Institutional investors in the UK and 'Carbon Major' Companies: Private Environmental Governance Post-Paris

Abstract

Climate change poses a number of risks to institutional investors across several categories, including physical, financial, and regulatory. These risks are particularly acute for investors in “carbon-major” energy companies, where fossil fuel reserves could become stranded assets given the new global temperature goals agreed in the Paris Agreement. Significant effort has been expended over the years by carbon-major companies to produce information-based disclosures on carbon emissions, and investors and other groups have formed their own private governance regimes based on disclosure initiatives.Institutional investors have the potential to incentivize these companies to provide further and more decision-useful climate-related disclosures, and an enhanced disclosure movement is already underway due in part to investor action and shareholder resolutions. Enhanced disclosure, which highlights systemic risks to these companies, could also catalyze these companies into making different and more climate-friendly capital expenditure choices, particularly in relation to post-2030 resources. While this transition has yet to occur, this Article will investigate whether a tipping point in investor action on climate disclosure is occurring, and whether the Paris Agreement, as well as a risk management approach to climate change, may coalesce to support more progressive action in carbon-major companies.