Investor Driven Climate Accountability

Abstract

As the world confronts an urgent climate crisis, corporations are under increasing pressure to take action to reduce greenhouse gas emissions. In place of genuine effort, many public companies have made climate pledges that they are not on track to fulfill. Further, despite the very real financial risks corporations face as temperatures rise, climate-related risks are often under-disclosed. While the SEC has proposed rules that could begin to address corporate accountability, formidable legal challenges are expected. Recognizing that top-down responses may not be effective, shareholders could opt to take matters into their own hands through direct action. This Article explores how investors may take the reins to hold corporations accountable for misstating their climate efforts and failing to disclose their climate risks. After describing top-down measures and their inherent weaknesses, we investigate the viability of private Rule 10b-5 claims, shareholder derivative suits, and shareholder proposals. Because some companies are focused on preparing for or lobbying against potential regulation, they may not be attuned to the risk of such investor-driven actions. After analyzing these bottom-up approaches to climate accountability, we provide a series of recommendations as to how corporations can respond to these efforts.

Keywords: climate change; securities fraud; derivative lawsuits; shareholder activism