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Controversial Material: Corporate Disclosure in the Climate Change Era

Controversial Material: Corporate Disclosure in the Climate Change Era

Frank DiMora

The private sector’s contributions to environmental degradation raises concerns about the wisdom, ethics, and sustainability of shareholder primacy, the prevailing corporate governance theory in the United States.  In 1997, the Business Roundtable (BRT), the trade association of record for America’s leading CEOs, produced a formal statement of corporate purpose: “The paramount duty of management and of boards of directors is to the corporation’s stockholders.”[1] This statement reflected both the heady economic days of the dot-com economy and the legal framework that enabled the ethos of that era.

A generation later, there is a widening divide between the wealthy and the working poor as well as greater understanding that the changing climate threatens the present and future environment and—most critically for business leaders—the economy.[2]  Corporations have adapted, at least rhetorically.  They have been quick to cast themselves as an essential source of the solutions to our most pressing social and environmental challenges.[3]  By and large, corporate leaders promise solutions in the form of technologies that will save us from the brink and allow current patterns of growth and consumption to carry on unchanged.[4] 

But some corporate leaders are deviating from the innovating-ourselves-out of this narrative.  According to the BRT, the fundamental purpose of corporations has evolved.  Revised in August 2019, the BRT’s statement of corporate purpose exchanges shareholder primacy for a more egalitarian model: “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”[5]  Notably, the chief executives of six fossil fuel companies, including multinational supermajors ExxonMobil and Chevron, were signatories to the BRT’s August announcement.[6]  Within this statement of born-again corporate purpose is a commitment to “protect the environment,” an honorable (albeit newly fashionable) gesture.[7] Yet, this commitment is entirely non-binding.[8]  Securities law fills this gap, providing a vital framework binding corporate boards and executives to their stated commitment to “protect the environment.” 

This Note will examine securities disclosure requirements in the climate change era, specifically for fossil fuel corporations and the institutions that invest in them.  Section I will examine environmental disclosure requirements in securities law, including why the SEC established them and what objectives they intend to fulfill.  Part II will survey the state of the fossil fuel industry in the climate change era. This will include an analysis of the industry’s exposure to a variety of climate-related liabilities and how these liabilities impact fossil-fuel companies’ short- and long-term financial viability.  Part III will assess how fiduciaries invested in the fossil fuel industry assess “material” risks, analyze whether climate change impacts constitute such risks, and discuss the scope and limitations of fiduciary disclosure requirements as they relate to climate change.  Finally, Part IV will discuss amending corporate disclosure requirements to account for climate change, including by resolving the mismatched timeframes of short-term corporate disclosures and the long-term effects of climate change that should constitute material risks. 

[1] Business Roundtable, Statement on the Purpose of a Corporation (Aug. 19, 2019),

[2] U.N. Env’t Programme and World Meteorological Org., Intergovernmental Panel on Climate Change [IPCC], IPCC Fifth Assessment Report, Climate Change 2014: Impacts, Adaptation, and Vulnerability (Summary for Policymakers) 20 (Christopher B. Field et al. eds., 2014), available at (contribution of Working Group II) (“Throughout the 21st century, climate-change impacts are projected to slow down economic growth, make poverty reduction more difficult, further erode food security, and prolong existing and create new poverty traps, the latter particularly in urban areas and emerging hotspots of hunger . . . .”).

[3] See, e.g., ExxonMobil, ExxonMobil and Global Thermostat to Advance Breakthrough Atmospheric Carbon Capture Technology (June 27, 2019),–carbon-capture-technology (“Global Thermostat’s game-changing direct-air capture and flue gas capture technologies offer a way to transform the growing risks associated with carbon dioxide emissions into a global solution that could satisfy both business and environmental objectives. By partnering with ExxonMobil, we’re harnessing the expertise and capabilities of one of the world’s largest energy companies to accelerate our ability to realize that vision.”) (emphasis added).

[4] Id.

[5] Business Roundtable, supra note 1.

[6] Id.

[7] Id.

[8] See Michael Grothaus, Patagonia, Ben & Jerry’s, and 30 Other Companies Tell Business Roundtable CEOs to Put Up or Shut Up, Fast Company (Aug. 26, 2019), (observing that the BRT’s new “purpose of a corporation” definition would need to be made legally binding to achieve its purported goal of delivering value to all stakeholders).  

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