William & Mary Law Review


This Article identifies a gap in the securities disclosure regime for climate change and demonstrates how filling the gap can improve financial disclosures and accelerate climate change mitigation. Private climate initiatives have proliferated in the last decade. Often led by advocacy groups, these private initiatives have used naming and shaming campaigns and other means to induce investors, lenders, insurers, retail customers, supply chain customers, and employees to pressure firms to engage in climate change mitigation. Based on an empirical assessment of the annual reports filed with the Securities and Exchange Commission (SEC) by Fortune 100 firms and the largest firms in several fossil fuel-heavy sectors, this Article concludes that roughly a third of these firms disclose the risks and opportunities posed by private environmental governance (PEG) initiatives. The assessment also finds, however, that disclosures vary substantially among similar firms and among similar sectors. The Article argues that this heterogeneity in disclosure is not surprising given that the SEC’s 2010 climate guidance and other disclosure regimes do not call sufficient attention to PEG climate initiatives, and many lawyers think of environmental risks as synonymous with governmental regulatory risks. The legal literature on climate transition risk focuses principally on whether regulatory and market-based risks should be disclosed, but it overlooks the importance of the material risks posed by PEG climate initiatives. PEG climate initiatives pose a discrete form of climate transition risk for many firms, and revisions to the SEC guidance and other disclosure regimes to account for PEG climate initiatives can be adopted more quickly, produce more complete financial disclosures, and yield greater and more durable emissions reductions than many other approaches.