Question A:
A mandate for public companies to provide climate-related disclosures (such as their greenhouse gas emissions and carbon footprint) would provide financially material information that enables investors to make better decisions.
Responses
Responses weighted by each expert's confidence
Question B:
A mandate for public companies to provide climate-related disclosures would provide material information that enables investors to make better decisions with regards to non-financial objectives (such as aiding portfolio choice based on ESG principles).
Responses
Responses weighted by each expert's confidence
Question C:
A mandate for public companies to provide climate-related disclosures would induce them to reduce their climate impact substantially.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 John Campbell |
Harvard | Bio/Vote History | ||
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Climate-related disclosures are clearly relevant for risk. They may be relevant for expected returns as well, although one should be skeptical of claims that "green" investments will outperform - in fact, investors' ESG preferences likely imply low green returns in the long run.
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 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Especially scope 3 -- carbon emissions by up and downstream links, triple-counting, are entirely made up numbers.
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 Francesca Cornelli |
Northwestern Kellogg | Bio/Vote History | ||
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Standardizing the climate-related disclosures may help assessing for example the costs of achieving stated targets on emissions. In that sense it could constitute financially material information
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 Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Probably the costs of a mandate exceed the benefits. The uncertainty is for firms where the impact is small and indirect. Climate is a risk that might be hidden.
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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Tricky issue: Firms are already required to disclose risks, but this would standardize some climate disclosure and give investors with climate-specific investment motives more information.
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 Janice Eberly |
Northwestern Kellogg | Bio/Vote History | ||
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Firms have made climate-related statements and goals, a well-designed and consistent disclosure could be financially material to investors and performance evaluation.
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 Kenneth R. French |
Tuck Dartmouth | Bio/Vote History | ||
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 Xavier Gabaix |
Harvard | Bio/Vote History | ||
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The accounting of that is tremendously complicated, especially as you’d have to track their suppliers, and the whole value chain. And also count their R&D, which can be very valuable.
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 Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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 John Graham |
Duke Fuqua | Bio/Vote History | ||
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I don't think this info would help investors earn a higher risk-adjusted return but may help with portfolio objectives
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 Lars Hansen |
UChicago | Bio/Vote History | ||
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Mandates can be costly interventions over and above market discipline. Moreover, firms face many challenges in addition to exposure to climate change. Abstracting from a potential climate exchange, I fail to see the rationale for this mandate.
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 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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Cost of supplying this information might exceed the benefit. Further, the reporting will be very noisy due to measurement difficulty. Finally, Scope 3 upstream/downstream needs to be considered. Is the company also responsible for reporting Scope 3?
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 David Hirshleifer |
USC | Bio/Vote History | ||
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 Harrison Hong |
Columbia | Bio/Vote History | ||
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Firms know more about their climate risks than shareholders.
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 Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Uncertain how the disclosures translate into stock performance.
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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As long as the policy uncertainty about sanctions for being brown persists, hard to say. Plus how do you assure accurate reporting?
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 Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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I worry that companies will have incentive to game the system, and measure these quantities in incorrect ways.
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 Andrew Lo |
MIT Sloan | Bio/Vote History | ||
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Disclosure is a two-edged sword. Although more information is often argued as being preferred to less information, providing additional disclosure is not costless and shareholders will have to pay for the direct costs as well as unintended consequences. This needs more thought.
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 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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 Sydney Ludvigson |
NYU | Bio/Vote History | ||
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 Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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 Gregor Matvos |
Northwestern Kellogg | Bio/Vote History | ||
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Standardizing climate related disclosures would make them more comparable across firms, potentially leading to better information and improved decision making. Badly designed disclosures could confuse investors, leading to worse decision making.
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 Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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Right now climate disclosure is important to investors and with regulation may become financially relevant, but there is a lot of uncertainty about that and how much it will matter.
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 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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May help with climate-risk exposure assessment, but not clear that the benefits are financially material
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 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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While environmental policies do pose material risks, carbon footprint mainly matter for all investors because it affects stock liquidity, breadth of ownership, and investor activism all of which matter for stock values.
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 Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Setting reporting guidelines that are effective and comprehensive is difficult.
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 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Mandate would standardize reporting, making it easier to compare exposures across companies. But much depends on exact choice of quality of chosen indicators.
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 Manju Puri |
Duke Fuqua | Bio/Vote History | ||
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 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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If it affects cash flows or risk, it's relevant.
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 Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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Mandatory disclosure "standardizes" market communication. Compared to the current voluntary disclosure, information will be comparable across firms. The object of the disclosure is crucially important and my answer flips if mandatory disclosure is on irrelevant information.
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 Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Depends on the disclosure design.
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 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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 Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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Research shows that investors demand and value carbon-related disclosures. The question is how much disclosure should be mandated given that there exist costs to firms (e.g., information gathering costs, releasing proprietary information).
-see background information here |
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 Jeremy Stein |
Harvard | Bio/Vote History | ||
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 Johannes Stroebel |
NYU Stern | Bio/Vote History | ||
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There is a lot of pressure from investors for this information, suggesting they find it important and relevant. This is consistent with surveys of investors that find climate risks pertinent, but feel they do not have the information to assess them adequately.
-see background information here -see background information here |
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 René Stulz |
OSU Fisher School | Bio/Vote History | ||
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It seems unlikely for most firms.
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 Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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Disclosure in filings even when information is already available from other sources has an effect, see link.
-see background information here |
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 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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exposure to (physical and regulatory) climate risk has become a substantial risk for firms but lack of consistent and audited reporting makes it difficult for investors to assess it currents.
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 Ingrid M. Werner |
OSU Fisher School | Bio/Vote History | ||
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 Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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John Campbell |
Harvard | Bio/Vote History | ||
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It is almost tautologically true that climate-related disclosures are relevant for investors with direct ESG preferences about their portfolios.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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The question is squishy. It will help only if investors care about the numbers that the regulation demands. My low rating reflects a view that the numbers will be largely meaningless. Except for forecasting regulatory displeasure, which does matter financially.
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Francesca Cornelli |
Northwestern Kellogg | Bio/Vote History | ||
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It depends on the detail of the mandate. But a properly balance mandate will help assessing whether the company has an actual well developed ESG strategy.
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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For those investors who care about these risks as part of their non-financial goals, disclosure is a strict benefit. If the reports are not reliable, then mandating them is of limited value.
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Janice Eberly |
Northwestern Kellogg | Bio/Vote History | ||
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The relevance and consistency of the disclosure is important, and there is heterogeneity across industries and firms as to importance.
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Kenneth R. French |
Tuck Dartmouth | Bio/Vote History | ||
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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has the potential to lead to standardized, easy-to-find information
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Lars Hansen |
UChicago | Bio/Vote History | ||
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Investors will gain from such information only if the mandated information can be firmly established. This imposes nontrivial cost on the governmental mandator. Investor demand alone could induce firm to provide such information in a credible way.
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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David Hirshleifer |
USC | Bio/Vote History | ||
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Harrison Hong |
Columbia | Bio/Vote History | ||
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Disclosures would address concerns about ESG greenwashing for instance.
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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If you are investing based on climate impact, then climate disclosure helps. Again, unclear how it affects stock returns.
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Companies may mismeasure and misreport these quantities, and investors may therefore get useless disclosure information to work with.
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Andrew Lo |
MIT Sloan | Bio/Vote History | ||
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For non-financial objectives, it makes more sense for companies to disclose their climate-related exposures. However, the cost factor is still present and must be considered relative to the benefits of disclosure.
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Gregor Matvos |
Northwestern Kellogg | Bio/Vote History | ||
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Similar to previous question, well designed disclosures allow investors to make better decisions related to their objectives. Badly designed disclosures could confuse investors, leading to worse decision making.
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Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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While I strongly agree with the general sentiment that climate-related disclosures matter to investors, it really depends how useful those disclosures are and how accurate in terms of impact on the environment and climate change. That remains uncertain.
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Once reporting requirements are promulgated, companies can easily re-organize their activities.
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Manju Puri |
Duke Fuqua | Bio/Vote History | ||
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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This seems almost tautological unless I'm misunderstanding.
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Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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It really depends on the disclosure mandate. First, lobbying for making mandatory disclosure less effective may undermine it. Second, disclosure of certain emissions can lead to shifts where firms create externalities on non-disclosed aspects. Scope for gaming the system is ample
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Depends on disclosure design (Also it is unclear what metrics different investors want).
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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While disclosure provides information to individuals for their non-pecuniary preferences, the question remains as to how to weigh this benefit against the costs. With no cost to disclose, such information would help individuals make investment choices aligned with their values.
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Bio/Vote History | ||
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Almost true by definition. Many ESG principles involve precisely adjust portfolios to account for these pieces of information.
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René Stulz |
OSU Fisher School | Bio/Vote History | ||
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It could, but not necessarily would.
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Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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Same link as before:
-see background information here |
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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More comprehensive, standardized and audited reporting on a range of E, S, and G metrics would make it much easier for ESG investors to build portfolios
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Ingrid M. Werner |
OSU Fisher School | Bio/Vote History | ||
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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John Campbell |
Harvard | Bio/Vote History | ||
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On balance I agree, but this depends on the tug-of-war between investors with green preferences and those with countervailing political opinions.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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It will induce them to do policies demanded by regulators. So far, many of these have negligible or negative impacts on actually fixing the climate.
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Francesca Cornelli |
Northwestern Kellogg | Bio/Vote History | ||
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We know from the theory that if the mandate requires to disclose only a subset of potential measures of ESG companies may reassess their strategy without really improving in terms of ESG. But in principle it is possible to have a mandate that induce companies to reduce impact
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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I do not know how the cost of capital will respond to disclosures.
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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The direct impact on a firm's cost of capital is probably small, but there is also a repetitional cost to disclosing significant negative effects on the climate.
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Janice Eberly |
Northwestern Kellogg | Bio/Vote History | ||
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A disclosure needs to be consistent and relevant to be meaningful. This also does not guarantee that a disclosure alone will induce a meaningful response from all firms. The investor and broader response is an added factor, also heterogeneous across industries and firms.
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Kenneth R. French |
Tuck Dartmouth | Bio/Vote History | ||
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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I don't think that we know that the impact would be substantial.
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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I think it would lead some companies to reduce their impact -- but not "substantially"
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Lars Hansen |
UChicago | Bio/Vote History | ||
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It would depend on the specifics of the stated mandate and the policies that might be put in place related to the mandate. Mandates should be used to provide data needed for prudent policy implementation.
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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There might be a reduction because companies manage these ratings. However, it is uncertain whether the reduction would be "substantial".
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David Hirshleifer |
USC | Bio/Vote History | ||
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Harrison Hong |
Columbia | Bio/Vote History | ||
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Whether or not firms reduce emissions depends on their underlying strategy.
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Because it is measured and public, some firms will try to reduce it. Again, very complicated what that does to stock returns.
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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See the answer to the earlier question. Look at exhibit 2.1 in this G30 report by Carney and Yellen to see how far the US has to go.
-see background information here |
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Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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The mandate will bring these issues into focus for firms, and they will slowly attempt to change their operations to do better in this regard. It will be a slow process, but the direction will be good.
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Andrew Lo |
MIT Sloan | Bio/Vote History | ||
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Disclosure, when combined with moral suasion, can be a powerful motivation for companies to reduce their climate impact, but it's not clear how certain companies are able to do so and "green washing" can quickly become an even greater concern.
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Unclear what the outcome would be. I also note that the previous questions only focused on whether a mandate would produce relevant information. They did not ask about the cost of the mandate and tradeoffs.
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Gregor Matvos |
Northwestern Kellogg | Bio/Vote History | ||
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Well-designed disclosures could reduce companies’ climate impact, but the magnitude is difficult to predict. Badly designed disclosures could worsen climate impact if companies focus on reaching objectives from disclosures at the expense of non-disclosure climate issues.
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Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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This is highly uncertain and could go either way. Disclosure can induce a company to be more climate conscious or it can make them less so because they feel disclosure is "good enough." I don't think we know what the impact of such disclosure might be in equilibrium.
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Firms with growing carbon footprint - or with below industry average performance - would suffer reputation losses. This provides good incentives as long as indicators are chosen properly.
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Manju Puri |
Duke Fuqua | Bio/Vote History | ||
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Unclear how strong an incentive a mandate would provide.
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Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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It depends on the mandate. Lobbying and gaming of the system make a generic answer impossible. In principle, yes. In practice, difficult to achieve.
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Depends on the disclosure design (e.g., might end up “whack-a-mole” within the firm).
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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Evidence exists that suggests climate-related disclosures affect firms’ emission choices. Whether the mandates result in substantial reductions to corporate climate impact is not as clear.
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Bio/Vote History | ||
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René Stulz |
OSU Fisher School | Bio/Vote History | ||
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Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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Same link as before:
-see background information here |
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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If it becomes better measured it becomes a KPI that management compensation can be tied to. Once those incentives are in place firms will need and want to show improvement.
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Ingrid M. Werner |
OSU Fisher School | Bio/Vote History | ||
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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