Climate Change Reporting and Due Diligence: Frontiers of Corporate Climate Responsibility

Climate change affects businesses significantly. Corporations are increasingly expected to consider the impacts of climate change on their business and, conversely, the impacts of their business on the global climate, which calls for adequate measures to reduce climate-related risks. Despite the widely accepted need for swift and quite drastic reductions of greenhouse gas emis-sionstolimitglobaltemperatureriseinlinewiththeParisAgreement,specificandbindinglegal obligations for corporations mandating such reductions are scarce. Potentially filling this regulatory gap, international best practices for private sector enterprises to address climate change related issues are quickly emerging, and regulators are beginning to transpose them into bind-inglegalframeworks.Inaddition,courtsareincreasinglycalledupontoreviewclimate-related business decisions and strategies. Climate change reporting and, more recently, climate change due diligence are core aspects in this complex debate. This article explores and contextualizes these developments from a transnational perspective, with a main focus on Europe


A. Introduction
Corporate boards are facing a number of complex risks relating to geopolitical uncertainties, cybersecurity, pandemics, and environmental degradation.Environmental problems such as plastic pollution, hazardous wastes, loss of biodiversity, deforestation, soil depletion, andthe focus of this articleclimate change are manifold and interconnected.The World Economic Forum's Global Risks Report 2021 ranks climate action failure as the second highest global risk (both in terms of likelihood and impact). 1 As a transboundary global challenge, climate change has traditionally been discussed primarily at the intergovernmental level.This fact is reflected, in particular, in the adoption of the 1992 United Nations Framework Convention on Climate Change (UNFCCC) 2 , the 1997 Kyoto Protocol to the UNFCCC 3 , and the 2015 Paris Agreement 4 .In recent years, however, the role of private actors (including large corporations) in addressing climate change has become a new focus. 5Given its economic power, the private sector plays a key role in the pursuit of limiting global temperature rise.Investors, regulators, NGOs and other stakeholders exert pressure on corporations to adopt strategies to address climate-change risks and opportunities. 6In addition, climate change litigation against corporate actors is clearly on the rise, which increases liability risks. 7sinesses' negative impacts on the environment have triggered a debate on how to reduce these risks.Environmental risks are addressed specifically under different labels ranging from Corporate Social Responsibility (CSR) and Environmental, Social and Governance (ESG) policies to internationally agreed standards on Responsible Business Conduct (RBC) promoted by international bodies, primarily the UN and the OECD.Further, environmental risks may be reflected in general corporate governance policies.Recently, the drive for increased corporate accountability was strongly reinforced by the widespread recognition of climate change as a significant financial risk to corporations, investors, and global financial stability. 8Accordingly, climate change should be a top priority for boards.
Today, obligations requiring corporations to restrict their greenhouse gas (GHG) emissions are scarce and often limited to technical aspects such as vehicle emission standards, whilst emission trading schemes are limited in scope and geographical reach. 9Specific norms mandating sustainable business conduct are lacking in many areas, including climate change. 10Further, internationally agreed standards and guidelines for corporate behaviour concerning human rights and the environment do not specifically refer to climate change in their current versions.Given this regulatory gap, international best practices and re- commendations (often referred to as "soft law") to address the role of corporations in the climate change context are quickly emerging.These efforts typically focus on two regulatory "tools": reporting and, more recently, due diligence.In the area of climate transparency, the work of the G20 Task Force on Climaterelated Financial Disclosures (TCFD) is a key reference point (infra, C.II).The TCFD's focus is based on the view that transparency reduces misallocations of financial resources in the market that contribute to climate-related financial risks.Going beyond disclosure, climate change due diligence is a new concept of high interest among policymakers (infra, D).The basic concept of corporate due diligence was shaped by the UN Guiding Principles and the OECD Guidelines for Multinational Enterprises.Climate-related standards for companies are beginning to be 'solidified' into mandatory hard law at the domestic and supranational levels.This is particularly the case in the EU, which tries to position itself as the leader in the global transition to a greener economy. 11 The article is structured as follows.Limiting global temperature rise at 1.5 °C requires "rapid and far-reaching" transitions in essentially all sectors of the economy: land use (including agriculture and forestry), energy, industry, buildings, and transport. 19In a 1.5 °C scenario, global net anthropogenic (human induced) CO 2 emissions must be reduced by about 45% by 2030 (compared to 2010 levels), reaching "net-zero" around 2050. 20 By steering financial flows towards "greener" activities, the financial sector can be a key driver in advancing global sustainability. 21he large scale nature of climate change makes it particularly challenging in the context of business decision-making. 22Climate change is a complex issue that entails scientific, economic and policy uncertainties on long time horizons that extend beyond board terms. 23Yet, the implications of climate change on private entities do not only manifest in the long term, but are also relevant to business decisions taken today. 24Transitioning to a "low-carbon" economy 25 has significant near-term effects on industries dependent on extracting, producing, and using fossil fuels, but also on other sectors of the economy, including the financial sector. 26e European Green Deal announced by the European Commission in December 2019 stresses that "[t]he private sector will be key to financing the green transition.Long-term signals are needed to direct financial and capital flows to green investment and to avoid stranded assets". 27The broadly accepted need for a transition based on warnings from climate science about the impacts of climate change (summarized in the IPCC reports) is strongly reinforced by the recent but widespread recognition of climate change as a significant financial risk for corporations and investors. 28If climate risks continue to be addressed inadequately, they present a potential threat to global financial stability. 29 Task Force on Climate-related Financial Disclosures (TCFD), Final Report -Recommendations of the In order to describe the manifold climate change related risks from a business perspective, two main categories can be identified: physical risks and transition risks.While physical risks concern financial impacts arising from climate-related events (for instance, due to bushfires linked to climate change 30 ), transition risks frame sub-categories of risks related to the global transition to a lowcarbon economy: market risks, policy risks, reputational risks, technology risks, and litigation risks. 31vestors, in particular institutional investors such as pension funds, have realized that climate change represents a major risk to their portfolio and hence, to their beneficiaries.Pension funds and investment funds are exposed for a substantial part of their portfolios to assets that could become stranded in a disorderly transition. 32This has prompted investors to assess climate change risks within their investment portfolios and to start adapting their investment policies accordingly, for instance by gradually divesting from fossil fuels (coal, oil, and natural gas). 33

II. Linking Corporate Governance and Climate Change
Combining corporate law, corporate governance and sustainability is an emerging field of research. 42Traditionally, corporate governance and sustainability, here understood as environmental sustainability, were often perceived as "two entirely separate issues". 43In a corporate governance context, sustainability typically refers to economic rather than ecological sustainability, at least thus far. 44Mainstream corporate governance tends to prioritize (often short-term) financial interests of shareholders over other interests such as a healthy climate, or put more drastically, a liveable planet for future generations.From a theoretical standpoint, the deeply ingrained shareholder primacy approach has received considerable criticism. 45 that the issue is currently not resolved in the public sphere, it is delegated to board rooms (and increasingly court rooms, see supra B.I). 48In most European civil law codifications (and similarly in common law traditions), boards have wide discretion in balancing different interests, including environmental issues such as climate change; at the same time however, enforcement of potential breaches of directors' duties typically faces high hurdles (relating mainly to standing, prohibitive costs, and the business judgement rule). 49However Arguably, less procedural and substantive hurdles apply where plaintiffs rely on tort law as a legal basis for their claim, as in Milieudefensie et al v. Shell and Lliuya v. RWE.
Overall, climate change concerns are often times only taken into account if a majority of shareholders takes the view that this contributes to the success of the company in terms of creating shareholder value ("win-win"). 50Notably, shareholders increasingly support climate change related proposals which aim at steering large energy companies towards shifting to a low-carbon business model, as recent examples show. 51Especially in the energy and financial sectors, the recognition of the financial impact of climate change reinforces the argument for shareholder engagement through (i) discussions with management (ii) filing climate change related proposals concerning GHG emission disclosures, emission-reduction target setting, executive remuneration, or lobbying, or ultimately (iii) litigation. 52With respect to mainstream investors, it should be kept in mind that their perception of the importance of enhanced climate action will be assessed in relation to a "business case". 53 which highlights the potential for new approaches, some of which are tested by emerging litigation.
Although CSR developed from an originally voluntary concept to placing greater emphasis on responsibility for the negative impacts of business 54 , the European Commission's approach remained closely connected with a "business case" or "win-win" narrative. 55In contrast, framing business responsibility in sustainability terms aims at balancing the interests of all stakeholders, including society at large and the planet. 56Beyond that, where no such business case is identified, regulation is arguably required. 57In the present context, the perceived binary opposition between (often short-term) economic sustainability and ecologic sustainability is called into question by the recognition of climate change (and other environmental issues) as a financial risk (see supra, B.I).
Fiduciary duties, consisting of the duty of care and the duty of loyalty, sit at the heart of corporate governance. 58Notably, corporate governance extends beyond fiduciary duties to a broader set of duties including those arising from contract (for instance, duties owed to insurance providers, lenders, suppliers, and customers) and regulation. 59In the climate change context, a number of scholars take the view that fiduciary duties oblige directors to have regard to the financial implications associated with climate change, in the best interest of the company or their beneficiaries, respectively. 60pproaching the issue from another angle, Clarke makes an argument for a widening of the scope of director's duties given changes in society. 61Corporate governance measures are suitable for increasing pressure on boards to use their discretion in a way that (more) weight to environmental factors is attached to their decision-making. 62In that respect, alongside environmental regulations, corporate governance can play a role to advance the trajectory towards more ecological sustainability, even though these steps may seem incremental. 63hese new approaches contrast "traditional" approaches which claim that unacceptable environmental impacts ("externalities") must be addressed by respective (environmental) legislation, but shall not serve to extend the mandate of boards. 64hnston and Sjåfjell identify three broad categories of EU regulatory initiatives to steer the private sector towards sustainability: (i) regulation of decision-makers, (ii) regulation of information provided to markets (in particular, financial markets), and (iii) regulation of design and production of goods. 65A key element in addressing the first two of these categories is the European Commission's Action Plan on Financing Sustainable Growth of 2018 (Action Plan), whichwhile recognizing environmental and social considerations more broadlyputs climate change concerns at its centre. 66The Action Plan includes mandates to strengthen sustainability disclosure and accounting rule-making (Action 9) and to assess "(i) the possible need to require corporate boards to develop and disclose a sustainability strategy, including appropriate due diligence throughout the supply chain, and measurable sustainability targets; and (ii) the possible need to clarify the rules according to which directors are expected to act in the company's long-term interest" (Action 10). 672018 report by the European Parliament calls for a legislative proposal implementing an "overarching, mandatory due diligence framework including a duty of care". 68The European Union is currently evaluating the introduction of mandatory human rights and environmental due diligence legislation (infra, D.III).Further, a report on director's duties and sustainable corporate governance for the Commission published in July 2020 mentions "minimum common rules to enhance the creation of long-term value" as a regulatory option. 69isclosure and due diligence are core elements of regulatory efforts in the EU to enhance Corporate Climate Responsibility.Therefore, these two issues are analyzed in more detail hereinafter.
C. Climate Change Reporting I. "Non-Financial" Reporting: Outdated for Climate Risk Transparency is a key element of governance and, integrated into regulation, thought to enhance legal certainty and confidence. 70Based on economic theories which suggest that providing sufficient information to the markets influences corporate decision making, regulatory initiatives in the EU and elsewhere to steer businesses into a more sustainable future put a strong emphasis on information disclosure. 71As a "regulatory tool of minimum intrusion", disclosure compels the release of information so that next steps can be taken by interested recipients, whether they be market participants (mainly investors) or non-market constituents. 72Notably, improved transparency does not necessarily relate only to a quantitative increase of information, but also to a higher quality. 73Both dimensions are important in the climate reporting context.
Disclosure regimes traditionally focus on investors' needs to evaluate financial performance. 74At present, corporations typically report their net worth only in relation to their financial and material capital, but not in relation to the other four components of capital: human capital, intellectual capital, natural capital, and social capital. 75However, transparency in terms of social and environmen-tal factors is considered to be "vital for managing change towards a sustainable economy by combining long-term profitability with social justice and environmental protection". 76Disclosure of such information (often referred to as "non-financial reporting") shall assist in measuring, monitoring and managing companies' performance and impact on society, thereby providing investors and other stakeholders (including consumers) easy access to relevant information. 77Accordingly, disclosure of social and environmental information shall enable the identification of sustainability risks and engagement with stakeholders. 78porting on social and environmental issues is promoted by the OECD Guidelines for Multinational Enterprises (OECD Guidelines, current version of 2011, see infra D.I) 79 ; in addition to reporting on all "material" matters including the financial situation, ownership and governance, board and executive remuneration, the OECD Guidelines encourage that companies report on issues where disclosure standards are evolving such as social, environmental, and risk reporting.This second set of disclosures "particularly" concerns reporting on GHG emissions (covering "direct and indirect, current and future, corporate and product emissions"). 80nce about 2010, various countries have introduced mandatory disclosure regimes relating to specific "non-financial" issues including, for instance, conflict minerals, modern slavery, or child labour. 81In the EU, representing a shift away from viewing CSR as a purely voluntary matter for companies (supra, B.II), in 2014, the Non-Financial Reporting Directive (NFRD) 82 introduced mandatory non-financial reporting obligations for large companies on environmental, social, human rights and bribery matters (see also infra, C.II). 83The "non-financial statement" required by the NFRD since 2018 must include a narrative description on the policies pursued by the company in relation to these matters, including due diligence processes implemented. 84 ligations with respect to due diligence implicitly require internal processes to engage with CSR issues. 85 the financial market area, additional regulations and initiatives to foster sustainability disclosure have been introduced recently, with special regard to the issue of climate change. 86Further, in April 2021, the Commission proposed a new Corporate Sustainability Reporting Directive (CSRD) 87 , which would revise the NFRD and represent a shift from "non-financial" to sustainability reporting; according to the proposal, large companies are obliged to inform, in particular, about their plans "to ensure that its business model and strategy are compatible with the transition to a sustainable economy and with the limiting of global warming to 1.5 °C in line with the Paris Agreement". 88inly due to its broadly accepted financial relevance (supra, B.I) and reinforced by a shared sense of urgency considering the recognized need for swift and quite drastic emission reductions, climate change is currently viewed by many as the most pressing concern in developing global sustainability reporting standards. 89 present valuations do not adequately factor in climate change risks due to insufficient transparency. 97cognizing these concerns, in April 2015, the G20 Finance Ministers and Central Bank Governors requested that the Financial Stability Board (FSB) consult with private and public sector representatives in order to assess how the financial sector can take account of climate-related issues. 98In December 2015, the FSB established the Task Force on Climate-related Financial Disclosures (TCFD) with the mandate to develop recommendations for disclosures to assist financial market participants understand their respective climate-related risks. 99There are a number of other initiatives that encourage companies to collect data and develop targets to assess climate risks and opportunities, including the Montréal Pledge 100 , the Portfolio Decarbonization Coalition 101 , and the Science Based Targets initiative (SBTi). 102e TCFD identified a need for (a) improved information to enable informed investment, lending, and insurance underwriting decisions and (b) improved understanding and analysis of climate-related risks and opportunities. 103Ultimately, providing guidance in relation to these issues is intended to contribute to a "smooth" transition to a "greener" economy, thereby avoiding an abrupt shock. 104In 2017, the TCFD issued its first recommendations for companies to adequately assess and price climate-related risks and opportunities (TCFD Recommendations). 105In comparison to other initiatives, the TCFD Recommendations were innovative in that they encourage companies and investors to dis- close, based on scenario analysis, the expected impact of climate change on their business and investment portfolios, respectively. 106Following the view that they are or at least could be financially material, the TCFD recommends to provide climate-related financial disclosures in mainstream annual financial filings. 107The TCFD Recommendations are structured around four core elements of climate-related financial disclosures: governance, strategy, risk management, and metrics and targets. 108Intended to solicit forward-looking information of financial impact from a broad range of companies, they were designed to cover not only the financial market, but to be adoptable across sectors and jurisdictions.
Not long after their publication in 2017, the TCFD Recommendations began to be transposed into more binding terms at the domestic and supranational levels.For instance, in September 2020, New Zealand announced to make TCDF-aligned climate-related financial disclosures mandatory for some organizations including larger financial institutions. 109In November 2020, recognizing that a voluntary approach to climate related financial disclosure may not be sufficient given the "urgency of the climate threat", the UK Government announced its intention to move towards mandatory disclosures across nonfinancial and financial sectors, in line with the TCFD. 110In the US, the Securities Exchange Commission (SEC) declared in March 2021 to reassess whether current disclosures adequately inform investors and other market participants on climate-related disclosures. 111Building on the TCFD Recommendations and as a deliverable under the Action Plan (Action 9.2, see supra B.II), the Technical Expert Group on Sustainable Finance provided recommenda- tions on climate-related disclosures in June 2018. 112Based on this work and as a supplement to the non-binding guidelines to the NFRD, the Commission published specific guidelines on reporting climate-related information in June 2019. 113A further incremental step is the proposed introduction of sustainability reporting (supra, C.I).
Going beyond climate risks, another new development is the recognition of "nature-related" financial risks, which has led to calls for setting up a Taskforce on Nature-related Financial Disclosures. 114

III. Challenges and Limitations
The NFRD has received quite some criticism.By adopting a flexible regime for regulated businesses rather than prescribing a specific reporting methodology, the NFRD opened the door for a fragmented reporting landscape. 115Further, being targeted primarily at the needs of investors, the implementation of the Directive by member states tended to adhere to the dominant shareholder-centric approach to disclosure. 116In addition, commentators take the view that the lack of enforcement of the reporting requirements by member states undermine the legislative aim of "nudging" corporations towards more sustainable practices, raising considerable doubts as to the relevance, reliability, and comparability of the data disclosed by companies. 117Overall, by adopting a very broad and generic approach, the NFRD has arguably failed to achieve its objective to increase the relevance, consistency and comparability of information disclosed by large companies. 118This conclusion has implications beyond the EU, which can be seen as a test-bed to identify the limitations of current disclosure regimes. 119e TCFD Recommendations receive widespread support from financial regulators around the world as well as from the private sector.TCFD-aligned disclosure is increasing since 2017. 120Nevertheless, the TCFD recommendations are far from being fully adopted.Very few companies currently provide the quantitative data as recommended by TCFD. 121The lack of standardized industry metrics relating to the availability of reliable and consistent data on which metrics could be calculated, has been flagged as one main problem. 122he TCFD sees industry associations, standard-setters and similar organizations best positioned to undertake the work to address this. 123sues concerning scope, availability, and comparability of data and metrics are challenges to meaningful climate disclosure.As one main example, most commonly used metrics generally only cover Scope 1 and Scope 2, but not Scope 3 emissions. 124Scope 3 emissions, however, account for up to 90% of a company's GHG emissions. 125Nevertheless, only about a third to a quarter of companies in scope of the NFRD disclose Scope 3 data. 126The TCFD Recommendations recommend to disclose Scope 1 and 2, but Scope 3 emissions only "if appropriate". 127This marks a significant gap.In Milieudefensie et al. v. Royal Dutch Shell, the Court mentions that the respondent Shell is required to reduce the indirect emissions of the Shell group merely on a "best effort" basis.
Further, the lack of specific guidance and case law on what climate-related information is subject to reporting duties may lead to hesitance to disclose new types of information. 128Concerns that commercially sensitive information is disclosed or vulnerability to climate action exposed could contribute to a reluctance to disclose certain details. 129Initiatives at the level of the EU, the TCFD and elsewhere aim at creating more clarity in respect of what level of disclosure is expected. 130general critique to the approach taken by the TCFD Recommendations is that they represent a further step in the 'financialisation of sustainability'; by focusing on disclosing risks to investors rather than the impacts of their activities, companies are to a certain extent distracted from their own contributions to climate change. 131This issue relates to the debate around "double materiality".This concept distinguishes between reporting on social and environmental impacts on the one hand, and reporting on the company's financial development on the other; this approach questions the conventional approach to reporting (to include non-financial reporting) centred around the 'true and fair view' doctrine, which has been criticized for being narrowly focused on value creation for the enterprise and its shareholders rather than shared value for society and the environment. 132With respect to implementation, Johnston goes as far as to say that "[w]ithout a credible threat of regulation, the [TCFD] Recommendations will amount to little more than (yet) another box-ticking exercise." 133As shown above (supra, C.II), national legislators as well as the EU have begun to transpose the TCFD Recommendations into financial market legislation.
128 Vizcarra (fn.90), 50.129 TCFD, 2020 Status Report (fn.104), 50.130 See also IFRS (fn.88).Equally, the International Organization for Standardization (ISO) is developing standards and frameworks in this area, see in particular ISO/FDIS 14097, Framework including principles and requirements for assessing and reporting investments and financing activities related to climate change (under development).131 Johnston (fn.106), 1, 29, who adds that therefore, the Recommendations cannot replace the disclosure of impacts under voluntary sustainability reporting regimes.132 See Monciardini/Mähönen/Tsagas, (fn.118), 27-29 (clarifying with respect to the EU that although reporting duality was already present in the text of the NFRD, it was "officially introduced" only in 2019 by the Commission's guidelines on reporting climate-related information (European Commission, Guidelines on non-financial reporting (fn.17), albeit with limitations).133 Johnston (fn.105), 29.

D. Climate Change Due Diligence I. Going Beyond Disclosure
Etymologically, the term due diligence means reasonable care or appropriate carefulness and refers to the level of attention required by the circumstances in order to avoid liability in negligence. 134In a broader sense, due diligence is generally understood as the cornerstone of executing corporate responsibility. 135otably, the term as used here is distinct from the concept of due diligence as an obligation for states in international law. 136though being comparable, the German concept of Sorgfaltspflicht is not necessarily the same as the duty of care under English law or the vigilance under French law.To create some uniformity in the international discussion, Rühmkorf and Walker suggest using the term due diligence as a recognised and widely used concept. 137Due diligence resonates with existing standards of duty of care in tort law and comparable standards in civil law, and is more expansive than a duty of care in terms of enforcement, given that it is not limited to private action (a claim in tort) but can also be subject to public enforcement (for instance, a fine for failure to conduct adequate due diligence). 138The concept of due diligence has become "embedded in the international discourse and prac-tices of stakeholders across the spectrum" and achieved global recognition. 139ompanies have developed self-regulatory forms of due diligence as a matter of private governance. 140e concept of due diligence was introduced to the public discourse on how to achieve more responsible business through the 2011 UN Guiding Principles on Business and Human Rights (UNGP) 141 , which frame it as a process by which companies identify, prevent, mitigate, and account for how they address their actual and potential adverse impacts on human rights. 142Although the UNGP do not specifically address environmental issues, human rights with an environmental "aspect" such as the right to water, health or food are covered. 143As a key element of their 2011 revision, the concept of risk-driven due diligence was incorporated into the OECD Guidelines, and extended beyond human rights to encompass all areas covered by the guidelines that relate to business impacts, including the environment, bribery, consumer rights, etc. 144 Although often referred to as a purely non-binding instrument, states adhering to the OECD Guidelines are obliged to establish National Contact Points (NCPs) to promote the Guidelines and to handle complaints. 145n 2018, the OECD published its Due Diligence Guidance for Responsible Business Conduct with the aim of promoting a common understanding of due diligence among governments and stakeholders across sectors; while not referring specifically to climate change, the OECD encourages companies to use the Guidance as a framework for developing and strengthening their due diligence systems and processes. 146The sector-specific 2018 Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector points to the need for measuring and reducing GHG emissions. 147Further, the 2019 Due Diligence for Responsible Corporate Lending and Securities Underwriting guidance highlights the key role of financial institutions in achieving the SDGs and the goals of the Paris Agreement, but remains vague with respect to climate related measures. 148As indicated above, due diligence tends to be framed as a process-based approach.In this regard, it should be stressed that performing a due diligence process alone, regardless of its result, is not per se sufficient to satisfy a required standard; similar to other areas such as money laundering or corruption, a 'tick the box' mentality must be avoided. 149Accordingly, due diligence should be understood as a context-specific standard of care requirement rather than a mere process. 150

II. New Focus on Climate Change
The concept of due diligence as an expression of informed corporate decisionmaking on climate-related issues has recently gained momentum. 151Although rooted in parallel developments in the legal sphere (supra, D.I), in practice, human rights due diligence and environmental due diligence have developed in their respective "silos". 152However, the significant correlation between climate change and human rights is increasingly recognized.

State-driven Developments
More and more, it is acknowledged that climate change (and environmental degradation) directly and indirectly interferes with the enjoyment of all human rights, to include the rights to life, housing, water and sanitation, food, health, development, and an adequate standard of living. 153Nevertheless, beyond the human rights area, the idea of supply chain wide corporate due diligence is still in its infancy. 154Climate change due diligence is a new and yet rarely used term.Contrary to impacts on human rights, environmental issues including climate change are more readily quantifiable (for instance, based on GHG emissions emitted by a given company) and can, in the case of climate change, be benchmarked against the 1.5 °C goal of the Paris Agreement.Mainly in the financial and insurance sectors, studies are being undertaken to assess the alignment of investment portfolios with the goals of the Paris Agreement. 155 their current 2011 version, the OECD Guidelines, although not explicitly mentioning climate change, provide relevant recommendations that businesses may use to address their climate-related impacts.Broadly reflecting principles and objectives of international environmental law, Chapter VI dedicated to the environment provides some insights as to what Corporate Climate Responsibility may entail more specifically in terms of due diligence and disclosure.It recommends that enterprises establish and maintain an environmental management system which ensures the collection of adequate and timely information, the establishment of measurable objectives and targets for improved environmental performance, and regular monitoring and verification of those objectives and targets.These targets should, "where appropriate", be consistent with relevant national policies and international environmental commitments. 156he Paris Agreement provides such an internationally agreed target with its 1.5 °C objective. 157ong other things, Chapter VI of the OECD Guidelines further expects enterprises to (i) inform the public and workers with adequate, measurable, verifiable and timely information on potential environmental impacts of their undertakings and (ii) in order to address foreseeable environmental impacts in decision-making, to prepare an appropriate environmental impact assessment (EIA) for activities that may have a significant environmental impact, and (iii) to continually seek to improve corporate environmental performance, including by developing products and services that reduce GHG emissions. 158Accordingly, the OECD Guidelines expect companies to conduct due diligence in respect to their environmental impacts, including climate impacts. 159Additional points of relevance are contained in the chapters on disclosure (Chapter III), consumer interests (Chapter VIII) and science and technology (Chapter IX).Accordingly, the OECD Guidelines, in their current version, provide at least some guidance in respect to how corporations are expected to deal with climate change, but they do not deal with the entire range of climate change impacts.Milestones such as the Paris Agreement will need to be adequately reflected in the next revision of the guidelines. 160 addition to written standards, recognized principles of international environmental law are likely to be "influential in the interpretation of any due diligence standard of care relating to the environment". 161This relates, in particular, to the principle of prevention and the precautionary principle, both of which are referred to in the UNGP and the OECD Guidelines. 162Although arguably, the mentioned principles may not themselves give rise to a legal obligation for companies at the international level, they can be relevant in the interpretation of existing or developing due diligence standards. 163he data protection impact assessment (DPIA); according to Article 35 GDPR172 a DPIA must be conducted if the data processing is based on new technologies being likely to result in a high risk to the rights of individual persons.The systematic description of the processing operations and purposes, their necessity and proportionality as well as the involved legitimate interests are to be evaluated along the lines of specific compliance guidelines.Similar efforts have been undertaken in other cross-topic-fields, for example through developing models for a human rights impact assessment (HRIA), which encompasses criteria including meaningful participation, non-discrimination, empowerment, transparency, and accountability, as well as for a social/ethical impact assessment.173 Such types of new organizational concepts may also make sense in the context of environmental matters; correspondingly, a climate change impact assessment should contain the factors that could contribute to leading the involved actors to take better informed decisions in the climate-related context.

III. From Voluntary to Mandatory
Over the last few years, mandatory due diligence requirements covering specific issues such as conflict minerals or child labour have been introduced in a number of jurisdictions. 174The French 2017 Loi de Vigilance175 is (to our knowledge) the only legislative example to date which imposes a general mandatory due diligence requirement with respect to human rights and environmental impacts. 176Large companies across sectors are required to establish and implement a plan de vigilance (vigilance plan) which must disclose adequate measures to identify risks to, and prevent serious violations of, human rights and fundamental freedoms, the health and safety of individuals, and the environment (implicitly including climate change issues) which result from the global activities of the company, extending to directly or indirectly controlled entities and subcontractors and supplies with which it maintains an established business relationship. 177Magnier argues that under the Loi de Vigilance, companies are expected to assess climate-related financial risks and to report on the measures taken to address them, including by adopting a low-carbon strategy across their extended production chain. 178e EU has launched a number of due diligence related initiatives and regulations, for instance the Conflict Minerals Regulation. 179Building on the UNGP and the OECD Guidelines and based on the mandate contained in Action 10 of the Action Plan (supra, B.II), in December 2020, the European Council called upon the Commission to launch yet another Action Plan focusing on "shaping global supply chains sustainably, promoting human rights, social and environmental due diligence standards and transparency", including by taking into account "lessons learned" from COVID-19. 180The idea of sanctioning companies or their representatives for poor corporate due diligence through penalties and civil liability is thought to incentivise management process to reduce negative impacts on human rights and the environment. 181erging litigation gives a taste of the climate due diligence related (and similar) claims courts will increasingly be called upon to decide.In a lawsuit filed against Total in January 2020 under the French Loi de vigilance, the plaintiffs seek a court injunction ordering Total to issue a vigilance plan which identifies (1) the risks resulting from the GHG emissions from the use of goods and services produced, (2) the risks of serious harm as outlined in the IPCC's 2018 Special Report, and (3) the measures to ensure that Total aligns with a trajectory compatible with the Paris Agreement temperature increase goals, without taking into account the use of carbon-capture technologies whose deployment remains uncertain. 182In the matter of McVeigh v. REST, a large Australian superannuation fund settled a lawsuit brought by one of its beneficiaries by committing to "measure, monitoring and reporting outcomes on its climate related progress and actions in line with the recom-mendations of the TCFD" and to "conduct due diligence and monitoring of investment managers and their approach to climate risk", among other settlement terms. 183In Milieudefensie et al. v. Royal Dutch Shell, the court took a closer look at how Shell identifies, assesses, and manages climate change risks; ultimately, it held that the respondent has an "individual partial responsibility to contribute to the fight against dangerous climate change according to its ability". 184rther, a number of climate related complaints against companies in the energy and the financial sectors have been submitted to NCPs under the OECD Guidelines. 185The complaint of 4 NGOs v. ING Bank 186 before the NCP of the Netherlands provides insights as to corporate due diligence and disclosure expectations related to climate change risks.The Dutch NCP's final statement on the complaint contains statements that advance the current debate.First, it clarified that the duty to perform climate due diligence extends to the value chain (as confirmed in Milieudefensie et al. v. Royal Dutch Shell). 187Second, reflecting the precautionary principle, it stated that the absence of a methodology or internationally accepted standard does not dismiss companies from seeking to measure and disclose their GHG emissions, whilst acknowledging that indirect emissions can be more difficult to measure. 188 described, steps are currently being undertaken with a view to transpose voluntary due diligence standards which cover climate change (and other issues) into more binding frameworks.The first cases before state courts and non-judicial bodies provide welcome fora to discuss and clarify open questions with respect to substantiating the concept of climate change due diligence and related issues.

E. Conclusion
Climate change is an emerging liability risk for corporations (and their boards and management) that certainly goes beyond reputational risks.In addition to addressing these risks appropriately, diligent boards may be expected to equally consider the business opportunities presented by climate change (supra, B.I).In times of high global uncertainty and expected phasing out of "business as usual", corporations with boards that take adequate measures are better positioned to achieve a more climate resilient business for the benefit of the company, its stakeholders and the planet.
Ongoing pressure on companies from investors, governments, NGOs, and initiatives such as the TCFD have gained considerable momentum over the last few years, and climate litigation against corporations is on the rise.Climate disclosure, and more recently, climate due diligence are important points in the debate on how to increase corporations' responsibility with respect to their contribution to climate change.While many initiatives seem to be incremental steps to formalize the private sectors' responsibility in the "green transition", certain limitations and challenges should not be overlooked.With respect to climate-related disclosure, a lack of standardization, enforcement and questions with regard to scope are considerable hurdles to meaningful disclosure.Concerning due diligence, although neither the UNGPs nor the OECD Guidelines explicitly mention climate change, it is widely accepted that the business responsibility to respect human rights and environmental issues includes a responsibility to identify, prevent, mitigate, and account for climate change.The OECD Guidelines are currently the only broadly accepted international standard which provide at least rudimentary guidance with respect to corporate climate due diligence.In their current version of 2011, they do, however, not cover the entire scope of climate related impacts and remain rather vague.In sum, specific climate change due diligence guidelines comparable to those existing in climate-related disclosures do not yet exist.
Although new regulatory proposals in the EU and decisions from courts as well as from non-judicial bodies such as the NCPs may provide welcome clarifications both in terms of climate-related disclosure and due diligence, co-operation between regulators, international organizations, investors and academia is needed to overcome existing barriers to enhance Corporate Climate Responsibility.
On a final note, as acknowledged from the outset of this article, although focusing on climate change, we certainly do not wish to disregard other, often interconnected social and environmental issues.While it is increasingly recognized that, on closer examination, most social, economic and environmental interests seem to be aligned when taking longer-term perspective, the EU's current legislative initiatives demonstrate an effort of considering a wide variety of (in the short term possibly conflicting) interests.Putting significant emphasis on climate change considerations seems nevertheless justified given the urgency of the matter, the readily available and far developed scientific basis, as well as the beneficial long-term effects of reducing GHG emissions on other social, environmental and economic issues (for instance, hunger, biodiversity, financial stability).
Corporate Governance and Research & Development Studies 2020, 37 (arguing that the WEF Principles are, as soft law, "the best possible instrument to address boards of directors of worldwide companies, foster convergence of their conduct and effectively help facing such global emergency").7 See, e.g., Javier Solana, "Climate Litigation in Financial Markets: A Typology", Transnational Environmental Law 9 (2020), 103.Andreas Hösli, "Milieudefensie et al. v.
June 2021).13 Ibid, 84 (proposing it as "a means to capture and contextualize various climate change related trends in the legal sphere as well as changing market practices' considering the need for sound corporate governance measures with respect to climate-related risks").
The first part (B) discusses why today, climate change is a key corporate governance issue.Building thereon and mainly focusing on the debate in Europe, the article then analyses two core elements of what we have proposed elsewhere 12 as Corporate Climate Responsibility 13 , with a view to implementing climate change considerations into corporate governance practices, namely climate change reporting (C) and climate change due diligence (D). 1411 Charles F. Parker/Christer Karlsson/Mattias Hjerpe, "Assessing the European Union's global climate change leadership: from Copenhagen to the Paris Agreement", Journal of European Integration 39 (2017), 239.12 Rolf H Weber/Andreas Hösli, "Corporate Climate Responsibility -The Rise of a New Governance Issue", sui generis 2021, 83, <https://doi.org/10.21257/sg.171>(last accessed on 1 Corporate Boards" (WEF, Climate Governance (fn.6)).14 The WEF (see WEF, Climate Governance (fn.6)) mentions further corporate governance measures including climate accountability, competence, management, and dialogue; these aspects are not discussed here, but see Bruno, "The World Economic Forum Principles" (fn.6).B. Corporate Climate Responsibility: A New Normal in a Changing World I. From Paris to Board Roomsand Court Rooms gas emissions and climate-resilient development" (art.2(1)(c)).The EU recognizes that "[t]he transition to a low-carbon, more sustainable, resource-efficient and circular economy in line with the SDGs is key to ensuring long-term competitiveness of the economy of the Union." 18 Beate Sjåfjell, "Reforming EU Company Law to Secure the Future of European Business", European Company and Financial Law Review 2021, 190, 197 (clarifying that EU initiatives have a strong emphasis on climate change, but extend to other (related) areas including biodiversity, among other things).38 With respect to the EU, see in particular European Commission, Action Plan: Financing Sustainable Growth, COM(2018) 97 final, 1. 39 E.g., IPCC, SR1.5 (fn.15), 22 (stating that pathways limiting global temperature increase to 1.5 °C project annual average investment in the energy system alone of around 2.4 trillion USD between 2016 and 2030).
In his "State of the Planet" speech in December 2020, UN Secretary General António Guterres highlighted that making climate-related financial disclosures mandatory is one of the key measures to translate government pledges into policies. 90r financial impact, framing climate-related risks as matters of non-financial reporting is outdated.This view is reflected in current efforts to enhance climate-related financial disclosures (see infra, C.II) and especially by the CSRD proposal.Notably, current disclosure requirements may mandate adequate climate transparency already today, particularly where climate risks are identified as financially material for a company.91Whatadequateclimatetransparency means, however, is often controversial.In the US and Australia, disputes over allegedly inadequate disclosure of climate-related risks have prompted legal actions against companies (and in some cases also their directors) in the energy and financial sectors.For instance, in the securities fraud class action Ramirez v. ExxonMobil, the company and some of its officers were sued by shareholders who claim a failure to recognize and inform investors of climate change risks and the loss of value of fossil-fuel operations (stranded assets).92Asthis example shows, failure to disclose climate risks adequately may amount to a breach of director's duties in common law jurisdictions (or under similar concepts in civil law jurisdictions).
org/-/media/project/sustainability-reporting/consultation-paper-on-sustainabilityreporting.pdf> (last accessed on 1 June 2021), 12. 90 António Guterres, The State of the Planet (speech held at Columbia University, New York), 2020, <https://www.un.org/sg/en/content/sg/speeches/2020-12-02/address-co lumbia-university-the-state-of-the-planet> (last accessed on 1 June 2021).Considering 93II.Climate Risk Disclosure: the TCFDThe recognition of climate change as a material financial risk (see supra, B.I) has accelerated the push for enhanced corporate transparency on climate related issues.Today, many economic decisions do not factor in climate risks, although climate change is "[o]ne of the most significant, and perhaps most misunderstood, risks that organizations face today".94Consideringmarkets'vulnerability to abrupt corrections, inadequate information about risks gives rise to concerns about misallocation of capital and financial instability.95Duetotheirhigh complexity, however, climate risks cannot be adequately captured by traditional financial risk pricing models.96Asa result, there is a concern that g.Stefano Battiston/Irene Monasterolo, "The Climate Spread of Corporate and Sovereign Bonds", <https://ssrn.com/abstract=3376218>(last accessed on 1 June 2021).