This section is to be read in conjunction with the above EU section, and focuses specifically on rules under Italian law regarding directors’ duties and obligations as they pertain to climate change.

In addition to new requirements under EU law, there have been recent developments in Italian law. In 2022, the Constitutional Affairs Committee approved amendments to Articles 9 and 41 of the Italian Constitution introducing the principle of protection of “environment, biodiversity and of ecosystems, also in the interest of new generations” and a general prohibition for entrepreneurial activities to be carried out in a manner that could hinder “health and environment”.¹

There has also been an increasing focus on sustainable finance. In January 2022, Banca D’Italia set up a Climate Change and Sustainability Committee, which will contribute to defining the bank’s sustainable finance strategy, and has also become a member of the Steering Committee of the Network for Greening the Financial System.²

Italy is a civil law jurisdiction. Directors’ duties are codified in the Civil Code (section 2392 ff.) - dated 1942, later amended in 2003 - according to which directors owe a duty to the company to manage its affairs with care, evaluated according to a subjective and objective standard. With the exception of creditors, consideration of whose interests arises when the company’s assets are no longer sufficient to satisfy creditor claims, the Code does not explicitly refer to any duties regarding obligations to stakeholders. Another relevant provision is article 2381 of the Civil Code, according to which the board of directors is responsible for ensuring that the company’s internal organization, administration and accounting are “adequate”; this responsibility includes, among others, the duty to ensure that the enterprise risk management system functions effectively.

Viewed alongside European Directive No. 2014/95/EU (the Non-Financial Reporting Directive) and European Directive No. 2022/2464 (the Corporate Sustainability Reporting Directive or CSRD),³ the Italian Code’s two above-noted provisions, combined with the Directives’ comprehensive disclosure requirements, create a clear obligation for boards of Italian corporations to adopt a governance approach that is focused on the long-term and thus includes climate change. In other words, by compelling disclosure that is long term-focused, boards are obliged to take appropriate actions to support these long-term disclosures, e.g. by identifying and managing climate risks and opportunities, embedding them in long-term corporate strategy, ensuring alignment with individual investment decisions, and correctly valuing company assets. It follows that under Italian law, directors’ civil liability for damages may arise in cases of misstatements, overvaluation of company assets, and breaches of their duty of care for failing to identify and/or manage climate-related risks or to consider climate-related opportunities in setting the strategy.

In addition to the Civil Code, the Corporate Governance Code – which, though not hard law, defines a set of voluntary ‘comply or explain’ recommendations – was amended in 2020 to include an explicit reference to “sustainable success”. Article 1 of the Corporate Governance Code provides that “[t]he board of directors leads the company by pursuing its sustainable success”, sets corporate strategy in accordance with this principle, and oversees its implementation. The concept of “sustainable success” is defined as “the objective that guides the actions of the board of directors and creates long-term value for the benefit of shareholders, taking account of the interests of other relevant stakeholders”. This echoes section 172 of the U.K. Companies Act 2006 and is consistent with the concept of ‘enlightened shareholder value’. Similarly, the draft European Sustainability Reporting Standards (ESRS) on general requirements under the CSRD states that engagement with stakeholders which are or could be affected by the company’s activities and its direct and indirect business relationships across its value chain, should form part of a company’s materiality assessment which should underpin its sustainability disclosures.⁴ While this does not directly relate to directors’ duties, it may inform directors as to how they may seek to comply with Article 1 of the Corporate Governance Code. That being said, the voluntary nature of the Corporate Governance Code means that breaches of this principle do not give rise to any enforceable legal liability against company directors. 

Contributors:

• Dr. Sabrina Bruno, Full Professor of Comparative Corporate Law, University of Calabria - Luiss G.Carli