Monthly Archives: July 2023

2023 Sustainable Investment Survey

Hilary Wiek is a Senior Strategist and Anikka Villegas is an Analyst at PitchBook. This post is based on their Sustainable Investment Survey. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto TallaritaDoes Enlightened Shareholder Value add Value (discussed on the Forum here) by Lucian Bebchuk, Kobi Kastiel, Roberto Tallarita; Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee (discussed on the Forum here) by Max M. Schanzenbach and Robert H. Sitkoff; and Exit vs. Voice (discussed on the Forum here) by Eleonora Broccardo, Oliver Hart and Luigi Zingales.

About the survey

This group of respondents represents the most balanced profile to date for this survey, showing that the interest in sustainable investment issues run far and wide.

Since the release of our last Sustainable Investment Survey report in October 2022, we have been busy with our sustainable investment research efforts. Using our proprietary Impact fund data set utilizing the Global Impact Investing Network’s (GIIN) IRIS+ taxonomy, we updated our reporting on fundraising trends in private Impact fund investing. [1] As a follow-up to 2022’s survey, we took some of the open-ended responses and wrote a report addressing the concerns and criticisms of ESG. In January, we published a piece on sustainable and digital infrastructure in the private markets, noting that infrastructure has not only been expanding as an area of investment, but it is increasingly looking to contribute sustainable solutions to areas like climate change and socioeconomic equality. Finally, we have brought on an emerging technology analyst focused on producing carbon & emissions tech and clean energy work for PitchBook clients.


Testimony at the HFSC hearing: “Examining Environmental and Social Policy in Financial Regulation”

James R. Copland is a Senior Fellow and the Director of Legal Policy at the Manhattan Institute. This post is based on his testimony.

My name is James R. Copland. Since 2003, I have been a scholar with the Manhattan Institute for Policy Research, a nonprofit public-policy think tank in New York City, where I have long been a senior fellow and directed the Institute’s legal policy research. Although my comments draw upon such research conducted for my employer, [1] my statement before the Committee is solely my own.

I am very pleased that this Committee is tackling the injection of environmental and social policy into financial regulation in such an extensive way—holding this hearing, and considering as many as 18 pieces of legislation designed to tackle this subject. This hearing is timely, in light of unprecedentedly aggressive new rulemaking at the Securities and Exchange Commission that exacerbates the trend of centering our large corporate boardrooms on divisive policy concerns; as well as new SEC “staff guidance” that has already led to a precipitous increase in activist pressure on corporate board decision making.


I have been studying these issues for years. As far back as 2006, I testified before this committee’s Subcommittee on Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises about threats to America’s capital markets leadership. [2] Overall, U.S. capital markets continue to lead the world. [3] But we have seen the number of companies listed on U.S. public exchanges decline more than 50% since the mid-1980s. [4]

Among the factors discouraging the public listing of companies in America are the intense pressures placed on publicly traded companies by the two major proxy advisory firms, ISS and Glass Lewis, as well as by various asset management companies holding aggregated capital, particularly through passive-index investment vehicles—notably the “Big Three” asset managers, BlackRock, State Street, and Vanguard. Underlying these pressures is the system of shareholder proposals included on the proxy statements of U.S.–listed companies, overseen by the Securities and Exchange Commission through Rule 14a-8. [5] I have been studying the shareholder-proposal process since before 2011, when, under my leadership, the Manhattan Institute launched our Proxy Monitor database, [6] which contains current and historical data on more than 5,700 shareholder proposals introduced at America’s largest publicly traded companies, dating back to 2006.


Testimony at the HFSC hearing: “Examining Environmental and Social Policy in Financial Regulation”

Keith Ellison is the Attorney General of Minnesota. This post is based on his testimony.

As Attorney General, I serve on the governing board of the Minnesota State Board of Investment, which we call the SBI. The SBI is a fiduciary for $125 billion in assets, serving more than 820,000 active and retired Minnesota public employees.

Active public employees entrust us with a portion of their salaries in return for a secure retirement.

Public employers across the state entrust us with a portion of their balance sheets in return for a critical future benefit for their employees.

I am proud that the SBI pays out more than $5 billion a year in benefits to our members. In many cases, these benefits are the recipient’s most important financial asset.

One of our values is that addressing environmental, social, and governance-related issues can and does lead to positive outcomes and adds long-term value to our investments.

Year over year, the Minnesota SBI is one of the highest-performing public pension funds in America. ESG best practices and high market returns go hand in hand.


Global Compliance Risk Benchmarking Survey: ESG

Darryl Lew and Courtney Hague Andrews are Partners at White & Case LLP and Joshua W. Rusenko is an Attorney at KPMG LLP. This post is based on a White & Case survey in collaboration with KPMG by Mr. Lew, Ms. Hague Andrews, Mr. Rusenko, Anneka Randhawa and Matthew McFillin. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto TallaritaDoes Enlightened Shareholder Value add Value (discussed on the Forum here) and Stakeholder Capitalism in the Time of COVID (discussed on the Forum here) both by Lucian Bebchuk, Kobi Kastiel, Roberto Tallarita; Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock (discussed on the Forum here) by Leo E. Strine, Jr; and Corporate Purpose and Corporate Competition (discussed on the Forum here) by Mark J. Roe.

ESG has increasingly become an area of focus, but responses indicate inconsistency in approaches to address ESG risks. In general, public companies and those with dedicated ESG resources appear to have a better understanding and implementation of ESG measures.

Almost four in ten respondents (38%) have not clearly defined ESG

Defining “ESG” remains a challenge for more than one third of companies


Racial Targets

Atinuke O. Adediran is Associate Professor of Law at Fordham University School of Law. This post is based on her recent paper, forthcoming in the Northwestern University Law Review.

In a forthcoming article, titled Racial Targets, I address the legal status and defensibility of corporate hiring and promotion pledges. Racial targets are non-binding, voluntary goals, or aspirations—rather than mandatory requirements—made by companies to hire or promote people of color by a future point in time—on a general institutional level—such as among employees, boards of directors, managers, and other leaders. For example, Meta publicly declared its goal to increase the representation of people of color, including Black leadership, by 30% between 2020 and 2025, and Hartford Prudential Financial has stated that it is on pace to reach its representation goal of 20% people of color in senior leadership roles by 2030.

The article argues that racial targets remain legally defensible even after the Supreme Court has declared it unconstitutional for colleges and universities to consider race in admissions in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (“Harvard case”).

I examined 901 public and privately held companies. In 2022, I found that 44% of public companies had some form of racial target. Some privately held companies also made racial targets. I categorize racial into two types. The first type is closed-ended racial targets. The second type is open-ended racial targets. Closed-ended racial targets vary in language and levels of specificity, but all of them have two common elements: (1) a specific goal or aspiration to hire or promote a specified percentage of people of color; and (2) a year or period by which the goal would be achieved. Racial targets by BNY Mellon, Hartford Prudential Financial, Starbucks, Sysco, and Target are illustrative of closed-ended racial targets. As those targets reveal, companies are often specific about the actual percentage increase they intend to reach, and the year in which they intend to reach the percentage. There are some exceptions where a company might use a range of years instead of a specific year. But like other closed ended targets, those exceptions have a point in time when the company seeks to meet the stated goal:


Greenwashing: Navigating the Risk

Peter Pears and Tim Baines are Partners and Oliver Williams is a Trainee Solicitor at Mayer Brown LLP. This post is based on a Mayer Brown memorandum by Mr. Pears, Mr. Baines, Mr. Williams, Henninger S. Bullock, Luiz Gustavo Bezerra, and Wei Na Sim. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto TallaritaHow Much Do Investors Care about Social Responsibility? (discussed on the Forum here) by Scott Hirst, Kobi Kastiel, and Tamar Kricheli-Katz; Does Enlightened Shareholder Value add Value (discussed on the Forum here) by Lucian Bebchuk, Kobi Kastiel, Roberto Tallarita; and Companies Should Maximize Shareholder Welfare Not Market Value (discussed on the Forum here) by Oliver Hart and Luigi Zingales.


  • At its core, greenwashing is about misrepresentation, misstatement and false or misleading practices in relation to environmental, social and governance credentials.
  • Greenwashing carries with it reputational, regulatory and litigation risks for which companies should be prepared.
  • There is no harmonised legal definition and the concept of greenwashing will vary by product, service, regulator and jurisdiction.
  • Greenwashing is not purely a legal or regulatory concept; allegations can have a significant reputational impact.
  • Tackling greenwashing is a priority for regulators around the globe who are taking tougher stances.
  • The prominence of greenwashing litigation is rising. These claims have a wider pool of claimants than in “traditional” litigation, who also have different barometers for what constitutes a “successful” outcome.
  • The best defences for organisations against greenwashing risk lie in existing principles of good practice in governance, disclosure and due diligence, in conjunction with a comprehensive understanding of the sustainability profile of the product, activity or transaction at hand.


The risk of an accusation of “greenwashing” is now an important concern for many companies. Greenwashing is an ill-defined concept but, nevertheless, is increasingly a source of litigation and regulatory scrutiny – with more of both expected. It carries with it reputational, regulatory and litigation risks for which companies should be prepared. Whilst the risks are always context specific – varying by jurisdiction, industry and product – there are common themes. Here, we take an in-depth look at those themes and make suggestions for how organisations can think about mitigating greenwashing risk.


Navigating Global Uncertainty: Do Foreign National Directors Protect US Firms from Supply Chain Disruptions

Ariel Rava is a Post-Doctoral Fellow at Harvard Law School’s Program on Corporate Governance, Musa Subasi is an Assistant Professor of Accounting and Information Assurance at the University of Maryland, and Rohan D’Lima is an Assistant Professor of Supply Chain Management at Oregon State University. This post is based on their recent paper.

International trade relies on a complex network of supply chain relationships, which involve navigating various political, legal, and regulatory environments across different countries. Efficient global supply chains require stable and predictable operations in each participating country; however, local government policies can introduce significant uncertainty to the business environment, affecting supply chains across these countries. For example, sudden increases in economic policy uncertainty (EPU) precede declines in investment, productivity, and employment. Furthermore, a change in a country’s EPU can result in a reduction in its exports, subsequently disrupting the operations of firms sourcing from that country.

In this study we investigate the role of foreign national directors in mitigating the adverse effects of supply chain disruptions caused by spikes in economic policy uncertainty (EPU) in their home countries.

The impact of foreign national directors on corporate boards continues to be a subject of ongoing debate. Foreign directors can potentially help reduce their firms’ exposure to EPU induced supply chain disruptions in their home countries for several reasons. Foreign national directors possess unique informational advantages pertaining to their home countries, including language proficiency, cultural knowledge, institutional understanding, and social connections, while staying attuned to news and political developments. However, certain factors could counterbalance the potential benefits that foreign directors offer. These include a lack of adequate information about the firms they serve, coordination costs, limited familiarity with buyer country (US) accounting rules, laws, regulations, governance standards, and management practices, and language and cultural differences that can impede communication and coordination among board members. Our research adds context to this debate by examining whether foreign national directors who serve on the boards of US manufacturing firms can alleviate the impact on these firms of supply chain disruptions triggered by EPU spikes in the foreign nationals’ home countries.


Buyer Found Liable for Aiding and Abetting Target’s Sale Process Fiduciary Breaches

Gail Weinstein is Senior Counsel and  Michael P. Sternheim is a Partner at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Sternheim, Steven Epstein, Warren S. de Wied and Brian T. Mangino and is part of the Delaware law series; links to other posts in the series are available here. Related research from the Program on Corporate Governance includes Are M&A Contract Clauses Value Relevant to Target and Bidder Shareholders? (discussed on the Forum here) by John C. Coates, IV, Darius Palia, and Ge Wu; and The New Look of Deal Protection (discussed on the Forum here) by Fernan Restrepo, and Guhan Subramanian.

In a 196-page post-trial opinion, the Delaware Court of Chancery found TransCanada Group Inc. (now, TC Energy Corp.) liable for aiding and abetting fiduciary breaches by Columbia Pipeline Group Inc.’s officers and directors during Columbia’s sale process pursuant to which TransCanada, in 2016, acquired Columbia in a $13 billion merger. The merger price represented a premium of 32% over Columbia’s unaffected market price; the Columbia board was advised by two independent financial advisors; and over 95% of Columbia’s outstanding shares voted in favor of the merger.

Columbia stockholders brought suit claiming that Columbia’s officers and directors breached their fiduciary duties in the sale process, aided and abetted by TransCanada. By the time of trial, the directors had been dropped as defendants and the officers had settled, leaving only TransCanada as a defendant. Vice Chancellor Laster found that: (i) Columbia’s CEO and CFO breached their fiduciary duties—by unreasonably favoring TransCanada in the sale process based in part on their personal desire to trigger their change-in-control benefits and then retire; and by failing to disclose to stockholders in the proxy statement their eagerness for a deal and their solicitude toward TransCanada in the sale process; (ii) Columbia’s directors breached their fiduciary duties—by failing to exercise sufficient oversight of the officers in the sale process; and (iv) TransCanada “knowingly participated” in the breaches—and therefore was liable for aiding and abetting. The Vice Chancellor awarded damages of $1 per share (totaling more than $400 million) to be paid by TransCanada to the former Columbia stockholders.


Right-Wing Attacks on the Freedom to Invest Responsibly Falter in Legislatures

Frances Sawyer leads Pleiades Strategy and Connor Gibson is the founder of Grassrootbeer Investigations. This post is based on their report. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto Tallarita; How Much Do Investors Care about Social Responsibility? (discussed on the Forum here) by Scott Hirst, Kobi Kastiel, and Tamar Kricheli-Katz Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee (discussed on the Forum here) by Max M. Schanzenbach and Robert H. Sitkoff; and Exit vs. Voice (discussed on the Forum here) by Eleonora Broccardo, Oliver Hart and Luigi Zingales.

Executive Summary

In 2023 Republican lawmakers in 37 states introduced 165 pieces of legislation to weaponize government funds, contracts, and pensions to prevent companies and investors from considering basic, common-sense risk factors. The legislation is framed around restricting the use of Environmental, Social, and Governance (ESG) investment criteria, such as the safety and treatment of employees, the diversity of management and workforce, and readiness to withstand the impacts of climate change. Were they to become law, the inevitable result of the bills would be to manipulate the market to favor select industries, particularly the volatile fossil fuel and firearms sectors.

This coordinated legislative effort, commonly referred to as the anti-ESG movement, generated massive backlash from the business community, labor leaders, retirees, and even Republican politicians. It is not an issue that resonates with the public. Despite all the hype, the vast majority of anti-ESG bills failed to progress through legislative chambers, including in ten states fully controlled by Republicans. At present, 22 laws and 6 resolutions in 16 states have made it through legislatures this year. Many of the finalized bills were heavily amended to reduce most of the substantive portions. Broad escape clauses were added to limit the most draconian prohibitions, which experts have warned legally contravene the basic tenets of fiduciary duty, creating a “liability trap.”

This report is the first comprehensive look at this legislative campaign and the broad effort to counter it. It follows the general arc of these 165 bills — where they came from, who sponsored them, who supported and opposed them, and how they fared.

As of June, 2023, our tracking has concluded that:

  • At least 165 distinct bills (including 9 resolutions) were introduced in 37 states.
  • 83 bills are dead, across 23 states:
    • In 17 states where legislation was introduced, no laws passed. 10 of these
      states are controlled by Republicans.
    • 3 bills were vetoed by the governor in Arizona.
  • 42 bills that did not pass will carry over into the 2024 legislative session.
  • 22 bills and 6 resolutions were approved by state governments:
    • 19 laws and 6 resolutions have passed in 14 states this year.
    • 3 enrolled bills await governor action in 3 states.
  • 12 active bills are pending. 6 have not had committee hearings.


SEC’s Approach to Enforcement After Cyber Incidents: Key Takeaways for Public Companies

Jennifer Lee, Charles D. Riely, and Shoba Pillay are Partners at Jenner & Block LLP. This post is based on a Jenner & Block memorandum by Ms. Lee, Mr. Riely, Ms. Pillay, and Eric Fleddermann.

Last month, Gurbir Grewal, the Director of the SEC’s Division of Enforcement, spoke at the Financial Times Cyber Resilience Summit. During the remarks, he outlined the importance of cybersecurity and signaled that the SEC is taking an aggressive stance against public companies that fail to take the right steps after experiencing a cyber incident.

Grewal’s comments come amid proposed changes to SEC rules that would require public companies to disclose “a material cybersecurity incident within four business days” after learning of “a material cybersecurity incident.” [1] These requirements accompany other anticipated changes to SEC rules designed to enhance disclosures regarding cybersecurity risk management and incident reporting by financial institutions. While these changes could usher in a set of new requirements, Grewal’s speech made clear that the SEC will continue to pursue enforcement under current law. This article discusses the key takeaways for public companies.

SEC Enforcement Action Following a Cyber Incident Is a Heightened Risk

Grewal acknowledged that, whatever its precautions, a company will experience cyber incidents. As Grewal noted at the outset of his remarks, “cyber resilience is a concept that recognizes that breaches and cyber incidents are likely going to happen, and that firms must be prepared to respond appropriately when they do. In other words, it’s not a matter of if, but when.” [2]


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