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2021 | OriginalPaper | Buchkapitel

5. Sustainable Corporate Governance: The Role of the Law

verfasst von : Alessio M. Pacces

Erschienen in: Sustainable Finance in Europe

Verlag: Springer International Publishing

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Abstract

The debate on sustainable finance seldom includes the perspective of shareholders. However, shareholders are important for the governance of publicly held corporations today, because their holdings are concentrated in the hands of few institutional investors. Institutional investors can therefore have an impact on the sustainability of the largest companies in the world, as they often claim they do—particularly in communications with their beneficiaries. Whether institutional investors actually have such an impact is an open question. Recent changes in EU financial regulation aim to bring more clarity on this matter. For instance, the revised Shareholder Rights Directive requires companies, on a comply-or-explain basis, to disclose voting policies and behaviours concerning sustainability. More in general, EU law is increasing the supply of standard measures of sustainable investment, to be used in institutional investors’ communications with their beneficiaries. This chapter discusses whether this legislation can align the incentives of institutional investors to pursue sustainable corporate governance with the prosocial preferences of their beneficiaries.

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Vorheriges Kapitel Redefining Corporate Purpose: Sustainability as a Game Changer

Nächstes Kapitel Integrating Sustainability in EU Corporate Governance Codes

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https://www.cdp.net/en/articles/media/new-report-shows-just-100-companies-are-source-of-over-70-of-emissions. 59% of the top-100 GHGs producers are state-owned companies and 9% are private companies.

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The 20 largest institutional investors own 25% or more, on average, in Canada, the Netherlands, Poland, South Africa, Finland, Japan, Sweden and Norway. De La Cruz, A., Medina, A., & Tang, Y. (2019). Owners of the World’s Listed Companies. Paris: OECD Capital Market Series.

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See Griffith, S.J. (2020). “Opt-In Stewardship: Toward an Optimal Delegation of Mutual Fund Voting Authority”. Texas Law Review, 98(6), 983–1047, wondering why private ordering has not yet offered this solution. Hart, O., & Zingales, L. (2017). “Companies Should Maximize Shareholder Welfare Not Market Value”. Journal of Law, Finance, and Accounting, 2(2), 247–275, discuss the same question, assuming incorrectly that fiduciary duties in the U.S. would prevent such arrangement. On why this is not the case, see e.g. Williams, C.A. (2018). “Corporate Social Responsibility and Corporate governance”. In J.N. Gordon and W.-G. Ringe (eds.), The Oxford Handbook of Corporate Law and Governance, Oxford University Press, 634–678.

Fisch, J.E. (2020). “The Uncertain Stewardship Potential of Index Funds”. European Corporate Governance Institute (ECGI)—Law Working Paper No. 490/2020, http://dx.doi.org/10.2139/ssrn.3525355.

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European Commission (2018). Action Plan: Financing Sustainable Growth. COM(2018) 97 final.

See Siri, M., & Zhu, S. (2019). “Will the EU Commission Successfully Integrate Sustainability Risks and Factors in the Investor Protection Regime? A Research Agenda”. Sustainability, 11(22), 6292 for an excellent overview.

Griffith, S.J. (2020). “Opt-In Stewardship: Toward an Optimal Delegation of Mutual Fund Voting Authority”. Texas Law Review, 98(6), 998–1000.

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On these problems and the economic rationale of mandatory disclosure, see Armour, J., Awrey, D., Davies, P.L., Enriques, L., Gordon, J.N., Mayer, C.P., & Payne, J. (2016). Principles of Financial Regulation. Oxford University Press.

Art. 19(3) Taxonomy Regulation.

The Taxonomy Regulation prioritizes climate change mitigation and adaptation. The relevant technical standards will apply from 1 January 2022. The technical standards relating to the other goals will apply from 1 January 2023.

See Pacces, A.M. (2000). “Financial Intermediation in the Securities Markets: Law and Economics of Conduct of Business Regulation.” International Review of Law and Economics, 20(4), 479–510, recommending this approach to flag the lack of suitability of financial investment.

Titel: Sustainable Corporate Governance: The Role of the Law
verfasst von: Alessio M. Pacces
Verlag: Springer International Publishing
Buch: Sustainable Finance in Europe
Print ISBN: 978-3-030-71833-6

Electronic ISBN: 978-3-030-71834-3

Copyright-Jahr: 2021
DOI: https://doi.org/10.1007/978-3-030-71834-3_5

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