ESG Disclosure in Comparative Perspective: Optimizing Private Ordering in Public Reporting
65 Pages Posted: 25 Oct 2019
Date Written: October 15, 2019
Demand for corporate non-financial “environmental, social, and governance” (ESG) information from investors and governments is on the rise globally, and leading securities regulators and stock exchanges worldwide now encourage or mandate its disclosure by large firms. However, rising demand has been matched by growing dissatisfaction with ESG informational gaps in financial reports, on the one hand, and the dearth of investment-grade information in corporate sustainability reports and other public sources, on the other. These developments raise questions about the extent to which the Securities and Exchange Commission (SEC) and its counterparts in other jurisdictions should continue to defer primarily to private market-based approaches to ESG disclosure, reform the disclosure framework to expressly address non-financial information, or seek to combine elements of both public disclosure regulation and private ordering in new ways.
This Article anticipates these policy choices by assessing the range of approaches to ESG disclosure that have been adopted in the United States and six other influential jurisdictions (South Africa, Brazil, the European Union, the United Kingdom, Hong Kong, and mainland China). Drawing on this comparative analysis, we find that a public-private hybrid approach to ESG disclosure is ultimately inevitable, and we argue that optimal approaches for improving the quality and utility of non-financial information must draw on the comparative advantages of both public and private forms of disclosure regulation.
Keywords: disclosure, social disclosure, ESG, securities regulation, securities law, private governance, private ordering
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