Dr Alperen Gozlugol and Mr Simon Witney

This course is available on the LLM (extended part-time), LLM (full-time) and University of Pennsylvania Law School LLM Visiting Students. This course is available as an outside option to students on other programmes where regulations permit.

In this course, we will closely examine regulatory and non-regulatory developments in sustainable finance, focusing mainly on the EU but also on the UK as the international pace-setters with comparison to the US as a home to many international financial players. The course will remain highly relevant to students from other jurisdictions as we will discuss theory and regulatory approaches on a higher level before or after we tackle specific legislative pieces.

We will start the course by first discussing whether changes to how corporations are governed are necessary and to what extent they will contribute to sustainable value creation. This discussion will concentrate on the debate on corporate purpose (shareholder value vs. stakeholder value), fiduciary duties and executive remuneration. We will then move on to scrutinize the contribution that finance can make towards sustainability and therefore, whether and to what extent policymakers should place hopes on sustainable finance initiatives. We will closely look at the policy rationales of specific measures and evaluate whether they will have the intended impact. In particular, we will discuss whether disclosure-oriented measures in sustainable finance will achieve intended outcomes or become a regulatory distraction. Furthermore, we will look at the incentives of financial players (institutional investors, asset managers, banks etc.) to use their leverage to push companies towards more sustainability in the current regulatory framework as well as regulatory and non-regulatory constraints they face when pursuing purely pro-social goals without any link to financial returns. We will integrate the risk perspective into our sessions and discussions as a means for positive sustainable impact or as a regulatory concern in itself. As any evaluation involves comparative advantages of different tools to address the current problems, we will close the course with a debate on alternative measures to address corporate harm or externalities (such as tax, duties and liabilities).

Below is a breakdown of weekly topics that will be covered:

• Week 1: Introduction to sustainable finance and ESG
• Week 2: Corporate purpose (I): shareholder vs. stakeholder value
• Week 3: Corporate purpose (II): cont’d and ESG-tied executive remuneration
• Week 4: Sustainability reporting (I): legal regimes and what are sustainability disclosures for?
• Week 5: Sustainability reporting (II): cont’d
• Week 6: Reading Week
• Week 7: Mechanisms of sustainable finance: theory and practice
• Week 8: Financial market participants: fiduciary duties and sustainability reporting
• Week 9: Investor engagement in sustainability: mechanisms (voice or exit), incentives and constrains
• Week 10: Sustainable banking and financial stability
• Week 11: A debate: what are the alternatives? Carbon tax, duties and liabilities

20 hours of seminars in the AT. 2 hours of seminars in the ST.

Students will be expected to produce 1 essay in the AT.

• Milton Friedman, The Social Responsibility of Business Is to Increase Its Profits (Sept. 13, 1970), The New York Times.
• Lucian A. Bebchuk & Roberto Tallarita, The Illusory Promise of Stakeholder Governance, (2020) 106 Cornell Law Review 91.
• Oliver Hart & Luigi Zingales, Companies Should Maximize Shareholder Welfare Not Market Value, (2017) 2 Journal of Law, Finance and Accounting 247.
• Lucian A. Bebchuk & Roberto Tallarita, The Perils and Questionable Promise of ESG-Based Compensation, (2022) 48 Journal of Corporation Law 37.
• David Kershaw & Edmund Schuster, The Purposive Transformation of Corporate Law, (2021) 69 The American Journal of Comparative Law 478.
• Wolf-Georg Ringe, Investor-led Sustainability in Corporate Governance, (2022) 7 Annals of Corporate Governance 93.
• Madison Condon, Externalities and the Common Owner, (2020) 95 Washington Law Review 1.
• Anna Christie, The Agency Costs of Sustainable Capitalism, (2021) 55 UC Davis Law Review 875.
• Roberto Tallarita, The Limits of Portfolio Primacy, (2023) Vanderbilt Law Review 511.
• Tom Gosling & Iain MacNeil, Can Investors Save the Planet? NZAMI and fiduciary duty, (2023) 18 Capital Markets Law Journal 172.

Exam (100%, duration: 2 hours and 30 minutes) in the spring exam period.