The Divergence of Mandatory Climate Disclosure in the United States and European Union

In this article, we ask why mandatory disclosure of climate risk differs between the U.S. and the EU. We identify a fundamentally different legal basis for securities regulation on the two sides of the Atlantic. While the EU treaty provides EU institutions with legislative authority to introduce far-reaching climate disclosure obligations, the SEC faces significant hurdles to do so under U.S. administrative and constitutional law. We focus on the SEC because it has acted on climate. Congress could pass a comprehensive climate disclosure statute, but the subject is controversial in the United States, and so the legislature is unlikely to act. Moreover, we discuss pros and cons of climate disclosure from an economic perspective. Finally, we discuss the recent developments in climate disclosure regulation, both in the EU and in California, and their potential to set voluntary disclosure standards for companies not subject to these jurisdictions.