A new report published by the Climate Risk Disclosure Lab highlights the need for a thorough, robust, and mandatory disclosure framework for climate-related information. The report exposes the failure of U.S. regulators to properly incorporate climate change into their mandates and assesses the threats that the vacuum of climate-related information poses to financial markets and the broader economy. Because there are inadequate climate-related disclosure requirements, companies are not consistently identifying, measuring, and communicating climate-related risks. As a result, investors, firms, stakeholders, and policymakers do not have the information needed to adapt to the inevitable consequences of climate change, and financial markets remain vulnerable to abrupt climate-related shocks.
The comprehensive reports begins by assessing the importance of climate-risk disclosure for investors, firms, and financial markets. It then exposes the failure of U.S. regulators to implement climate risks into their mandates and finds that this failure has led to inadequate disclosure of climate-related information. Finally, the report assesses the market, legal, and regulatory factors that are driving improvements in disclosure practices and explores the future of climate disclosure.
“The report makes clear that U.S. regulators must act to implement a thorough, robust, and mandatory disclosure framework for climate-related information,” said Lee Reiners, the report’s lead author and executive director of the Global Financial Markets Center at Duke Law. “Such a regime is needed to ensure that firms assess and measure climate-related risks and opportunities, and that they transmit that information to financial markets in a comparable and decision-useful way.” Mandating the disclosure of climate-related information would have broad market benefits. It would increase investor ability to compare companies and promote more efficient allocations of capital; ensure that firms identify adaptation measures and emerging opportunities, and enable them to share that information with stakeholders under a common and accessible framework; lead to more confident long-term investments and accurate asset pricing; and create more sustainable companies and economies.
The full report can be accessed here.