Two Recent Legal Decisions in Delaware Have the Potential to Change the Landscape for ESG Investing

In mid-July, the Delaware Senate passed a bill which, among other things, amends the code related to decedents' estates, fiduciary relations and property with a new provision that states that when making an investment decision a fiduciary may take into account the needs of the beneficiaries "as well as the beneficiaries’ personal values, including the beneficiaries’ desire to engage in sustainable investing strategies that align with the beneficiaries’ social, environmental, governance or other values or beliefs of the beneficiaries."

Additionally, the Delaware Certification of Adoption of Transparency and Sustainability Standards Act was signed by the Governor at the end of June and will become effective October 1, 2018This piece from Harvard Law School describes the act that makes it possible for companies to seek a sustainability certificate.

"In recognition of the increasing calls from investors, customers and clients for greater transparency in sustainability practices, the Act provides Delaware entities a verifiable means of demonstrating to their constituents that they are committed to sustainability.”

The certification process is completely voluntary and flexible in keeping with Delaware’s history as a business friendly state, but it is required that standards and assessments used are made publicly available and approved by the governing body of the company.

In other Delaware news, it was decided in mid-July that the Investor Responsibility Research Center Institute (IRRCi) research will now be managed out of the University of Delaware’s Weingberg Center for Corporate Governance. From the news release:

"The Weinberg Center will receive a grant from IRRCi in excess of $1 million as part of the successor. With these funds, the Weinberg Center will materially expand its environmental, social, corporate governance and capital market research, and also maintain the full IRRCi research library so that more than 75 research reports remain publicly available at no cost. The Weinberg Center also will continue to fund and manage the annual IRRCi Investor Research Award that recognizes outstanding practitioner and academic research."

 

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