Climate Disclosure Line-Drawing & Securities Regulation

The SEC’s efforts to standardize climate disclosure have revealed deep divides among the public and among corporate and securities law scholars about the proper scope and goals of climate disclosure reform. This controversy comes at a time when investor demand for ESG investment products is rising exponentially and when other regulators worldwide are already moving to standardize how climate risk and other ESG information is reported to investors.

This Article clarifies the line-drawing choices behind mandatory climate risk disclosure, explains the established frameworks for corporate climate reporting that regulators internationally are building upon, and identifies how both have informed the SEC’s proposed climate disclosure rules. This Article contributes to the debates over ESG disclosure mandates by exploring the boundaries and intersections of climate risk and broader ESG concepts and by considering the potential liability implications of mandatory climate risk disclosure. It concludes by explaining the impact and limits of the SEC’s line-drawing choices and outlining steps that could be taken to better achieve the goals of the proposed reforms and perhaps to move beyond them.