Investors from around the world have spoken. For the first time in history, they have publicly demanded more transparent and complete corporate financial risk disclosures related to climate change. While climate change risk disclosures are nothing new, the current position of many investors on the issue surely is. Some of the world’s largest asset management firms and top investors are now publicly supporting improved disclosures.

These recent demands from investors beg two questions: why should we care about corporate climate change disclosures, and why the sudden shift by investors on the issue? To answer the first question, corporate climate change disclosures supply critical information to investors. Particularly, they provide statistics and other information that allow investors to analyze the risks and opportunities facing a company because of climate change. This in turn allows investors to make more informed decisions about how and where they should invest their money. Nevertheless, many corporations have reportedly failed to properly disclose such information to investors for years.

Recognizing this, organizations like CDP (formerly the Carbon Disclosure Project) have worked with investors and corporations for over 15 years to ensure that climate change financial risks are accurately disclosed. In 2010, the Securities and Exchange Commission also addressed the issue by providing companies with guidance on corporate climate change disclosure rules. Most recently, the Financial Stability Board commissioned the Task Force on Climate-related Disclosures. The purpose of the Task Force is to develop voluntary, consistent climate-related financial disclosures so that corporations can supply useful statistics to lenders, investors, and other stakeholders.

So, what caused investors’ shift on the disclosure issue? It certainly comes at an unusual time, following President Trump’s decision to withdraw the United States from the Paris Accord and other regulatory decisions that seemingly devalued the impact of climate change. As reported by commentators, the shift was likely the result of intense and highly publicized governmental investigations into certain corporations’ business practices. Those investigations reportedly revealed deficient and misleading corporate disclosures about the impact of climate change on the companies’ businesses.

Commentators believe investors recognized the risk of those misleading disclosures and the governmental investigations. Indeed, the consequences of failing to properly disclosure such information could be severe. Corporations and their Directors and Officers could face liability for deceptive disclosures. This would likely lead to bad publicity, lower stock prices, and lower investment returns for stakeholders in the company, as well as potential securities class actions and derivative actions.  In any event, for now we wait to see if corporations comply with investors’ demands and provide improved climate change risk disclosures in the future.