Mitigating the worst consequences of climate change by transitioning to a net zero economy requires investment on a large scale. Directly pricing emissions, the first-best solution to drive capital reallocation, is considered politically infeasible—so policymakers put their currency in facilitating the pricing of climate risk by investors. Yet investors, faced with scientific and policy uncertainty around climate risks compounded by a lack of information about companies’ exposures, struggle to do just that. This essay shows that current disclosure policies do not require companies to disclose the information that investors need to price climate risk, and voluntary frameworks like the TCFD—important as they are—have failed to turn the tide. The result is mispricing and a misallocation of capital, which harms investors and hampers the net zero transition. Against that context, this essay argues that traditional securities regulation rationales and net zero imperatives call for mandatory corporate climate disclosures. To create a yardstick against which governments’ proposals can be evaluated, both to support their efforts and to call out policy greenwashing, it outlines several design principles that go beyond the emerging consensus and cover the regulatory architecture that supports such a disclosure regime.
Mandatory Corporate Climate Disclosures: Now, but How?
A new report published by Oxford Net Zero presents a comprehensive ‘stocktake’ of developments in net-zero regulation across the G20 in 2023. It focuses primarily on four regulatory domains: claims and financial products standards, disclosure, ... Read more
The scaling up of clean electricity, and using it to decarbonise other parts of the economy, is central to all decarbonisation pathways. In their latest report, “Rolling out renewables in the Global South”, Oxford Net Zero’s Sam Fankhauser ... Read more
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