Academic journal article Environmental Law

Investing in the Future: Why the Sec Should Require a Uniform Climate Change Disclosure Framework to Protect Investors and Mitigate U.S. Financial Instability

Academic journal article Environmental Law

Investing in the Future: Why the Sec Should Require a Uniform Climate Change Disclosure Framework to Protect Investors and Mitigate U.S. Financial Instability

Article excerpt

  I.  INTRODUCTION                                                  493  II.  CLIMATE CHANGE WILL AFFECT THE U.S. ECONOMY AND A WIDE       VARIETY OF INDUSTRIES IN MATERIAL WAYS                        497 III.  IN ORDER TO MITIGATE THE ECONOMIC IMPACTS OF CLIMATE       CHANGE, THE CURRENT SEC CLIMATE RISK DISCLOSURE       REQUIREMENTS SHOULD BE SUPPLEMENTED BY A MORE STRINGENT       STANDARDIZED FRAMEWORK SUCH As SASB OR TCFD                   499         A. Two Major Problems Exist with the SEC's Current            Approach--Lack of Enforcement and Lack of            Uniformity--That Can Be Resolved with a Uniform            Disclosure Framework                                     500         B. SEC Disclosure Requirements and Regulation S-K: An            Overview                                                 502         C. Sustainability Accounting Standards Board (SASB): An            Overview                                                 503         D. Task Force on Climate-Related Financial Disclosure            (TCFD): An Overview                                      504         E. Implementing a Uniform Climate Disclosure Framework,            Such As SASB or TCFD, Offers Significant Benefits to            Investors and Eliminates the Current Lack of            Enforcement and Uniformity.                              505  IV.  THE BENEFITS OF ADOPTING A THIRD-PARTY DISCLOSURE       FRAMEWORK OUTWEIGH THE POTENTIAL CHALLENGES, PROVING IT IS       THE BEST OPTION FOR IMPROVING THE FUTURE OF CLIMATE RISK       REPORTING IN THE UNITED STATES                                506         A. A Mandatory Disclosure Framework Would Ensure the            Best, Most Comprehensive Information Reaches Investors            and Would Greatly Increase Compliance                    507         B. Key Reasons to Endorse Adoption of a Third-Party            Disclosure Framework Include Increased Efficiency,            Access  and Attention to Industry Expertise, and            Improved Compliance                                      508         C. Opponents May Argue Against Adoption of a Third-Party            Disclosure Framework Because of Potential            Pohticization, Lack of Accountability and Objective            Evaluation by Third Parties, and Potentially High            Costs for Regulated Entities                             511   V.    A  COMPARATIVE CASE STUDY OF LEED GREEN BUILDING STANDARDS            FURTHER REVEALS THE ADVANTAGES OF ADOPTING A UNIFORM            DISCLOSURE FRAMEWORK                                     514         A. Key Similarities Between LEED and SASB/TCFD Include            Their Motivations for Formation and Their            Industry-Backed, Research-Based Standards, Which Make            Them Suitable for Federal Government Adoption            516         B. Government Adoption Models of LEED Standards Provide            Several "Lessons Learned," Suggesting that SASB/TCFD            Must Be Implemented at a Federal, Mandatory Level        518  VI.  CONCLUSION                                                    519 

I. INTRODUCTION

Climate change is one of the most profound and complex issues facing the United States and global economies today. In 2014, the Intergovernmental Panel on Climate Change noted that "[e]ach of the last three decades has been successively warmer at the Earth's surface than any preceding decade since 1850." (1) The long-term, global scale of the issue makes it uniquely challenging, especially for businesses and economies trying to predict their economic futures. (2) In particular, international reduction of greenhouse gas emissions shows a movement away from fossil fuel energy and other related industries. (3) This transition to a lower carbon economy requires significant changes, which may disrupt economic sectors and industries, leading to financial shocks and sudden losses in global economic value. (4) Both public corporations and the investment and financial community must face the realization that climate change risks will impact the economy. …

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