Τhis section is to be read in conjunction with the above EU section and focuses specifically on rules under Greek law regarding directors’ duties and obligations as they pertain to climate change.
At government level, Greece has made substantial progress and has established specific policies and targets to foster climate resilience to climate change.
In December 2019, the Greek Government adopted the National Energy and Climate Plan (NECP).1 The NECP is a strategic plan which sets out a detailed roadmap for the attainment of specific energy and climate targets by 2030 and describes specific priorities and policy measures in respect of a wide range of economic activities for the achievement of the targets, and therefore operates as a reference text for the forthcoming decade. There is a specific target for reduction of greenhouse gas (GHG) emissions by 42% by 2030, compared to 1990 levels. In addition, the target for 2030 for the share of renewable energy in gross final energy consumption is 35%.
In May 2022, Greece adopted a national climate law which aims at creating a coherent framework for the improvement of the adaptability and climate-resilience of Greece and the gradual transition of the country to climate neutrality by 2050 in the most environmentally sustainable, socially fair and cost-efficient way.2 For the achievement of the target of climate neutrality by 2050, the climate law sets as intermediary targets for the years 2030 and 2040 the reduction of greenhouse gas (GHG) emissions caused by human activity by at least 55% and 80% respectively, compared to 1990 levels, taking also into account the targets of the NECP. For the achievement of the above goals, the national climate law provides for the adoption of climate adaptation strategy at a national and regional level for a period of ten and seven years respectively, as well as for specific measures and policies, including the phase-out of lignite’s share in power generation by 2028, the promotion of the use of zero carbon and electric vehicles in the public and private sector and the reduction of CO2 emissions from residential and public buildings and companies.
The NECP is currently under revision so as to comply (as the national climate law does) with the ambitious EU climate targets of reduction of CO2 emissions by 55% compared to 1990 levels by 2030 (European Green Deal, European Climate Law, Fit for 55 package) and the phase out of EU’s dependency on fossil fuels well before 2030 set out in the Repower EU plan. The Ministry of Environment and Energy is in process of consulting with the European Commission before presenting the revised version of the NECP for public consultation.
Greek regulators, especially in the financial sector, are also becoming increasingly focused on the importance and necessity for companies to apply climate resilience policies and measures in the interest of their sustainability and competitiveness.
In 2019 the Athens Stock Exchange (ATHEX) produced the ESG Reporting Guide and updated such guide in 2022.3 The ESG Reporting Guide offers voluntary guidance on incorporating ESG information, including climate risks. The ESG Reporting Guide is aligned with leading reporting frameworks – including the Sustainability Accounting Standards Board (SASB), the 2021 Global Reporting Initiative (GRI), the Sustainable Finance Disclosure Regulation and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations – and applicable legislation, including the Non-Financial Reporting Directive (NFRD) and the Corporate Sustainability Reporting Directive (amending the NFRD), the Sustainable Finance Disclosure Regulation (SFDR), the EU Taxonomy, and Greek law 4548/2018, as well as the Hellenic Corporate Governance Code (HCGC). While voluntary, compliance with the ESG Reporting Guide is likely to help companies meet ESG regulatory requirements under the national climate law and other relevant legislation, and increase access to capital.
The Hellenic Corporate Governance Code (HCGC) recommends that listed companies rely on the ATHEX guidance in relation to their non-financial disclosures.
In addition, in November 2021, the Bank of Greece announced its eight-point plan for climate change. The Bank committed to following a climate change action plan, applying sustainable and responsible investment principles to its portfolios, assessing climate risk in the financial system, and using the recommendations of the Network for Greening the Financial System (NGFS).
At the corporate level, Greek law has introduced the concept of sustainability, including climate related risks, in the governance of listed companies. This has not yet taken the form of an obligation for the management boards, but rather as an issue left at the discretion of the boards to decide whether the adoption of a policy addressing climate change risks is appropriate for the business activity of the company. However, the fact that Greece has adopted an ambitious strategy towards the climate neutrality with the adoption of binding climate targets (see the national climate law) presumes an understanding by the boards of climate-related risks and assessment of their impact on the business of the company (and vice versa of the company’s business to the climate) and is expected to increasingly affect the governance culture of directors.
Directors’ Duties and Climate Change
Directors’ duties are set out in the Greek corporate law 4548/2018 (Corporate Law).4 Pursuant to articles 96 and 97 of the Corporate Law, all board members have a duty of care, loyalty, diligence and confidentiality towards the company and must exercise their duties for the benefit of the company. Directors are liable to the company for any damage of the company due to an act or omission which constitutes breach of their duties.5 The standard for the assessment of directors’ liability is the diligence of the “prudent businessman”. Based on the business judgement rule, no liability exists for acts or omissions which are based on a lawful resolution of the general meeting, or which concern a reasonable business decision which was adopted in good faith, based on adequate information and exclusively for the promotion of the corporate interest. The court may also rule that no liability exists for acts of board members which are based on an opinion of an independent body or commission which operates in the company. Although the duty of care of directors is owed to the company, if the company fails to proceed with an action against the board members, the shareholders could proceed themselves to seek compensation in tort for the indirect damage they have suffered. Furthermore, shareholders may be entitled to file an action in tort against the board members for any direct damage they have suffered. In addition, the legal representatives of a company are jointly and severally liable with the company to compensate any person that suffers damage because of such action.
Interpreting the duty of care of board members under the standards and requirements of the EU and national climate change strategy, management board directors are expected to be skilled to understand and assess the impact of climate risks to the company’s business (and vice versa of the company’s business to the climate) and to implement policies and measures to foster company’s resilience against climate related risks.
Climate change, which falls within the bounds of sustainability issues, is explicitly associated with the governance of listed companies in the Greek corporate governance law 4706/2020 (Corporate Governance Law),6 although not in the form of an obligation. Article 14 of the Corporate Governance Law provides that listed companies shall include in their internal regulation the sustainable development policy pursued by the company, where required.
According to the HCGC, sustainability is determined by reference to the impact of the company's activities on the environment and the wider community and is measured on the basis of non-financial factors related, among others, to the environment, which are economically essential for the company and the collective interests of key stakeholders (employees, customers, suppliers, local communities and other important stakeholders). Pursuant to the best practices of HCGC, board directors must: determine in the annual report the non-financial issues concerning the long-term sustainability of the company that are essential for the company, the shareholders and the stakeholders and how the company must apply them; bind and monitor the executive administration on matters relating to new technologies and environmental issues; ensure that mechanisms are in place for the knowledge and understanding of the interests of the stakeholders and monitor their effectiveness; and disclose to shareholders information on the management and performance of the company on sustainable (ESG) issues. HCGC recommends that listed companies should use indicators of the ESG 2019 Reporting Guide of the Athens Stock Exchange or internationally recognized initiatives, such as the GRI, the SASB organization, the CDP or the UNGC.
Another area where climate related risks, as part of the concept of sustainability, are considered is the remuneration policy of the executive members of listed companies. HCGC recommends that the board directors shall examine and link the remuneration of executive members with indicators on ESG issues and sustainable development that could give long-term value to the company.
Pursuant to article 150 of the Corporate Law, non-financial indicators related to the company’s business activity, including information about climate related issues, may also be included in the management report to the extent required for the understanding of the development, the performance or the position of the company. Again, the use of non-financial indicators about climate change issues is left at the discretion of the management board. Very small joint-stock companies (other than listed companies, insurance companies and banks in relation to which please see below) are exempted from the obligation to include non-financial information in their management report.
Pursuant to article 152 of Corporate Law, companies must also include in their management report a corporate governance statement which, pursuant to HCGC’s recommendation, shall include, among other items, information on the sustainable development policy (including climate change issues) followed by the company, such as description of key elements of the policy adopted and implemented with a view to promoting the corporate interest and competitiveness of the company, reference to the essential non-financial issues relating to the long-term sustainability of the company, reference to the standards used by the company for the disclosure of such non-financial information.
Breach of the provisions of articles 150 and 152 of the Greek Corporate Law may entail imprisonment of the board member for up to three years or imposition of fine from €5.000 - €50.000.
The proposed Corporate Sustainability Due Diligence Directive (on which, please see the EU section) may influence the governance culture even before being adopted, including the duty of care of directors, as Greek companies (in particular large ones) may wish to take measures to meet its requirements as pro-active governance in order to be competitive against other EU companies established in member states that have already introduced due diligence laws, such as France and Germany.
Directors’ Disclosure Obligations and Climate Change
Greece has implemented the NFRD in the Corporate Law. According to article 151 of the Corporate Law, listed companies, banks and insurance companies7 with over 500 employees includes in their management report a non-financial statement, in relation at least, to environmental, social and employment issues, human rights, anti-corruption and anti-bribery, to the extent required for the understanding of the development, the performance, the status and impact of their activities. This statement must include a brief description of the business model, a description of policies, the results of those policies, the main climate related risks and the company’s activities, including, where to the extent appropriate, business relations, products or services that may have negative results and mitigating actions, as well as non-financial performance indicators. If the company does not adopt any policies to address the above issues, the non-financial statement must include a clear and justified explanation for the lack of any such policies (on a comply or explain basis). The non-financial statement must also include, where appropriate, references and additional explanations regarding the amounts stated in the annual financial statements. As an exception, the company may omit to include in the non-financial statement any information about upcoming developments or issues under negotiation if, subject to the reasoned opinion of the board members, such information would cause significant damage to the company and provided that such omission does not impede the correct and balanced understanding of the impacts of the company’s activities. In relation to the non-financial disclosures, companies may use national or EU or international standards and, in this case, must clarify the standards they relied upon. The non-financial disclosure obligation is subject to external auditors’ control. In case of incompleteness or errors in the non-financial statement the Hellenic Capital Market Commission (HCMC) may issue a reprimand or impose a fine up to €3.000.000 to the board members.
In January 2023, the European Commission adopted the Corporate Sustainability Reporting Directive (EU) 2022/2464 (CSRD). CSRD amends the NFDR by expanding the scope of companies which are required to make sustainability disclosures to all large companies and all companies listed on regulated markets (except listed micro-enterprises), requiring the sustainability information to be disclosed as part of the management report and audit (assurance) of reported information, introducing more detailed reporting requirements and a requirement to report according to mandatory European Sustainability Reporting Standards (ESRS) as well as requiring the digitalisation of sustainability information Companies already subject to the NFRD will be required first to make CSRD disclosures in 2025, in respect of FY2024. The CSRD has not yet been transposed into national law.
Although the NFRD and CSRD make no reference to directors’ duties, the reporting obligations indirectly oblige the management board members to develop a governance culture which takes into account and assesses the impact of climate related issues to the business of the company and adopts appropriate measures and policies to address climate risks in the short-, medium- and long-term interest of the company’s interest and competitiveness.
Practical Implications for Directors
Despite the absence of specific commitments and obligations of directors at corporate level in relation to climate change and environmental issues, the existing EU and national legal framework on climate change and non-financial disclosures as well as the adoption of the CSRD and the proposal of a Directive on Corporate Sustainability Due Diligence visibly indicate that board directors of Greek companies must contribute to the company’s resilience to climate change. Our practical recommendations are as follows:
- Ensure that management board is skilled, and, where required, train the management board to understand climate-related risks and how they may affect the business of the company across the company's operations, subsidiaries and value chain, including products, clients and in general stakeholders;
- Allocate identification of climate risks and opportunities and their evaluation to a specific management team that reports directly to the board;
- Designate to a department the monitoring of the legal and policy developments in relation to EU climate goals, and the potential direction of these developments and put on the agenda for the board to review, within 3 or 6 months, a process to initiate the development of a climate transition roadmap to 2050, with transparent carbon neutrality targets, clear interim targets to 2040, 2030 and near-term within the current rolling multi-medium and long-term targets, and at least annually thereafter report back to the board;
- Delegate to the appropriate committee(s) of the board, such as risk, audit, legal and governance, scenarios/strategy, nominations/remuneration, or sustainability/corporate responsibility, the task of translating the long-term climate change strategy into a clear decision-making process for each aspect that is relevant to each committee;
- Review and, where required, adopt and create a governance policy to ensure appropriate management and handling of climate-related risks and associated defamation risks;
- Ensure compliance with the Corporate Law and the Corporate Governance Law on climate related issues; and
Discuss with disclosure counsel, to develop an external engagement and communications plan and to oversee rigorous disclosure and accounting.
- Stathis Potamitis, PotamitisVekris
- Dimitra Rachouti, PotamitisVekris
- Natalia Nicolaidis, Dynamic Counsel Ltd.