There's an article on climate change disclosure in today's WSJ that uncritically accepts two highly contested propositions:
- Investors want climate change disclosure
- Climate change disclosure is desirable
I'm not claiming bias. I am claiming shoddy reporting.
As to the question of whether investors want climate disclosure, I have no doubt that some do. But how many? I addressed the related ESG issue of diversity disclosure in my 5/14/201 post SEC Chairman Gary Gensler is not being serious about what investors want:
The best data on what investors really want comes not from surveys (as evidenced by the disastrous performance of the polling industry in recent years, which has cast doubt "on all types of survey research"), but from what people actually do when given the opportunity to vote on shareholder proposals relating to ESG issues. ...
I went back to the Gibson Dunn report I cited in that post. It found that climate change-related shareholder proposals are garnering, on average, about 30% support (p.7). To be sure, Gibson Dunn claims that this shows an increase in investor support but it's still less than 1/3.
On a related topic, see my post Do apolitical investors want corporations to disclose political contributions?, which concludes that some do but most do not.
As for the desirability of climate change disclosure, see my 3/14/21 post Objecting to Climate Change Disclosure: It's Just Progressive Political Theater. In it, I make three points:
- Even if we assume that climate change disclosure would lead to public corporations reducing their carbon output, it would still be at best a minor change. It doesn't effect output in other countries.
- Disclosing climate-related risk factors will not bend the curve on climate change.
- Climate change disclosure is likely to be hugely expensive.
And, finally, I continue to recommend
Mahoney, Paul G. and Mahoney, Julia D., The New Separation of Ownership and Control: Institutional Investors and ESG (March 22, 2021). Columbia Business Law Review, Forthcoming, Virginia Law and Economics Research Paper No. 2021-09, Virginia Public Law and Legal Theory Research Paper No. 2021-18, Available at SSRN: https://ssrn.com/abstract=3809914
Scholars and policy makers have long debated whether corporations should serve social purposes at the expense of shareholder wealth. The SEC has recently been drawn into the debate as it faces calls to mandate environmental, social, and governance (ESG) disclosures. This Article urges the SEC to proceed with caution. The adoption of ESG disclosure mandates in order to serve environmental or social goals is not well-aligned with the SEC’s stated mission of protecting Main Street investors and maintaining fair, orderly, and efficient markets. Accordingly, the SEC should decline to act absent a showing that ESG disclosures will serve the financial interests of the households for whom institutional investors are fiduciaries and whose retirement and other savings they manage.
