Directors’ liability for ESG factors under caremark claims

Resumo

ESG investing has grown substantially during the past few years, and it is continuing to gain traction in markets today; correspondingly, lawyers, scholars, and regulators are debating the consequences of this trend on corporate and securities law. Although there is enough reason to believe that, in the coming years, Courts will be faced with the question of whether directors may be held liable for failing to oversee ESG factors, and if so, under which circumstances, very few authors have tried to answer this question. It is proposed in this Essay that, when dealing with ESG-related claims, Courts should resort to the same test and standards developed under Caremark and its progeny. Therefore, directors may be held liable for breaching their duty to oversee legal and business risks related to ESG (in the latter case, subject to a much higher burden on the plaintiffs), while remaining shielded from liability for failing to address ESG opportunities, in line with the business judgment rule.