Mark Ortega


Directors and officers have a fiduciary duty to act in the best interests of a corporation and its shareholders. Yet corporations may be employing unsustainable, short-term business models that fail to properly account for financial and systemic risks that could harm the corporation in the long term. This paper asks whether there is, embedded within directors' fiduciary duties, a greater duty to consider "sustainability" (as this paper defines it). Specifically, this duty would require directors and officers to return corporations to the established shareholder wealth maximization ("SWM") norm of creating long-term shareholder value under Delaware law.

This paper argues that directors' and officers' fiduciary duties under Delaware corporation law include a duty to implement a minimum "core" of sustainability—a "Sustainability Core." The Sustainability Core requires a fair and impartial consideration of all shareholders' investment horizons, including long-term investment horizons. The Sustainability Core also requires directors to implement and oversee a system for monitoring environmental, social, and governance ("ESG")-related risks and opportunities, as identified, monitored, and managed via thoughtful materiality assessments. These include ESG-related risks and opportunities which may foreseeably become financially material on long-term investment horizons. Moreover, failure to implement the Sustainability Core may give rise to liability for breaches of fiduciary duty.

In these efforts, directors and officers retain significant discretion in how they choose to implement sustainability practices: many actions, decisions, and best practices enacted to implement or "mainstream" sustainability would fall within a "Sustainability Periphery." The Sustainability Periphery contains a wealth of best practices which interested activists and stakeholders may draw on to push sustainability further, by working to shape the Sustainability Core in a manner which improves transparency and accountability.

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