S. Beyond the ESG Crisis – Corporate Disclosure, Financial Markets and Social Responsibility

For decades, some investors and activists have been urging corporations and investment managers to provide public disclosures about a range of topics that are often grouped under terms like "sustainability," or "ESG" (environmental, social and governance), or "CSR" (corporate social responsibility). Many have responded by providing information and making claims about their practices in areas like (to name a few) greenhouse gas emissions, environmental impact, supply chain management, indigenous cultures, and diversity. Numerous frameworks have developed seeking to organize and govern these disclosures, and now these are being complemented by mandatory disclosure requirements – most broadly in the European Union, but also in other jurisdictions and, with respect to climate-related matters, under SEC regulations and California state law.

What is the purpose of these disclosures? Can sustainability disclosures really contribute to changing outcomes in the areas they address, or are they a diversion from meaningful policy changes? How can they be misused -- and how have regulators struck a balance between eliciting information and preventing misinformation? How have the various voluntary and mandatory disclosure regimes arisen, and how do they differ? What is the future path of sustainability disclosures -- could standards and practices converge, or will they proliferate?

The seminar will explore these questions, with a particular focus on the urgent issue of climate change. We will discuss the ambitious EU regulatory framework, with its governing concept of double materiality, the standards developed by the International Sustainability Standards Board (ISSB), and the path being pursued in other jurisdictions including the United Kingdom, China and Japan. We will also address the rules on climate disclosures adopted in early 2024 by the U.S. Securities and Exchange Commission, as well as the federal court litigation seeking to vacate them. Finally, we will discuss requirements adopted in California and proposed in other states. The course will provide students with a thorough grounding in this growing and controversial area of legal practice and policy.