Seminars

As most of you know, the debate over shareholder primacy – which was intensively advanced in the late 20th in both theory and practice as the essence of corporate purpose – has been faced with broader and deeper challenges. At the turn of our recent century, more and more people were urging greater recognition of the necessity of many forms of capital – not just financial but also human, intellectual, natural and others – as key to long-term value creation for both the corporation and society. At the same time, voices around the world were calling for a greater role on governance of the stakeholder groups associated with those capitals. With the creation of the International Integrated Reporting Commission in 2019 and declarations by groups like the Business Roundtable in 2019 that “each of our stakeholders is essential [and] … we commit to deliver value to all of them, for the future success of our companies, our communities and our country” it seemed a decade ago that a fundamental shift was about to take place. Then the momentum slowed and now we are facing a backlash that may be only temporary … or permanent.

Public debates about sustainability and finance are taking place vigorously around the world. Among the most important is the controversy around the proposed “simplification” of the key laws and regulations governing sustainability disclosure in the European Union such as the CSRD, the Taxonomy system, and the CSDDD. Some corporate leaders have attacked existing the disclosure requirements as unnecessary and burdensome, arguing that European companies will never be globally competitive unless the scale and scope of the requirements are drastically reduced. Leaders of civil society groups have countered that this argument is misleading, that integrating sustainability actually improves competitiveness, and that what is really happening is that industry leaders who opposed the measures at the beginning are now seeking another path to kill them.

Our complex capital markets can be compared to systems of computer code patched together from hundreds of thousands of subroutines, each developed with different assumptions for different purposes. Some of this “legacy code” is outdated and dysfunctional. Over the last ten years, experts, practitioners, scholars, and thought leaders have zeroed in on three core concepts that together hold the promise of bringing capitalism into alignment with the systemic ecological, social, and technological changes sweeping the world. These are: The evolution of fiduciary duty The shift towards system-level investing And the development of improved sustainability measurement and disclosure. In our next seminar, we will be asking: How do these three concepts relate? How could they be combined? Where, together, could they lead? Each is critical to the future, but none can succeed in creating deep system change in isolation.

Will the New GRI Standards for Banking, Capital Markets, and Insurance Be Successful? At a time when political forces are rolling back corporate transparency in the United States and Europe, the Global Reporting Initiative has continued to move forward with sustainability disclosure standards for three of the most influential sectors in the international economy: banking, capital markets, and insurance. This work, launched in early 2023, has involved intense work by three separate technical committees made up of 40 sector specialists from business, labor, civil society, investors, the United Nations, central banks, and other expert groups. The GRI has now released the proposed standards globally for public comment. Presentations and discussion are currently taking place in every region of the world. The Sustainable Investing Research Initiative (SIRI) is proud to anchor one of the key discussions in North America within Columbia University. There is much at stake. The current weakening of mandatory standards in some jurisdictions underscores the urgent need for independent standard setting bodies like the GRI and the ISSB. These organizations produce carefully considered, high quality standards free from political pressures. These organizations are jointly leading the way in establishing global baseline standards for impact and financial materiality that can then be adopted — in whole or in part — by government jurisdictions around the world. If successful, this will continue to shape global markets and governance into a 21st century capitalism that successfully integrates sustainability into its theory and practice.

The last few weeks have witnessed the emergence of major efforts to roll back two of the most powerful governmental instruments of corporate accountability. The first is the recent revocation of long-standing shareholder rights by the newly appointed leaders of the U.S. Securities and Exchange Commission, and the second is the proposed dramatic reduction in the requirements in the Corporate Sustainability Due Diligence Directive (CSDDD) law within in the European Union. Taken together, these represent an effort to alter – and in some cases to nullify – several decades of progress towards encouraging disclosure of major sustainability risks to corporations, investors, and the public at large. In the US, whose legal structures favor shareholder primacy, this systematic reduction of the rights of shareholder is puzzling, and in many cases, self-contradictory. In Europe, the original decision to expand disclosure about sustainability as a means of improving long-term corporate performance is being challenged by industries who say the gathering of such information harms European competitiveness.

We are focusing our first session on the critical dimensions of the debate over fiduciary duty in the United States and beyond. Though the concept of fiduciary duty is often presented as easy to determine and to enforce, it has a complex history and a rich body of interpretation which must be reexamined in light of the changing role of capital markets in the modern economy.

Human Capital performance is quickly becoming a central pillar of the “S” of ESG reporting. This is driven not only by regulatory developments from the SEC and EFRAG, but by demands by other stakeholders – employees, customers, strategic partners. This presentation will provide a context for understanding the pressure for more disclosure, developments in global standards related to required reporting, and the business rationale for understanding the human capital impact on sustainable business outcomes.