Corporate Climate Governance

Changing market conditions and investor expectations have revived long-standing debates about corporate purpose and the place of stakeholder concerns in corporate law, inspiring a growing body of scholarship on themes like “new corporate governance” and “stakeholder capitalism.” Such proposals have renewed strong criticisms of the impracticability, ineffectiveness, and costs of bringing stakeholder considerations, like climate change, into corporate governance.  

These theoretical divides now have immediate real-world implications for the future of corporate governance.  Climate risk disclosure mandates have already been widely adopted internationally and in the United States, despite implementation challenges. All of them aim to standardize how information on climate-related financial risk reaches the capital markets, with international standards extending to material sustainability risks as well. Due to their importance to investors, all of them also ask companies to prioritize these stakeholder-linked considerations, and to embed them into corporate governance mechanisms in some form. This Article therefore argues that these regimes are poised to transform not only corporate reporting practice but corporate governance worldwide as well. 

This Article shows how mandatory climate disclosure is already shifting corporate governance norms and standards toward stakeholder integration and considers the implications of this shift for corporate governance doctrine and practice with reference to Delaware law.  Even though these mandates do not yet apply nationally in the U.S., this analysis is critical given Delaware’s influence internationally and the fact that many U.S. companies are already voluntarily following these frameworks or are subject to international standards.  

This Article’s first contribution is to develop a typology of “thin” and “thick” “corporate climate governance” based on the primary U.S. and international corporate climate reporting standards.  Secondly, it identifies how even the “thinner” conceptions of corporate climate governance that have been adopted in the U.S. challenge the normative underpinnings of fiduciary duties and other corporate governance principles articulated by the Delaware courts. This Article sets the stage for a companion article that responds to the critics of stakeholder governance and that makes the case that corporate climate governance in fact offers a new model of “good” corporate governance.