Emily Strauss (Duke University School of Law) has posted Climate Change and Shareholder Lawsuits on SSRN. Here is the abstract:
As climate change has become one of the most pressing and debated issues of our age, activists have become frustrated with the waffling of governments and grown progressively vocal in their demands that the largest companies take action to slow global warming. These calls have resulted in a cascade of ESG reports, corporate shakeups at petro-giants, and recently, the SEC’s promulgation of draft rules mandating climate risk disclosures for public companies.
But the controversy surrounding these rules has largely overlooked a critical question: Will shareholder litigation effectively enforce the accuracy of firms’ climate-related disclosures – voluntary or mandatory? To answer this question, I examine the climate-related lawsuits to date that shareholders have brought against their firms, creating a typology illustrating where such lawsuits are likely to arise. I find that much climate-related shareholder litigation has so far been follow-on litigation, piggy-backing off information produced either by the government, or by market participants such as short-sellers who are willing to do substantial digging, usually because they have an interest in the firm’s relatively short-term financial prospects.
While some inaccuracies in climate risk disclosures may be adequately – or even excessively – litigated under this regime, others that do not directly affect the firm’s bottom line might slip through the cracks. Key among these may be greenhouse gas disclosures, which so far have failed to generate any shareholder lawsuits. Moreover, the plaintiffs who seem best suited to bring these lawsuits – the climate activist investors who have lobbied so hard for firms to act on climate – have been virtually absent in climate-related shareholder litigation to date. Accordingly, I argue that under the current regime for shareholder litigation, the accuracy of some climate disclosures may not be enforced in a socially optimal way.
