Mandatory vs. Voluntary ESG Disclosure, Efficiency, and Real Effects

In recent years, several countries have imposed disclosure requirements on public firms for environmental, social, and governance (ESG) performance. These mandates have also been accompanied by the European Union’s wide-reaching Non-Financial Reporting Directive, effective in 2018 (Directive 2014/95/EU). Similar legislative attempts to impose mandatory ESG disclosure have been made in the U.S. For example, in June 2021, the U.S. House passed the Corporate Governance Improvement and Investor Protection Act (HR 1187), which includes ESG-metrics disclosure requirements for public companies and allows enforcement of these requirements by the SEC. At the same time, a sizable portion of public firms in the … Read more