While there are many things to worry about for companies required to make disclosure pursuant to these new requirements, one particular concern I have with respect to the new requirements is that the company disclosures (or omissions) could create heightened litigation risks. For starters, any disclosure requirement creates a context within which disclosure or omissions can be alleged to be misleading or deceptive. The obligation for companies to disclose their financial risk associated with climate change also creates a context within which companies experiencing setbacks owing to, for example, extreme weather events, could be subject to hindsight claims that prior disclosures failed adequately to disclose the risks the company faced.
Another risk arises from the fact that companies may face a natural tendency to want to try to put the best face on companies’ GHG status and progress. The possibility for litigation arises out of these kinds of circumstances is not just theoretical; as noted here, this past summer Delta Airlines was sued a securities lawsuit by a shareholder in a class action lawsuit alleging that the company’s claims of “carbon neutrality” were false and misleading.
Source: California Enacts Far-Reaching Climate-Related Disclosure Requirements | The D&O Diary
