October 20, 2021

Fiduciary Duties and Climate Change in the United States

Our understanding of climate change has evolved from an “ethical, environmental” issue to one that presents foreseeable financial and systemic risks (and opportunities) over mainstream investment horizons. This evolution has substantially changed the relevance of climate change to the governance of corporations. A critical corollary of that evolution is that there are implications for the fiduciary duties of directors and officers.

This report provides an overview of contemporary evidence that climate change and the transition to a net-zero emissions economy presents foreseeable, material, and systemic financial risks that will affect corporations. It considers that evidence in the context of directors’ and officers’ fiduciary duties under Delaware law, particularly in light of recent case law on the duty of oversight. In so doing, it sets out the practical circumstances in which a failure by directors or officers to have adequate regard to climate change-related issues could fail to satisfy the standard of conduct required to fulfil their duties and lead to potential litigation and liability exposures.

The executive summary is available here.

This is a Canada Climate Law Initiative publication.