become an important factor in the decision making criteria for investors, regulators, government, and
other stakeholders. Currently, companies are not required to release data that is not material to
stakeholders, and as a result many companies choose not to disclose carbon emissions. This is because
many issuers have determined that “climate change will not have a material impact on their financial
results”1. The SEC’s guidance on carbon disclosure will not change firm’s decision‐making criteria
because it is impossible to measure the impact of future legislation on green house gases. “Two thirds
of S&P 500 companies have inadequate greenhouse gas emission disclosures.”1There is debate if the
SEC’s guidance on disclosure related to climate change has any impact. The SEC states that
interpretative guidance does not create any obligations. Corporations must disclose any material facts
that would influence a reasonable user. The most detrimental factor facing pubic companies and
investors is the uncertainty around the allocation and pricing of carbon emission permits, making the
determination of materiality virtually impossible.
Stock markets world‐wide are virtually one hundred percent efficient due to the increase in
technology and access to information. Academia are still debating between markets being semi‐strong
(all publically information is reflected in market price) and strong (all information including insider
information is reflected in market price). Both of these hypotheses predict that current stock prices
should reflect the future earnings potential and thus future cost of carbon should be reflected. The
... middle of paper ...
...Toronto: Pearson Prentice Hall,
8. Lewis, Alan. "A Focus Group Study of the Motivation to Invest: 'ethical/green' and 'ordinary' Investors
Compared." Journal of Socio‐Economics 30.4 (2004): 311‐22.
9. KÖHLER, NICHOLAS. "Oil Sands Outlook Darkens." The Canadian Encyclopedia. Web. 12 Mar. 2010.
10. Salo, James. "The Carbon Footprints of Mutual Funds in the US." Trucost. Apr. 2009. Web. 12 Mar. 2010.
11. Gibbins, Michael, and Bradley Pomeroy. BEYOND‐GAAP CORPORATE REPORTING: INSIGHTS FOR PRACTICE
AND OPPORTUNITIES FOR RESEARCH. Rep. Web. 14 Mar. 2010.
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