assessment decisions. (119) On the other hand, ESG-related risk analysis and materiality assessment is emerging as a mainstream risk management and accounting tool. While this may arguably still remain within the Sustainability Periphery, the extent to which it is foreseeable may soon cause it to fall within the Sustainability Core. Therefore, the Sustainability Core would require the use of at least one established ESG reporting standard. In the absence of this, directors and officers should at the very least ask themselves (and any other responsible executives, officers, and employees) the following questions, (120) and have a systematic, objective, good faith approach in finding the answers and acting on them:

1. What ESG risks are foreseeable for a company of our size, in our sectors, and in our markets? ("material ESG risks") What risks are our peers in similar situations facing?

2. What are the views of our shareholders with regard to these risks?

3. What are the views of our key stakeholders (e.g. lenders, insurers, customers) with regard to these risks?

4. What is our corporation's exposure to the material ESG risks under various time horizons (short-, medium-, long-term)?

5. In the various jurisdictions in which we operate, what ESG-related laws and regulations have been implemented? Or could be implemented? What ESG-related litigation risk could arise?

6. Do we need to adjust the book value of our assets (including impairments and liabilities) to account for our assessment of these ESG-related risks?

Question 1 is the most significant question directors and officers need to ask and investigate. It is also important to note how the Sustainability Core may include additional requirements for specific industries and sectors. A leading ESG reporting standard, SASB, which focuses on sustainability integration, and takes a sectoral approach, emphasizes this in its concept of "[a] minimum set of industry-specific disclosure topics reasonably likely to constitute material information." (121)

Sustainability Periphery: The Sustainability Periphery preserves directors' and officers' discretion on decisions such as: which ESG reporting standard(s) to use, whether to use one or multiple standards, and decisions on how to integrate them. For example, Amazon's sustainability report uses several leading ESG reporting standards, and integrates them by issuing a single sustainability report and including in its appendix references to ESG matrices. The matrices map unto the standards it uses, namely, SASB, the Taskforce of Climate-related Financial Disclosures ("TCFD"), and the UN Guiding Principles Reporting Framework. (122)

(3) Stakeholder Engagement

Sustainability Core: Stakeholders include shareholders. Therefore, a stakeholder engagement process might help provide the data needed in the ESG risk monitoring systems described above. The Sustainability Core along this theme is quite minimal. Specifically, directors and officers should consider whether stakeholder engagements are needed as part of the process to monitor, identify, and assess ESG risks which may arise specifically from stakeholder concerns. The ESG risks may include, for example, human rights abuses which may not otherwise be known to directors and officers absent a stakeholder engagement process.

Sustainability Periphery: Stakeholder engagement processes provide a great deal of insight and best practices. others have commented on the importance of proactive shareholder engagement in mitigating shareholder activism risks, such as the risk of proxy battles. (123)

In her book Pathways to Success: Case Studies for Mainstreaming Corporate Sustainability, (124) Suzanne Farver studies the example of the Levi Strauss company, which determined that it was important to reduce the risk of factories that passed audits but were out of compliance. (125) The Levi Strauss company realized it needed to engage with suppliers and other interested stakeholders to find innovative solutions. It partnered with Ceres, a leading sustainability nongovernmental organization, to develop a stakeholder engagement process. Following this, it started pilot projects to test the program with some of the company's suppliers. Their goal was to discover what workers really wanted and cared about, rather than what Levi Strauss thought they cared about. (126) They then developed seven Guiding Principles on worker engagement and stakeholder management, including on how to prioritize specific locations, balance competing worker needs, and track metrics and progress. (127) This is an example of positive, proactive stakeholder engagement in the Sustainability Periphery, designed in part to help improve the corporation's compliance with regulations and factory audits.

On this note, Professor Lisa Fairfax, has pointed out how shareholder democracy, in all the forms it takes in the united States and abroad, is likely to succeed in its aims of enhancing financial returns, enhancing management's accountability, and reducing corporate misconduct. (128) In anticipation of shareholder activism (including proxy battles), lawyers have advised directors to take the approach of proactive shareholder engagement. (129)

These contexts, experiences, case studies, and literature all point to the importance of a holistic, robust, proactive stakeholder engagement process. Since stakeholder perspectives can provide important data points on many ESG risk metrics, it is an important part of the ESG risk monitoring framework discussed above.

To recap, this Part defined the key concepts of the Sustainability Core and the Sustainability Periphery, and provided illustrations along three decision-making themes: time horizons for strategic corporate planning, risk monitoring systems, and stakeholder engagement. This flowed from both an assessment of the historical and geopolitical context of the term "sustainable development" as well as the theoretical and doctrinal analysis of directors' and officers' fiduciary duties discussed in Part II above. The next Part of this paper will explore further the implications of the Sustainability Core in relation to directors' and officers' fiduciary duties. It considers a key practical aspect of these duties--how they can be enforced via litigation, and who is likely to enforce them.

IV. ENVISIONING SUSTAINABILITY IN ACTION

A. The Sustainability Core and Possible Litigation

An overview of the litigation landscape will help further clarify how the Sustainability Core is legally enforceable and, therefore, how lawyers advising directors and officers should consider the litigation risk which can arise from directors' and officers' failure to implement the Sustainability Core.

This section will focus on environmental litigation cases brought by shareholders. It will also discuss comparable litigation brought by shareholders for breaches of Caremark-style duties cited in the CCLI US Report. Shareholders initiated these cases after various triggering events that caused a significant drop in share price. A triggering event could be a disaster or outbreak, (130) an expose following private investigations, (131) or a regulatory action, (132) which reveals to the shareholders a major defect or risk in the corporation's business model that the directors and officers ought to have known about, managed, and disclosed to shareholders.

This perspective perhaps reflects a practical reality surrounding shareholder litigation against directors and officers: if a given shareholder who adopts a long-term investment outlook believes the decision-makers of a corporation to be inadequately pricing long-term risks, that shareholder is free to divest from (i.e. sell some or all her shares in) that corporation. This is simpler and cheaper than litigation, and therefore the more likely outcome. It is only when shareholders suffer financial losses that they may be sufficiently motivated to litigate to attempt to recover these losses. Emily Strauss also points out how the potential for recovery is high when shareholder litigation tags onto an existing expose, investigation, or regulatory action because the costs of retrieving information or evidence is relatively low. (133)

Cases where shareholders allege a breach of fiduciary duty typically take the form of a derivative action brought by plaintiff shareholders directly against the corporation's directors and officers, and against the corporation itself as a nominal defendant. (134) There may also be "books and records" requests where breaches of fiduciary duties are suspected. (135) The following are a few examples:

Cases following a disaster or outbreak. The case of Marchand v. Barnhill (136) involved a listeria outbreak, causing Blue Bell Creameries to recall all of its products, shut down all of its production plants, and lay off a third of its workforce. Three deaths followed the listeria outbreak, and shareholders suffered losses due to a liquidity crisis that forced Blue Bell to accept a dilutive private equity investment. (137) A shareholder brought a derivative suit against two key executives and the directors, claiming breaches of fiduciary duties. The shareholder specifically claimed a breach of the duties of care and loyalty by failing to oversee Blue Bell's food-making operations and breaching their duty of loyalty under Caremark. (138) In reversing the Court of Chancery's dismissal of the plaintiff's case for failure to plead facts sufficient to support their contentions, the Supreme Court of Delaware found that, as food safety was one of the most important aspects of Blue Bell's business, its directors needed to do more than ensure ongoing compliance with food safety regulations. The Court declared that the directors "have a duty 'to exercise oversight' and to monitor the corporation's operational viability, legal compliance." (139) The CCLI US Report relied on this reasoning in Marchand and post-Marchand cases in coming to its conclusions discussed above, (140) specifically those regarding directors' duty to implement and oversee risk monitoring systems for climate risks, a logic which may be extended to other foreseeable ESG risks as well. (141) Marchand is also an example of a case following a disaster, specifically, a disease outbreak.

The case of In re Boeing (142) was also cited in the CCLI US Report, and involved shareholder losses resulting from a drop in Boeing's share prices after two tragic airplane crashes of Boeing 737 MAX airplanes. Shareholders brought numerous books and records requests and derivative actions, which were consolidated by the Delaware Chancery Court. (143) These included derivative claims for alleged breaches of fiduciary duty by the defendant directors, for allegedly failing to fulfill their Caremark duties to monitor and oversee the safety of Boeing's airplanes. The court dismissed the defendants' motion to dismiss. In re Boeing can be considered a successful post-Marchand case. It is also another example of a shareholder derivative suit following tragic disasters leading to shareholder losses.

Shupak v. Reed (144) is a pending environmental litigation case following a massive, months-long methane leak from one of SoCalGas's natural gas storage facilities in California. This led to the temporary relocation of many residents and the California Governor declaring a state of emergency, as well as negligence-related class actions, a securities class action, a criminal complaint, and a federal government investigation. (145) The plaintiff shareholder brought derivative complaints against directors and executive officers of SoCalGas and Sempra (the sole parent company of SoCalGas) for alleged breaches of fiduciary duties of loyalty and good faith. (146) one of the allegations was a failure to "properly oversee [SoCalGas's and Sempra's] business," (147) based on directors' and officers' requirement to "exercise reasonable and prudent supervision over the management, practices, control, and financial and regulatory affairs" (148) of SoCalGas and Sempra.

Cases following private investigations which expose undisclosed defects or risks. The complaint filed in Perri v. Croskrey (149) concerned a plastic product which Danimer Scientific, Inc. was producing, and that product's purported biodegradability when compared to fossil fuel plastics. Following an article published by the Wall Street Journal titled "Plastic Straws That Quickly Biodegrade in the Ocean, Not Quite, Scientists Say," (150) discoveries were made of alleged false and misleading statements which overstated the product's biodegradability. (151) These public events caused drops in Danimer's stock prices, (152) leading to shareholder losses. Plaintiff shareholders alleged breaches of fiduciary duties by the defendant directors, including failure to "maintain an adequate system of oversight, disclosure controls and procedures." (153)

The case of Jacob v. Bloom (154) similarly involved a report, called the "Hindenburg Report," which included forensic analysis and concluded that Bloom Energy, Inc., misrepresented the financials and performance of its "green" energy technology. (155) Following this report, two of Bloom's shareholders demanded to inspect Bloom's books and records (under Section 220 of the Delaware General Corporation Law) to investigate potential mismanagement by Bloom's directors and officers. (156) The plaintiff shareholders stated their purposes for inspection as being: "to investigate... breaches of fiduciary duties by management and the Board in connection with the events, circ*mstances, and transactions described in the Hindenburg Report" and, to prepare and file a stockholder derivative lawsuit, if appropriate. (157) The Delaware Chancery Court granted the one of the plaintiff's demands for inspection, but narrowed the category of documents sought. (158)

Cases following investigations or regulatory action by public authorities. The case of In re Exxon Mobil Corp. Derivative Litigation, (159) arose from a series of events occurring around 2014 involving Exxon's alleged false and misleading statements, which failed to adequately price the impairments to its oil and gas operations. The litigation itself was preceded by regulatory action taken by multiple states' attorneys' general including investigations, and a complaint lodged by the New York's Office of the Attorney General for alleged securities fraud, equitable fraud, and other alleged statutory breaches. (160) These events triggered a series of litigation, including securities fraud litigation brought by a shareholder class action. (161) It is in the derivative litigation being discussed that shareholders alleged breaches of fiduciary duties by Exxon's directors and officers, including directors' failures to require that an impairment charge be reflected. (162)

There is a chance that some of these shareholder litigation actions were also motivated by broader environmental values and goals, rather than merely a financial incentive. If so, these values could further incentivize such litigation as being, in part, for public interest purposes. For example, in the Complaint in Shupak v. Reed, the plaintiff alleged that the methane link had undermined California's "vaunted program to combat climate change," thereby "erasing years of [] progress made under California's effort to overhaul its energy industry, a program that has cost consumers tens of billions since 2006." (163)

B. In the Shadow of Possible Litigation: Lawyers' Advice and Mainstreaming Long-Term Outlooks in the Sustainability Periphery

The above survey of shareholder litigation arising from alleged breaches of directors' and officers' fiduciary duties helps us extrapolate and imagine what litigation surrounding an alleged breach of the Sustainability Core could possibly look like. This includes who might be sufficiently motivated to sue, under what circ*mstances, and how these lawsuits might play out. Therefore, lawyers advising corporations, or their directors and officers, should note these potential legal risks.

Directors and officers should also proactively consider how to manage the risk of widespread and systemic "short-termism," including within the corporation. one approach may be to link the compensation of top executives, and perhaps even the directors themselves, to climate risk metrics and other ESG-linked metrics rather than to the traditional metrics which are largely tied to the corporation's financial performance during directors' and executives' tenure. There are many corporations already purporting to follow this practice, but there is much to be improved in implementation. (164) A deeper analysis of this important and innovative development is beyond the scope of this paper. Such practices would fall within the Sustainability Periphery.

V. PUSHING SUSTAINABILITY FURTHER: STRATEGIES, PROPOSALS, AND NORMATIVE JUSTIFICATIONS

This paper has thus far focused on the law as it is today. As mentioned in the Introduction above, one of the goals of this paper is to highlight a legal avenue for greater director and officer accountability which may help encourage corporations to transition to more sustainable business activities. But this alone is not enough. The Sustainability Core and Sustainability Periphery of today can and should be pushed further by interested citizens, environmentalists, human rights advocates, governments, as well as directors, officers, and the lawyers advising them. Each group has a role to play in driving sustainability (in both its "core" and its "periphery"), while also fulfilling its distinct but related legal duties and responsibilities (such as shareholder wealth maximization).

The following are a few strategies which can help push sustainability further.

Using the Benefit Corporation Form. Directors and officers have a fiduciary duty to act in the best interest of the corporation and its shareholders, and specifically, to maximize long-term shareholder value. In a for-profit corporation, "value" is equated to financial value. Yet many stakeholders of a corporation (including the shareholders themselves) may have other environmental and social values they also hope the corporation will pursue. In the stakeholder engagement process, directors and officers can and should listen to the concerns and values of their stakeholders. This was discussed in Part III, Section B(3) above. If a majority of the shareholders or the corporation itself decide to pursue specific public interest goals, the directors and officers may consider converting the corporation to the form of a benefit corporation. This would allow directors and officers to deliberately pursue non-financial goals alongside financial goals in a holistic, robust way that is more in line with stakeholders' values. (165)

Shareholder Activism and Shareholder Democracy. Shareholders who hold values which they want incorporated in corporate decision-making can consider legal avenues which promote a greater degree of shareholder activism or shareholder democracy. The legal strategy of alleging breaches in fiduciary duty is one possible pathway, but it has its costs and limitations. (166) other strategies include the use of proxy action, most famously in the case of Engine No. 1's proxy action to successfully appoint three directors on ExxonMobil's board. (167) Lisa Fairfax has argued that shareholder democracy--in the many forms it takes--is an overall positive development in terms of improving its aims of enhancing financial returns, enhancing management's accountability, and reducing corporate misconduct. (168)

"Mainstreaming" Sustainability. I believe that there are many people within corporations, including directors and officers, who want to do good, and who want to ensure that they are making money without compromising the ability of future generations to live good lives and plan for generations in the farther future--in short, to achieve sustainability in the broadest sense of the word. This involves going beyond the bare minimum of the Sustainability Core and operating in the Sustainability Periphery. There are many handbooks, guides, resources, and best practices, which demonstrate a wealth of knowledge, tools, and resources on how to "mainstream" sustainability. These include the work of Suzanne Farver, quoted above in the Levi Strauss case study, (169) on how corporations can "Mainstream Sustainability", as well as William R. Blackburn's The Sustainability Handbook. (170)

Holistic Legislative Reform of Business Law, Implementing the "Environmental Priority Principle." If we are serious about protecting the environment for future generations, we must transform all areas of business law in a manner that promotes environmentally-protective decision-making within corporations. This is Sarah Light's big push for corporate law as environmental law. (171) Light proposes the enactment of an "environmental priority principle" ("EPP") in business law, to leverage and shape business law holistically to better serve environmental goals. Light's basic idea is that taking a piecemeal approach to "greening" different aspects of business law is insufficient. This is because environmental gains in one siloed area of business law may be undercut by another aspect of business law. The EPP seeks to holistically change all significant aspects of business law--corporate law, securities regulations, antitrust law, and bankruptcy law--to build in the EPP. (172)

Within this holistic EPP framework, the relevant part touching directors' and officers' fiduciary duties is the shaping of the Business Judgment Rule's safe harbor. To this, Light recommends that state corporate law serve as "laboratories" of experimentation. Specifically, state legislatures could "strengthen the ordinary business judgment rule into an incentive [towards greater environmental protection] by requiring firm managers to identify and pursue general and specific environmental benefits alongside profit." In other words, state legislatures "could transform all corporations within a given state into benefit corporations." (173)

Light's EPP and all the changes she pushes for, including in relation to directors' and officers' fiduciary duties, do not reflect the state of current laws, at least not in Delaware. Legislative amendments are needed. Furthermore, legislative amendments to business law and, specifically, directors' and officers' fiduciary duties may also shift practices that currently exist in the Sustainability Periphery to the Sustainability Core. To support the push for such amendments, I now briefly propose a public law theoretical justification for such a transformation of the business judgment rule and the safe harbor it provides.

The private law of corporations operates within the rules and structures set by public law. Many rules of private corporation law (e.g., limited liability and distinct legal personality of corporations) are founded on the idea that there are public benefits to the current set-up of corporation law (e.g., there are overall public benefits from people associating via the corporation in its current legal form).

A corporation is both beneficial and extractive. Business operations redistribute public goods and public harms: business is neither inherently good nor inherently harmful. Rather, it is fundamentally redistributive. Yet businesses and those who run them largely benefit from the current legal forms of private law (such as the separate legal personality (174) and limited liability of corporations (175)). For businesses to continue enjoying their moral and public license to operate with these protections, businesses must continue to deliver an overall net good to society. (176) Financial wealth accumulation (in the form of share price, or even financial long-term value) cannot be a proxy for good. Because it largely ignores distributional concerns, wealth accumulation (like profits) is not a neutral goal within a democracy. What is "good" must be determined democratically, with respect to the public's values, and within the messiness of democracies' deliberative and representative institutions. The public predominantly agrees the environment is worth protecting. (177) This can justify building in environmental values and goals into decision-making frameworks like those described above.

These are all ways in which directors, officers, shareholders, stakeholders, governments, activists, environmentalists, and advocates, can work towards pushing for more sustainable business practices.

VI. CONCLUSION

Humanity faces a polycrisis where multiple interconnected environmental and social crises threaten widespread, systemic risk to all human-built and living systems. Against this backdrop, if corporations carry on with business as usual, they expose themselves (and all their stakeholders) to significant financial risks and the effects of systemic risks. Corporations, which like sustainability itself, have a kind of "forever" quality to them, (178) must transition to truly sustainable business practices. This means focusing on the long-term, and at the very least, leaving the next one or two generations with enough options to live good lives and for them to be able to plan ahead for the next one to two generations. Sustainability will involve corporations planning for the future, both for people and the planet. In so doing, the directors and officers who control these corporations would also fulfill their minimum, core, legally-enforceable fiduciary duties owed to the corporation and its shareholders. Taking care of people and the planet will eventually, in the long-term, lead to taking care of oneself--this applies to corporations, their management, and their stakeholders (which, in the broadest sense, include all of us).

This paper aimed to highlight the scope of directors' and officers' fiduciary duties, especially in light of climate change and other related ESG risks. It also aimed to shed light on one legally-enforceable mechanism by which directors and officers can be held accountable in their fiduciary duties--the Sustainability Core which exists today in directors' and officers' fiduciary duties under Delaware law.

This paper defined the Sustainability Core as the minimum actions which directors and officers need to take to avoid liability for breaches of their fiduciary duty. The Sustainability Core requires that directors and officers, in discharging their fiduciary duties, particularly their duty of loyalty, consider and plan for climate change-related risks and other foreseeable ESG risks as a category of risks which may arise in short-, medium-, and long-term investment horizons, bearing in mind that the SWM norm in Delaware law seeks to promote long-term shareholder value. (179) Fairness to shareholders who hold a long-term investment outlook in corporations requires that, at a minimum, directors and officers implement a system for identifying, monitoring, and managing foreseeable ESG risks. (180) The assessment of whether any given, specific ESG risk is financially material should be done through a materiality assessment, taking into consideration the question of whether specific ESG risks are likely to become material over a long-term investment horizon.

This paper's broader message includes the all-important Sustainability Periphery, which bounds and contextualizes the Sustainability Core. It is in the Sustainability Periphery where we find inspiration, good stories, (181) practical ideas, and creative doctrinal proposals to push sustainability further--perhaps even to the point of changing and shaping the Sustainability Core itself. I earnestly hope that these tools will contribute to the critical ongoing conversation around how sustainability can be implemented.

MARK ORTEGA (*)

(*) Teaching Assistant, Faculty of Law, National University of Singapore (NUS); Academic Fellow, Asia-Pacific Centre for Environmental Law, NUS. I am especially grateful to Professor Jason J. Czarnezki for his astute guidance in helping me shape early drafts of this paper. I would also like to thank all my excellent colleagues in the Sustainable Business and the Environment class at Pace University, Elisabeth Haub School of Law, where I wrote and frequently workshopped this paper, especially Bailey Andree, Maggie Pahl, and Barbara Ballan for being consistent and attentive peer reviewers. I am also very grateful for the hard work of the tireless and utterly professional editors at the Duke Environmental Law & Policy Forum, and for the highly valuable and valued comments by the anonymous Duke Law faculty reviewer. All of you helped fine-tune and shape this article into its current, sharpened form.

Copyright [c] 2023 Mark Ortega.

(1.) Christian Huggel et al., The Existential Risk Space of Climate Change, 174 CLIMATIC CHANGE 2 (2022). See also INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, CLIMATE CHANGE 2023: SYNTHESIS REPORT 33 (H. Lee & J. Romero eds., 2023) https://www.ipcc.ch/report/ar6/syr/downloads/report/IPCC_AR6_SYR_LongerReport.pdf ("Future warming will be driven by future emissions and will affect all major climate system components, with every region experiencing multiple and co-occurring changes. Many climate-related risks are assessed to be higher than in previous assessments, and projected long-term impacts are up to multiple times higher than currently observed. Multiple climatic and non-climatic risks will interact, resulting in compounding and cascading risks across sectors and regions. Sea level rise, as well as other irreversible changes, will continue for thousands of years, at rates depending on future emissions. (high confidence).").

(2.) SARAH BARKER, CYNTHIA WILLIAMS & ALEX COOPER, COMMONWEALTH CLIMATE & LAW INITIATIVE, FIDUCIARY DUTIES AND CLIMATE CHANGE IN THE UNITED STATES 1 (2021) [hereinafter CCLI US REPORT]. See also FINANCIAL STABILITY OVERSIGHT COUNCIL, REPORT ON CLIMATE-RELATED FINANCIAL RISK (2021), https://home.treasury.gov/system/files/261/FSOC-Climate-Report.pdf.

(3.) Simon Torkington, We're on the Brink of a 'Polycrisis'--How Worried Should We Be?, WORLD ECONOMIC FORUM (Jan. 13, 2023), https://www.weforum.org/agenda/2023/01/polycrisis-global-risks-report-cost-of-living/.

(4.) Id.

(5.) Id. See also Interconnected Crises of Climate Change, Biodiversity Loss and Pollution Demand Urgent Action to Ensure Healthy Future for All, UN DEVELOPMENT PROGRAMME (Feb. 1, 2023), https://www.undp.org/asia-pacific/news/interconnected-crises-climate-change-biodiversity-loss-and-pollution-demand-urgent-action-ensure-healthy-future-all; Andres Vina & Jianguo Liu, Effects of Global Shocks on the Evolution of an Interconnected World, 52 AMBIO 95, 95-106 (2023).

(6.) Many ESG reporting standards and articles tend to refer to ESG "risks and opportunities" when discussing ESG-related factors for consideration. See, e.g., CCLI US REPORT, supra note 2, at 1 (referring to climate-change related "risks (and opportunities)"). This paper will focus only on "ESG risks" and considers ESG opportunities to be subsumed under the term "ESG risks" since, in a competitive market, a failure to exploit an opportunity is, itself, a risk.

(7.) For example, oil and gas corporations today face climate change-related risks in the form of litigation risk, regulatory risk, and risks of being less able to acquire insurance or funding for potentially stranded assets. See, e.g., Chantal Beck et al, The Big Choices for Oil and Gas in Navigating the Energy Transition, MCKINSEY & COMPANY (Mar. 10, 2021), https://www.mckinsey.com/industries/oil-and-gas/our-insights/the-big-choices-for-oil-and-gas-in-navigating-the-energy-transition. Other risks, such as industry-level shifts in technologies causing technological obsolescence (for example, the rise of electric vehicles), may only become significant over a longer-term investment horizon. See, e.g., Brad Hehl et al, How Auto Suppliers Can Navigate EV Technology Disruption in Four Steps, EY PARTHENON (Dec. 14, 2021), https://www.ey.com/en_us/strategy/how-auto-suppliers-can-navigate-ev-technology-disruption-in-four-steps (discussing inter alia technology predictions for 2030 affective uptake of electric vehicles).

(8.) See, e.g., GLOBAL SUSTAINABILITY STANDARDS BOARD, CONSOLIDATED SET OF THE GRI STANDARDS (Global Reporting Institute, June 2022), at 12 [hereinafter CONSOLIDATED GRI STANDARDS] ("Even if not financially material at the time of reporting, most, if not all, of the impacts of an organization's activities and business relationships on the economy, environment, and people will eventually become financially material issues."); CCLI US REPORT, supra note 2, at 1 (observing that climate change has evolved from an "ethical, environmental" issue to one that "presents foreseeable financial and systemic risks (and opportunities) over mainstream investment horizons.").

(9.) Since this paper focuses on Delaware law, it treats the fiduciary duties of directors and officers of the company as the same and interchangeable. See Gantler v. Stephens, 965 A.2d 695, 708 (Del. 2009) (holding that corporate officers owe fiduciary duties that are identical to those owed by corporate directors in Delaware).

(10.) In this paper, I used "shareholders" to also refer to "stockholders."

(11.) See discussion infra Part III.

(12.) See e.g., Beth-ann Roth, Sustainable Investing and Impact Investing, in ESG IN THE BOARDROOM: A GUIDEBOOK FOR DIRECTORS 115, 115 (Katayun I. Jaffari & Stephen A. Pike eds., 2022) (observing that "there is growing interest in viewing companies through a lens of sustainability.") [hereinafter ESG IN THE BOARDROOM]; Colin Myers & Jason J. Czarnezki, Sustainable Business Law? The Key Role of Corporate Governance and Finance, 51 ENV'T L. 991, 1040 (2022) [hereinafter Sustainable Business Law] (observing that businesses are increasingly adopting sustainability metrics, and the expanding role of lawyers in the sustainability space).

(13.) See, e.g., WORLD COMM. ON ENV'T & DEV., OUR COMMON FUTURE (1987) [hereinafter BRUNDTLAND REPORT] (providing the classic definition of "sustainable development" as "meet[ing] the needs of the present without compromising the ability of future generations to meet their own needs."). See also discussion infra Part II, Section A (discussing this report and definition further, contrasting the terms "sustainability" and "sustainable development.").

(14.) See discussion infra at Part III, Section C (describing the strong doctrinal link between trust law and the fiduciary duty); see Plater et al., ENVIRONMENTAL LAW AND POLICY: NATURE, LAW AND SOCIETY 880 (5th ed. 2016) (explaining that trust law imports a concept of stewardship for beneficiaries and that the public trust doctrine has also been linked to sustainability and sustainable development).

(15.) In the United States, corporate law is governed by state law. See generally 1 WILLIAM MEADE FLETCHER ET AL., FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS [section] 2.50 (perm. ed., rev. vol. 2023). Delaware is a significant and leading jurisdiction in corporate law because most large U.S. companies are incorporated in Delaware. See, e.g., Charlotte Morabito, Here's Why More Than 60% of Fortune 500 Companies are Incorporated in Delaware, CNBC (Mar. 13, 2023), https://www.cnbc.com/2023/03/13/why-more-than-60percent-of-fortune-500-companies-incorporated-in-delaware.html, citing DELAWARE DIVISION OF CORPORATIONS, Annual Report Statistics, https://corp.delaware.gov/stats/ (last visited Nov. 4, 2023)). See also Faith Stevelman, Regulatory Competition, Choice of Forum, and Delaware's Stake in Corporate Law, 34 DEL. J. CORP. L. 57, 57 (2009) (discussing the significance of Delaware state law in driving developments in American corporate law generally).

(16.) See discussion infra Part III, Section A.

(17.) Id.

(18.) Monciardini et al., Rethinking Non-Financial Reporting: A Blueprint for Structural Regulatory Changes, 10(2) ACCT. ECON. & L. 1, 13-14 (2020) (referring to the "business case" for "corporate social responsibility."). This term may also be substituted with "sustainability" in this specific context. See Sustainable Business Law, supra note 12, at 997 (distinguishing "sustainability" from "corporate social responsibility.").

(19.) See discussion infra Part III on the Business Judgment Rule.

(20.) See also Edith Brown Weiss, In Fairness To Future Generations and Sustainable Development, 8 AM. U. INT'L L. REV. 19, 22 (1992) (describing the principle of "conservation of options" as being the duty of each generation to conserve a baseline of the environment so as not to "unduly restrict the options available to future generations in solving their problems and satisfying their own values," as a basic principle of intergenerational equity).

(21.) CCLI US REPORT, supra note 2.

(22.) Id. at 13.

(23.) Id. at 1. See also discussion supra note 6 regarding the relationship between ESG risks and opportunities.

(24.) Id. at 2-4.

(25.) Id. at 5, 11.

(26.) See, e.g., Alan Palmiter, The US Corporate Elephant 9 (Wake Forest Univ. Legal Stud. Rsch. Paper Series Working Paper, Paper No. 05-05, 2005), http://ssrn.com/abstract=658522 ("Given the business judgment rule, the directors' 'duty of care' is symbolic, aspirational.").

(27.) See CCLI US REPORT, supra note 2 at 19, citing Weinberger v. UOP, Inc., 457 A.2d 701, 709-11 (Del. 1983).

(28.) Id. citing Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985).

(29.) Id. citing American Law Institute, Principles of Corporate Governance: Analysis and Recommendations (2008) and Miller v. Am. Tel. & Tel. Co., 507 F.2d 759, 763 (3d Cir. 1974).

(30.) Id. citing In re Walt Disney Co., 905 A.2d 27, 52-53 (Del. 2006).

(31.) Id. citing In re Walt Disney Co., 905 A.2d 27, 62-68 (Del. 2006) (discussing unconsidered inaction).

(32.) 3A WILLIAM MEADE FLETCHER ET AL., FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS [section] 1036 (perm. ed., rev. vol. 2023).

(33.) Id.

(34.) Id. at 21.

(35.) In re Caremark Int'l' Inc., 698 A.2d 959 (Del. Ch. 1996).

(36.) Marchand v. Barnhill, 212 A.3d 805 (Del. 2019).

(37.) CCLI US REPORT, supra note 2, at 5.

(38.) Id.

(39.) Marchand, 212 A.3d at 824.

(40.) CCLI US REPORT, supra note 2, at 6.

(41.) Id. at 38-45.

(42.) Id. at 39.

(43.) Id. citing Rich ex rel. Fuqi Int'l, Inc. v. Yu Kwai Chong, 66 A.3d 963, 979 (Del. Ch. 2013); contra In re Walt Disney Co., 825 A.2d 275, 278 (Del. Ch. 2003) (holding the Business Judgment Rule protects directors who do not act or decide where they have place good faith reliance on monitoring systems they have in place for oversight).

(44.) CCLI US REPORT, supra note 2, 44-45.

(45.) See infra Part III for further discussion.

(46.) See id. at 2, 13-15, 18-20, 41, 57.

(47.) Id. at 47-48, citing BlackRock, Pursuing Long-Term Value for our Clients: A Look Into the 2020-2021 Proxy Voting Year (July 2021).

(48.) Matt Phillips, Exxon's Board Defeat Signals the Rise of Social-Good Activists, NEW YORK TIMES (Jun. 9, 2021), https://www.nytimes.com/2021/06/09/business/exxon-mobil-engine-no1-activist.html.

(49.) Lisa Benjamin, The Road to Paris Runs Through Delaware: Climate Litigation and Directors' Duties, 20 UTAH L. REV. 313 (2020) [hereinafter Climate Litigation and Directors' Duties].

(50.) Id. at 363.

(51.) Id. at 364, citing Edward B. Rock & Michael L. Wachter, Norms & Corporate Law, 149 U. PA. L. REV. 1607, 1608 (2001).

(52.) Id.

(53.) See Climate Litigation and Directors' Duties, supra note 49, at 364 (explaining that "[t]he contractarian theory views the corporation as a nexus of private, default contracts between parties, and where the prevailing assumption is that all parties agree to maximize shareholder value, with fiduciary duties entering as "gap-fillers.").

(54.) Id. at 365.

(55.) Id. at 365, citing Michael C. Jensen, Value Maximization, Stakeholder Theory and the Corporate Objective Function, 14 J. APPLIED CORP. FIN. 3, 12 (2002). See also William T. Allen et al., THE GREAT TAKEOVER DEBATE: A MEDITATION ON BRIDGING THE CONCEPTUAL DIVIDE, 69 U. CHI. L. REV. 1067, 1071 (2002) (discussing whether the director election process could be changed to create more accountability to shareholders while still allowing flexibility through an exploration of the ideological differences in the two schools of corporate purpose theory).

(56.) Climate Litigation and Directors' Duties, supra note 49, at 366.

(57.) Id.

(58.) Id.

(59.) Madison Condon, Market Myopia's Climate Bubble, 2022 UTAH L. REV. 63 (2022).

(60.) Id. at 79.

(61.) Id. at 80-83.

(62.) Id. at 84-86.

(63.) Id. at 88.

(64.) Id. at 89.

(65.) Id. at 95.

(66.) Id. at 98-99.

(67.) Marchand v. Barnhill, 212 A.3d 805, 824 (Del. 2019).

(68.) See, e.g., SUSTAINABILITY ACCOUNTING STANDARDS BOARD, CLIMATE RISK - TECHNICAL BULLETIN (Apr. 2021), https://sasb.org/knowledge-hub/climate-risk-technical-bulletin/; IFRS S2 Climate-related Disclosures, IFRS (2023), https://www.ifrs.org/issued-standards/ifrs-sustainability-standards-navigator/ifrs-s2-climate-related-disclosures/#standard.

(69.) See, e.g., Serna Dibra, The Increasing Global Supply Chain Risks in Retail Manufacturing, THOMSON REUTERS (May 18. 2022), https://www.thomsonreuters.com/en-us/posts/international-trade-and-supply-chain/preventing-supply-chain-risk/; GLOBAL SLAVERY INDEX, FINDINGS, https://www.walkfree.org/global-slavery-index/.

(70.) See, e.g., Evidence of Corporate Risk from Harms to Workers in their Value Chains, RIGHTS COLAB (Jan. 7, 2021), https://rightscolab.org/evidence-of-corporate-risk-of-harms-to-workers-in-their-value-chains/ (describing how labor abuses have led to regulatory risk and reputational harm); Kelli Okuji Wilson, SASB Standards Board Approves the Human Capital Research Project, SASB STANDARDS (Nov. 19, 2019), https://www.sasb.org/blog/standards-board-approves-human-capital-research-project/ (noting that human capital issues are of growing importance to corporations and investors).

(71.) Pamela McElwee, Climate Change and Biodiversity Loss: Two Sides of the Same Coin, 120 CURRENT HIST. 295 (2021) (explaining that_deforestation and biodiversity loss is worsened by a warming planet).

(72.) See, e.g., ALAN R. PALMITER, SUSTAINABLE CORPORATIONS 349 (2023) (explaining that many institutional investors are increasingly interested in ESG risk and opportunities); GOV'NANCE & ACCOUNTABILITY INST., 2021 Sustainability Reporting In Focus (2021), https://www.ga-institute.com/2021-sustainability-reporting-in-focus.html (demonstrating that ninety-two percent of S&P 500 Index companies published sustainability reports in 2020).

(73.) See infra Part II, Section A.

(74.) CCLI US REPORT, supra note 2, at 21 (suggesting a possible direct conflict of interest between directors' and officers' self-interest and the corporation's best interests in the long-term, another breach of the duty of loyalty--"a potential conflict may emerge between the long term financial interests of a company which has... a strategy to transition to a business model which will be profitable in a net-zero economy... and the personal financial interests of its officers or directors where short-term discretionary components of remuneration are in whole or in part tied to "business as usual" strategy--for example, compensation based on hydrocarbon reserve replacement ratios."). See also infra Part IV, Section B (discussing the need to link directors' and officers' remuneration to ESG metrics as a Sustainability Periphery strategy).

(75.) 3 WILLIAM MEADE FLETCHER ET AL., FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS [section] 837.50 (perm. ed., rev. vol. 2023) [hereinafter 3 FLETCHER'S CYCLOPEDIA ON CORPORATIONS], at [section] 848 citing at n.3, e.g., Walker v. Action Indus., Inc., 802 F.2d 703 (4th Cir. 1986); Montgomery v. Aetna Plywood, Inc., 956 F. Supp. 781 (N.D. Ill. 1997) (applying Delaware law only in contrast to other cases listed).

(76.) Id. citing at n.2, e.g., Jackson v. Ludeling, 88 U.S. 616 (1874); Radol v. Thomas, 772 F.2d 244 (6th Cir. 1985); Mansfield Hardwood Lumber Co. v. Johnson, 263 F.2d 748 (5th Cir. 1959); Coster v. UIP Companies, Inc., 255 A.3d 952, 960 (Del. 2021).

(77.) Id. at [section] 838, citing at n.2, e.g., Chambers v. Blickle Ford Sales, Inc., 313 F.2d 252 (2d Cir. 1963); Clayton v. James B. Clow & Sons, 212 F. Supp. 482 (N.D. Ill. 1962), aff'd, 327 F.2d 382 (7th Cir. 1964); Gottlieb v. McKee, 107 A.2d 240 (Del. Ch. 1954); Bodell v. General Gas & Electric Corporation, 132 A. 442 (Del. Ch. 1926), aff'd, 140 A. 264 (Del. Ch. 1927).

(78.) Id. citing at n.1, e.g., Chambers, 313 F.2d at 252.

(79.) Id. citing at n.6, e.g., Hurt v. Cotton States Fertilizer Co., 159 F.2d 52 (5th Cir. 1947); Chenery Corporation v. SEC, 128 F.2d 303 (D.C. Cir. 1942); Arn v. Bradshaw Oil & Gas Co., 108 F.2d 125 (5th Cir. 1939); Westwood v. Continental Can Co., 80 F.2d 494 (5th Cir. 1935).

(80.) RESTATEMENT (THIRD) OF TRUSTS [section] 79 (AM. L. INST. 2007).

(81.) Id.

(82.) Susan N. Gary, Best Interests in the Long Term: Fiduciary Duties and ESG Integration, 90 U. COLO. L. REV. 733, 794-95 (2019).

(83.) CCLI US REPORT, supra note 2, at 26.

(84.) Kaplan v. Centex Corp., 284 A.2d 119, 124 (Del. Ch. 1971).

(85.) See discussion supra Introduction.

(86.) See generally WILLIAM R. BLACKBURN, THE SUSTAINABILITY HANDBOOK (2d ed. 2015). See also CONSOLIDATED GRI STANDARDS, supra note 8, at 33 (stating "the terms 'sustainability' and 'sustainable development' are used interchangeably in the GRI Standards," and adopting the Brundtland definition of "sustainable development").

(87.) BRUNDTLAND REPORT, supra note 13, at ch. 1 para. 27.

(88.) Id.

(89.) DAVID HUNTER, JAMES SALZMAN & DURWOOD ZAELKE, INTERNATIONAL ENVIRONMENTAL LAW AND POLICY 141-43 (6th ed. 2020).

(90.) BRUNDTLAND REPORT, supra note 13, at ch. 2 para. 1.

(91.) Id. (describing "needs" as "the essential needs of the world's poor, to which overriding priority should be given.").

(92.) Id.

(93.) There is an inherent duality to corporations. Corporations contribute to the public good: they are sites of innovation and creativity and provide goods and services that raise the quality of life for a certain section of the public. But corporations are also essentially extractive--they draw down on people and the planet (viewing these as a "resource"--human and natural) and convert these into what their decisionmakers deem as "value" elsewhere. Thus, corporations and business activity are essentially redistributive. one may argue that corporations deliver an overall net good, while others may argue that corporations deliver an overall net harm. These arguments are--ultimately--based on a difference in values or value prioritization. These arguments may also be based on the application of some kind of methodology which attempts to calculate the net "good," or "harm," of a given corporation, sector, or business decision (such as cost-benefit analysis). While most of such methodologies purport to be value-neutral, they are inherently value-laden; in this sense, they are flawed, reductive, and often misleading. See, e.g., DOUGLAS A. KYSAR, REGULATING FROM NOWHERE: ENVIRONMENTAL LAW AND THE SEARCH FOR OBJECTIVITY, 99-119 (2010) (discussing the benefits and drawbacks associated with applying a cost-benefit analysis, which often purports to be value-neutral, to harms incurred by certain sectors of society). See also discussion supra at Part V.

(94.) Sustainable Business Law, supra note 12, at 997 ("Business sustainability has its roots in the Brundtland Report definition, but due to the definition's focus on resources, many think it only pertains to environmental issues. However, this is an incorrect interpretation, sustainability relates to time. Thus, business sustainability shifts the business's focus to the future and can be described 'as a business strategy that creates long-term stakeholder value by addressing social, economic, and environmental opportunities and risks material to a company.'").

(95.) IISD et al, BUSINESS STRATEGY FOR SUSTAINABLE DEVELOPMENT (1992).

(96.) Id. (emphasis added).

(97.) Sustainable Business Law, supra note 12, at 997 (citing Joshua Cramer-Montes, Sustainability: A New Path to Corporate and NGO Collaborations, STAN. SOC. INNOVATION REV. (Mar. 24, 2017), https://ssir.org/articles/entry/sustainability_a_new_path_to_corporate_and_ngo_collaborations).

(98.) See, e.g., CONSOLIDATED GRI STANDARDS, supra note 8, at 104 (GRI taking the position that almost all ESG factors will eventually become financially material).

(99.) 3 FLETCHER'S CYCLOPEDIA ON CORPORATIONS, supra note 75, at [section] 837.50.

(100.) See infra Part IV, Section A.

(101.) See supra Part II, Section A.

(102.) See supra Part II, Section C.

(103.) Id.

(104.) Id.

(105.) Id.

(106.) Id.

(107.) Id.

(108.) Id.

(109.) See infra Part V.

(110.) See discussion supra Part II, Section C.

(111.) See supra Part II, Section C (discussing this hypothetical in greater detail).

(112.) See discussion infra Part IV, Section B.

(113.) See discussion infra Part IV, Section B.

(114.) See, e.g., James Chen, Investment Time Horizon: Definition and Role in Investing, INVESTOPEDIA (May 9, 2023), https://www.investopedia.com/terms/t/timehorizon.asp (stating that long-term investment horizons are expected "to hold for ten or twenty years, or even longer").

(115.) CCLI US REPORT, supra note 2, at 4.

(116.) See supra Part II, Section C.

(117.) See discussion supra Introduction.

(118.) See SASB standards, supra note 68 (providing a climate change-related example). See also Consolidated GRI Standards, supra note 8; IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, IFRS (2023), https://www.ifrs.org/issued-standards/ifrs-sustainability-standards-navigator/ifrs-s1-general-requirements.html/content/dam/ifrs/publications/html-standards-issb/english/2023/issued/issbs1-ag/#standard (explaining the IFRS's general approach focusing on financial materiality).

(119.) For example, there is discretion for which ESG standards to use, which ESG risks to prioritize as "material," the methodology for prioritizing specific ESG risks as "material," the identification and description of qualitative risk factors, discretion in measuring quantitative risk factors, and so on. See, e.g., CONSOLIDATED GRI STANDARDS, supra note 8. This particular point is also discussed at length in my forthcoming article, Mark Ortega, Environmental, Social, and Governance (ESG) Reporting from an Environmentalist's (Not Investor's) Lens, ENVIRONS ENVT'L L. & POL'Y F. (forthcoming 2023-2024).

(120.) I have adopted these questions from Annex II of the CCLI US REPORT, supra note 2 at 59, which in turn, is adopted from "soft law and climate risk disclosure frameworks," including TCFD, SASB, CDSB, etc.

(121.) BDO U.S., SASB Issues Sustainability Reporting Standards--Why Boards Should Take Notice (2018), https://www.bdo.com/insights/assurance/sasb-issues-sustainability-reporting-standards-why-boards-should-take-notice#:~:text=Disclosure%20topics%20%E2%80%93%20A%20minimum%20set,topic%20may%20affect%20value%20creation.

(122.) AMAZON, 2021 SUSTAINABILITY REPORT (2021), https://sustainability.aboutamazon.com/2021-sustainability-report.pdf.

(123.) See Reuben Zaramian et al., Shareholder Proposals and Activism, in ESG IN THE BOARDROOM, supra note 12 at 98 (explaining that there are serious consequences for boards of directors when they ignore the ESG concerns of investors such as "institutional shareholders [using] the company's inaction as a reason to vote against the board's recommendations in the future.").

(124.) SUZANNE FARVER, PATHWAYS TO SUCCESS: CASE STUDIES FOR MAINSTREAMING CORPORATE SUSTAINABILITY 34-40 (2019).

(125.) Id. at 437.

(126.) Id.

(127.) Id. at 538.

(128.) Lisa Fairfax, Shareholder Democracy on Trial: International Perspective on the Effectiveness of Increased Shareholder Power, 3 VA. L. & BUS. REV. 1, 2 (2008).

(129.) See Beth-ann Roth, Board Oversight of the Dynamic ESG Landscape, in ESG IN THE BOARDROOM, supra note 12.

(130.) See, e.g., Marchand v. Barnhill, 212 A.3d 805 (Del. 2019); In re Boeing Co., No. 2019-0907-MTZZ, 2021 WL 4059931 (Del. Ch. Sept. 7, 2021); Complaint, Shupak v. Reed, No. BC-617444, 2016 WL 1718171 (Cal. Super. Ct. Apr. 19, 2016).

(131.) Jacob v. Bloom Energy Corp., C.A. No. 2020-0023-JRS, 2021 WL 733438 (Del. Ch. Feb. 25, 2021). See also Complaint, Perri v. Croskrey, No. 1:12021cv01423 (D. Del. Oct. 6, 2021).

(132.) In re Exxon Mobil Corp., No. 3:19-cv-01067 (N.D. Tex. Sept. 24, 2021) (regarding investigations by SEC and several States' Attorneys General over "greenwashing" and climate change claims).

(133.) Emily Strauss, Climate Change and Shareholder Lawsuits, in DUKE L. SCH. PUB. L. & LEGAL THEORY SERIES NO. 2022-41, at 25-28.

(134.) See, e.g., Marchand, 212 A.3d 805; In re Boeing Co., No. 2019-0907-MTZ, 2021 WL 4059931 (Del. Ch. Sept. 7, 2021); Complaint, Shupak v. Reed, No. BC-617444, 2016 WL 1718171 (Cal. Super. Ct Apr. 19, 2016); Complaint, Perri v. Croskrey, No. 1:12021cv01423 (D. Del. Oct. 6, 2021); In re Exxon Mobil Corp., No. 3:19-cv-01067 (N.D. Tex. Sept. 24, 2021).

(135.) Jacob v. Bloom Energy Corp., No. 2020-0023-JRS, 2021 WL 733438, 23 (Del. Ch. Feb. 25, 2021).

(136.) 212 A.3d 805 (Del. 2019).

(137.) Id. at 807.

(138.) Id. at 807.

(139.) Id. at 809.

(140.) See supra Part II, Section A.

(141.) See discussion supra Part II, Section B.

(142.) In re Boeing Co., No. 2019-0907-MTZ, 2021 WL 4059931 (Del. Ch. Sept. 7, 2021).

(143.) Id. at 20.

(144.) Complaint, Shupak v. Reed, No. BC-617444, 2016 WL 1718171 (Cal. Super. Ct. Apr. 19, 2016).

(145.) Id. at 1 5.

(146.) Id. at 1 100.

(147.) Id. at 1 102.

(148.) Id. at 1 101.

(149.) Complaint, Perri v. Croskrey, No. 1:12021cv01423 (D. Del. Oct. 6, 2021).

(150.) Id. at 1 44.

(151.) Id. at 1 7.

(152.) Id. at 1 48.

(153.) Id. at 1 8.

(154.) Jacob v. Bloom Energy Corp., C.A. No. 2020-0023-JRS, 2021 WL 733438 (Del. Ch. Feb. 25, 2021).

(155.) Id. at 1.

(156.) Id. at 2.

(157.) Id. at 9.

(158.) Id. at 2-3.

(159.) Complaint, In re Exxon Mobil Corp., No. 3:19-cv-01067 (N.D. Tex. Sep. 24, 2021).

(160.) Id. at 1 22.

(161.) E.g. Ramirez v. Exxon Mobil Corp., 334 F. Supp. 3d 832, 839 (N.D. Tex. 2018).

(162.) Complaint at 1 348, In re Exxon Mobil Corp., No. 3:19-cv-01067 (N.D. Tex. Sep. 24, 2021)

(163.) Complaint at f 58-67, Shupak v. Reed, No. BC-617444, 2016 WL 1718171 (Cal. Super. Ct. Apr. 19, 2016).

(164.) See, e.g., Jim Wilson, Majority of Employers Tying ESG Metrics to Executive Pay, HUMAN RESOURCES DIRECTOR (Jan. 11, 2023), https://www.hcamag.com/ca/specialization/esg/majority-of-employers-tying-esg-metrics-to-executive-pay/432550#.Y79BpJqLhKE.linkedin, citing 2023 ESG Disclosure Study, FASKEN (Jan. 9, 2023), https://www.fasken.com/en/knowledge/2023/01/fasken-esg-disclosure-study#iframe (reporting that 67% of TSX60 and 80% of CEC40 companies include ESG metrics in executive pay plans); Boris Groysberg et al., Compensation Packages that Actually Drive Performance, HARV. BUS. REV. (Jan.-Feb. 2021), https://hbr.org/2021/01/compensation-packages-that-actually-drive-performance. I would like to thank and acknowledge the work of my colleague, Bailey Andree, who drew my attention to the literature surrounding the linking of executive pay to ESG metrics, as well as these citations in this footnote.

(165.) See, e.g., Dana Brakman Reiser, Benefit Corporations--A Sustainable Form of Organization?, 46 WAKE FOREST L. REV. 591 (2012).

(166.) One of these limitations is, as described in Part IV, Section A above, bearing in mind the costs of litigation, shareholders may only be sufficiently motivated to sue errant directors and officers after some irrecoverable (and relatively large) financial loss has been suffered. This limits its effectiveness as an ex ante accountability mechanism.

(167.) Phillips, supra note 48.

(168.) Fairfax, supra note 128.

(169.) FARVER, supra note 124.

(170.) BLACKBURN, supra note 86.

(171.) Sarah E. Light, The Law of the Corporation as Environmental Law, 71 STAN. L. REV. 137 (2019).

(172.) Id. at 165-99.

(173.) Id. at 210.

(174.) 1 WILLIAM MEADE FLETCHER ET AL., FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS [section] 5 (perm. ed., rev. vol. 2023).

(175.) Id. at [section] 14.

(176.) Lawrence D. Fink, Annual Letter to CEOS: A Sense of Purpose, BLACKROCK INVESTOR RELATIONS, quoted in PALMITER, supra note 72, at 314-317.

(177.) DANIEL A. FARBER, ECO-PRAGMATISM: MAKING SENSIBLE ENVIRONMENTAL DECISIONS IN AN UNCERTAIN WORLD 107-110 (2001).

(178.) Since a corporation is not dissolved when one shareholder (or director, or officer) steps away: 1 WILLIAM MEADE FLETCHER ET AL., FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS [section] 6 (perm. ed., rev. vol. 2023). I would like to thank the anonymous Duke Law faculty reviewer for this particular phrase ("'forever' quality"), which I thought was pithy, striking, and memorable.

(179.) See discussion supra Part II, Section A.

(180.) See discussion supra Part II, Section C.

(181.) See, e.g., Good Stories, NORMANDY CHAIR FOR PEACE, https://normandychairforpeace.org/lines-of-research/good-stories/ (last visited Oct. 14, 2023).