Tighten US corporate disclosures to address climate risk: ClientEarth lawyers

ClientEarth lawyers are calling on the US Securities and Exchange Commission (SEC) to make seven key changes to corporate law to ensure the stability of the nation’s economic and financial system.

Lawyers from the environmental law organization’s US office are urging government regulators to take bold and immediate steps to ensure corporations provide adequate disclosures of climate risks. This is key to long-term economic resilience and alignment with Paris Agreement goals.

Under the Biden Administration, the SEC is expected to make major regulatory changes and it has requested recommendations from the public.

ClientEarth lawyers have developed seven key recommendations to ensure adequate and enforceable climate disclosures:

1. Adopt mandatory disclosure requirements for all companies, that are well-defined and based on a checklist or standards-based framework;
2. Require corporations to describe how their business model contributes to (or hinders) meeting the goals of the Paris Agreement when they file with the SEC;
3. Coordinate with foreign regulators to promote the universal adoption of robust requirements for corporate climate change disclosure;
4. Require a CEO or CFO to certify the corporation’s climate-related disclosures;
5. Ensure that climate-related disclosures are subject to independent third-party review;
6. Create a federal Office of Environmental and Social Governance (ESG); and,
7. Allocate resources to the Office of the Whistleblower to create a dedicated ESG whistleblower hub and reporting hotline.

If adopted, these recommendations will improve the quality of information provided by corporations to investors. They will also promote international reporting consistency and facilitate more efficient capital flows between markets.

ClientEarth’s Americas Director Doug Ruley said: “As our understanding of the impacts of our planet’s changing climate has evolved, it has become obvious that climate change is not merely a moral or environmental challenge, but also a financial one.

“Climate risks threaten corporations’ financial performance, undermine the stability of financial markets, and destabilize the entire economic system of the United States.”

This summer, ClientEarth’s US team will be meeting with the SEC to discuss these recommendations.

In June 2021, the House of Representatives passed its own legislation on environmental social governance (ESG), which requires disclosure of ESG metrics and dictates reporting expectations, though the legislation faces opposition from Republicans in the Senate.

ClientEarth’s lawyers recognize the many organizations in the country providing valuable recommendations on other issues that are equally deserving of enhanced disclosure, including human rights, diversity, health and safety, political lobbying and donations, and the preservation of biodiversity.

The full list of ClientEarth recommendations can be found here.

Photo credit: Aaron Burson / Unsplash