Mandatory disclosure would reveal corporate carbon damages

Abstract

The US Securities and Exchange Commission recently proposed a rule that would mandate that public companies report their greenhouse gas (GHG) emissions. This follows similar efforts in the European Union (EU) and United Kingdom. One rationale is that disclosure will provide information on material risks to investors, making it evident which firms are most exposed to future climate policies. In addition, some believe that reporting will galvanize pressure from companies’ key stakeholders (e.g., customers and employees), leading them to voluntarily reduce their emissions. This reasoning is in line with evidence for financial markets (1) and disclosure mandates that form the third wave of environmental policy, which follows a wave of direct regulation and a wave of market-based approaches (2). But what might such disclosure reveal? We provide a first-cut preview of what we might learn about the climate damages caused by each company’s GHG emissions by drawing on one of the largest global datasets, which covers roughly 15,000 public companies.