On March 21, 2022, the Securities and Exchange Commission (SEC) released its statement on proposed mandatory climate risk disclosure. In the statement, Chairman Gensler said, “Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions.” Gensler added, “In making decisions about disclosure requirements under the federal securities laws – including decisions about today’s climate-related disclosures – I am guided by the concept of materiality. As the Supreme Court has explained, information is … Read more
In a 1987 paper, available here, we argued that non-investor stakeholders play an important role in influencing financial policy and corporate valuation. We also distinguished explicit claims between a company and its counterparties from what we called implicit claims. In more recent years, there has been a growing focus on non-investor stakeholders and environmental, social, and governance (ESG) and, in particular, their role in creating corporate value. Left largely unexplained, though, is how this occurs. Here we argue that one of the keys is the distinction between explicit and implicit claims.
Explicit claims are familiar contracts. These include employment … Read more