The Securities and Exchange Commission is weighing whether to require public companies to disclose climate change vulnerabilities that might affect their future stock performance. Debate is raging about whether companies should be trusted to carry out this due-diligence exercise at their own discretion or whether they should be forced to. Either way, it makes common sense from a fiduciary standpoint. The more open companies are about the risks they face, the less vulnerable they are to lawsuits claiming that they deceived investors about those risks.
Exhibit A supporting the case for greater openness is Exxon Mobil, the behemoth petroleum company whose very existence symbolizes the dangers of fossil fuel-induced climate change. The company is being sued by the states of New York and Massachusetts, claiming Exxon Mobil lied to investors about its knowledge of climate change.
Exxon Mobil for years has listed environmental and climate change dangers as potential risks in its annual reports. But plaintiffs suggest the company downplayed the risks or tried to exaggerate its efforts to reduce the environmental damage its products cause. Exxon Mobil has lost appeal after appeal, including at the federal level, in its effort to quash the lawsuit.
