Does Climate Disclosure Work to Reduce Greenhouse Gas Emissions? Emerging Evidence Suggests Cautious Optimism

Significant regulatory resources have been spent developing global, voluntary climate and sustainability disclosure standards, such as the TCFD, TNRD, and ISSB’s Sustainability and Climate Disclosure standards, or domestically required disclosures, such as in the EU and in the U.S. Thus, it is important to evaluate whether this disclosure, particularly voluntary, qualitative disclosure, will have the power to shift the allocation of capital, will have a significant effect on the management of climate risk within firms, and ultimately will reduce climate change risk and biodiversity loss. In this Article, several interrelated questions will be discussed. First, what does the empirical evidence show about the effects of required greenhouse gas (GHG) disclosures on emissions? What mechanisms are engaged in producing the reductions in GHG emissions that are seen in some studies?

Is there evidence that disclosure of climate data causes institutional investors to re-allocate capital, and that this re-allocation is a significant source of pressure on firms? What, then, can we conclude about the use of disclosure in efforts to address climate change? Part One will first briefly describe three global, voluntary disclosure frameworks—TCFD, TNRD, and ISSB—each of which has either been globally influential (TCFD) or has the capacity to become influential (TNRD and ISSB). Part One will also describe two mandatory climate disclosure regimes: the Corporate Sustainability Reporting Directive (CSRD) in the EU, and the Securities and Exchange Commission’s (SEC) Climate Disclosure Rule in the U.S. Part Two will discuss some emerging empirical evidence on the effects of GHG emissions disclosure as an example of targeted climate transparency.

Empirical research on the effects of mandatory GHG emissions disclosure in the UK and U.S. will be used to inform that discussion. Part Three will explore the implications of that empirical evidence for evaluating the likely power of the disclosure initiatives described in Part One in reducing GHG emissions and stabilizing nature loss, and will conclude.