One would think that consumers and investors would have adequate information to make wise choices. After all, we believe in efficient and effective markets! However, a closer look reveals that when it comes to climate change, our vision is clouded by a lack of standard and needed information. It appears that there has been resistance to casting light on the subject.

US stock investors––58 percent of the adult population––do not know how much their companies emit greenhouse gases. Investors recognize that climate risks can pose significant financial risks to companies, and they need reliable information about climate risks to make informed investment decisions. There is no way to reward those who behave responsibly, such as by reducing risks or emissions, as opposed to those who act poorly. Voluntary disclosure standards, such as the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) and the Greenhouse Gas Protocol, were introduced in 2017 and 2001, respectively. Still, authorities have been reluctant to establish mandatory procedures.

This is changing.

Under the Biden administration, on March 21 this year the SEC issued a proposed rule to enhance and standardize the climate-related disclosures provided by public companies. Under the proposed rule, a registrant would be required to provide disclosures about GHG emissions (with attestation for Scope 1 and Scope 2 disclosures), certain financial statement disclosures, and qualitative and governance disclosures within its registration statements and annual reports (e.g., Form 10-K).

Scope 3 emissions are defined as indirect greenhouse gas emissions that occur in the upstream and downstream activities of a registrant’s value chain. For example, downstream emissions include the use of products sold; upstream emissions, those attributable to purchased supplies and services. All filers except smaller reporting companies are required to disclose their Scope 3 emissions if the Scope 3 emissions are material or if the registrant has a target or goal that includes these emissions.

“Companies have concerns about tackling Scope 3 emissions because they don’t have a clear roadmap on how to collect, analyze, reconcile, and report complex data from a range of third parties when making public disclosures,” notes Kenneth Rivlin of the international law firm Allen & Overy. “Although many market participants already provide this information on a voluntary basis, they may not be ready to make the leap to the level of scrutiny that mandatory disclosures involve.” He adds that it’s likely the SEC is also considering its proposal because of the Supreme Court’s June 30 key ruling in West Virginia v. EPA limiting the Environmental Protection Agency’s powers to regulate greenhouse gas emissions without congressional authority. “Some advocates,” Rivlin says, “fear that the same analysis may be applied to actions of other administrative agencies, including the SEC. This approach could present serious legal challenges for the SEC’s final rule, as litigants will likely use the Supreme Court’s recent decision to claim the agency is acting outside the scope of its expertise and past activities. On the other hand, many observers believe the proposal is well within the SEC’s historical mandate to provide investors with decision-relevant information” (Rivlin 2022, p 2).

I concur: the mandate of the SEC is different than that of the EPA, and the GHG scope 3 emissions are decision-relevant information and within the historic SEC mandate. The materiality requirement could be interpreted with flexibility and gradually introduced. This may be the compromise. Legal experts predict the SEC will finalize and adopt the issue rule, in some version, by the end of 2022.

This would be a huge win: the capitalization of the listed companies is 24.19 trillion US dollars for the NYSE and 18.59 trillion dollars for NASDAQ. The capitalization of these two giants represents 54% of the total of the ten most important exchanges worldwide. Euronext, the London Stock Exchange, and others will be under pressure to provide the same or similar information The European Banking Authority recently announced that it will make climate disclosures mandatory from December 2023, something it says will push banks to amass the information they need to manage climate risks..

What can you do with this new information? Apply it to your favorite investments: how much are their emissions, and what are the companies doing about them? How are they handling climate risk? You may want to exclude companies with a record of poor performance or reward the winners. With this new information, I am sure many new services will emerge, allowing all kinds of comparisons within and between sectors, supplanting and improving the older ESG classifications.

Protecting consumer rights to product information regarding climate change is at an early stage of development. The European Union leads the way. The primary concern begins with the observation that we can no longer justify an economy of producing goods and services, usually from virgin raw materials, and dumping the old goods and waste into the environment without considering the negative externalities of excessive use of resources, damage to the environment, and erosion of ecosystems.

The concept of circular economy is one that considers these externalities. The online publication European Parliament recently featured a news article detailing the importance and benefits of the circular economy, defining it as “a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. In this way, the life cycle of products is extended.” It goes on to say that, “[i]n practice, it implies reducing waste to a minimum. When a product reaches the end of its life, its materials are kept within the economy wherever possible. These can be productively used again and again, thereby creating further value. This is a departure from the traditional, linear economic model, which is based on a take-make-consume-throw away pattern. This model relies on large quantities of cheap, easily accessible materials and energy. Also part of this model is planned obsolescence, when a product has been designed to have a limited lifespan to encourage consumers to buy it again. The European Parliament has called for measures to tackle this practice” (News European Parliament, 2015, p.1).

The consumer’s need for a choice of goods favoring a circular economy centers on knowing the guaranteed durability and repair information of a product. The durability also involves maintenance and the use of consumables and spare parts of the original producer. Instead, reparability depends primarily on the availability of spare parts and repair manuals. It does not imply that consumers will choose any given good but rather that they have the right to the decision-relevant information available to choose their products. This is logical and highly commendable given our climate emergency, but it is a new battle. Over half the world's countries have no consumer protection laws. The information rights of the consumer still remain to be gained.

On March 30 this year, the European Union proposed amending the Consumer Right Directive to require traders to provide consumers with information on products' durability and reparability, as noted above. The Commission also proposes several amendments to the Unfair Commercial Practices Directive on misleading customers about environmental and social impacts (greenwashing). The new “blacklist” of prohibited practices includes, among others:

  • Not informing about features introduced to limit durability.
  • Making generic, vague environmental claims where the ecological performance cannot be demonstrated.
  • Making an environmental claim about the entire product when it concerns only a certain aspect of the product.
  • Not informing that a good has limited functionality when using consumables, spare parts, or accessories not provided by the original producer.

The Council and the European Parliament will discuss the Commission's proposals, and once the proposals are adopted and transposed into the Member States' national legislation, consumers will be entitled to remedies in case of breaches, including class action redress (European Commission 2022).

Even without the best product information, a new consumer, sensitive to climate change, is emerging. According to the Oliver Wyman Forum, which conducted 100,000 interviews in 10 western countries over the last 15 months, "climate catalysts" are identified as a new type of consumer. They make up 13 percent of the population surveyed, and they expect businesses to do more. A great majority, 74 percent, say they are less likely to buy from companies that do not value climate change, and 84 percent indicate they would pay a premium for sustainable offerings. They are walking the walk: 55 percent have recently changed their diet habits because of climate change, and of these, 97 percent are certain they will sustain their behavior (Kreacic et al., 2022).

Decision-relevant information concerning climate change is coming to the investor and the consumer. This represents a significant pushback on investor and consumer behavior conditioned by marketing and artificial intelligence. This new knowledge advances the proper functioning of markets and the mitigation of climate change.


European Commission, (2022), Press release: Circular Economy: Commission proposes new consumer rights and a band on greenwashing, March 30, accessed November 11.
Kreacic, A., Uribe, L., Ahmed, M., Luong, S., (2022), Renaissance 2022: The New People Shaping Our Future, OliverWyman Forum, accessed November 11.
News European Parliament, (2015), Circular economy: definition, importance and benefits, Updated: 26-04-2022 - 14:41, accessed November 10, 2022.
Rivlin, K., et al., (2022), Scope 3 emissions and the SEC’s proposed disclosure rules: Key take-aways from the public comment process, Allen and Overy Publications, News and Insights, August 2, assessed November 9.