Legal Tools for Climate Adaptation Advocacy: Securities Law
From the Sabin Center for Climate Change Law, this report focuses on how governments and investors can use financial disclosure as a tool to incentivize or pressure publicly traded companies to undertake climate change adaptation measures. The chapter explains why financial disclosure is a powerful tool, describes the relevant regulatory schemes, and outlines both regulatory or enforcement and market-based strategies for improving corporate responses to climate change.
As expressed in this paper, reviewing financial disclosure reports presents several opportunities for investors. They can use disclosure reports to hold corporations accountable for failing to report material financial risks that are attributable to climate change. Investors may also be able to use disclosure reports to incentivize or pressure corporations to take steps to address risks from climate change.
Disclosure with respect to climate change is also in the financial interest of the corporations. In particular, such disclosure requires corporations to identify the best long - term investments, which ultimately safeguards and improves profitability. Evidence already shows that the corporations making the greatest effort to implement adaptation measures are financially outperforming their competitors. (See report for inline data references.)
The report describes enforcement and regulatory solutions in four areas:
- Relevant SEC regulations
- SEC’s 2010 Interpretive Guidance regarding climate change
- Strategies for investors
- State “Blue Sky” laws (State security laws)
As explained by the report, in 2010, the SEC issued its first, and to date, only guidance document explicitly related to disclosure of material risks related to climate change. Significantly, the SEC acknowledges that risks attributable to climate change fall within the scope of the existing regulatory scheme.
The strategies for investors included in the report discuss: petitioning the SEC (noting that the 2010 guidance was a result of petitioning), filing comments, demand letters, and shareholder suits.
The Blue Sky laws section provides an overview of some of the different statutory schemes as exemplified by New York, California, and Massachusetts, and discusses how government entities can use these statutes to improve disclosure practices related to adaptation.
The report ends with Market-Based Solutions describing shareholder activism activities such as proposals and letters to management, along with “Strategies for Framing the Issue.”
Publication Date: May 2015
Author or Affiliated User:
- Nina Hart
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Resource Types:
- Legal Analysis
