Taking the Heat: (Non)Disclosure of Climate Change Risks in India

Business Law Review, Volume 41, Issue 3, pages 152-158 (2021)

15 Pages Posted: 14 Feb 2021 Last revised: 27 Oct 2021

Date Written: February 1, 2021

Abstract

Following the bankruptcy of Pacific Gas and Electric in California, a number of academic commentators, central banks and regulators are coming to the realization that climate change poses a massive threat to the existing financial markets. While numerous legislative proposals to combat the emerging threat are being discussed across the world, there has been a massive rise in securities litigation involving climate change issues, particularly in the US. As early as in 2007, some US states had begun investigating companies for deliberately misleading their shareholders through non-disclosure of climate change risks. A number of similar suits have followed, increasingly binging into question the meaning and extent of ‘material information’ in the context of capital markets.

In India, the Reserve Bank of India (RBI) has identified climate change as a potential risk to the stability of the financial system, but there has been little legislative action in this regard. The Securities and Exchange Board of India (SEBI) has a provision similar to that in the US requiring all listed companies to disclose ‘material’ facts regarding their assets and value on the market, while Indian courts have long recognized that corporations as well as intermediaries on the securities market are bound by a fiduciary duty to disclose all material information to investors. Drawing a comparison with the rising trend of climate change related securities litigation in the US, this paper explores whether a company failing to disclose risks associated with climate change would be in violation of the current Indian regulatory framework, and what kind of legislative changes, if any, are required to safeguard the interests of Indian investors.

Keywords: climate change, disclosure, securities regulation, corporate governance, financial bubble

Suggested Citation

Bhaduri, Anik, Taking the Heat: (Non)Disclosure of Climate Change Risks in India (February 1, 2021). Business Law Review, Volume 41, Issue 3, pages 152-158 (2021), Available at SSRN: https://ssrn.com/abstract=3777390 or http://dx.doi.org/10.2139/ssrn.3777390

Anik Bhaduri (Contact Author)

NALSAR University of Law ( email )

India

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