Climate Change and Corporate Law in the United States: Not "Woke" But Eyes Open.

Abstract

This Essay discusses the evidence that climate change and nature loss create financially material risks for corporations that must be carefully considered by officers and directors pursuant to their fiduciary duties of loyalty and care. This analysis concludes that under the current state of fiduciary duty law and the known financial risks presented by climate change and nature loss, officers and directors of corporations may breach their fiduciary duties by failing to implement and monitor a robust system to identify and manage each type of industry-specific climate-related and nature related risk. Risk of breach is particularly acute for entity-specific compliance risks, such as those arising from climate-related breaches of disclosure laws. Attending to the financial risks of climate change and nature loss does not imply changes in the corporate purpose. Rather, such attention is inherent in the directors' and officers' obligations to promote the long-term best interests of the corporation for the benefit, ultimately, of its shareholders. This conclusion is supported by recent caselaw in Delaware, particularly new Caremark cases and McRitchie v. Zuckerberg, and the conclusions of the American Law Institute's current project developing an updated Restatement of Corporate Governance. Where a company's strategy to advance its long-term success has been developed in good faith and on reasonable investigation, its directors would prevail in litigation even if that strategy imposes costs in conflict with some shareholders' interests in short-term profit maximization.