Harnessing Investor Interest in Sustainability: The Next Frontier in Environmental Information Regulation

Abstract

This Article rethinks the theory and application of environmental information regulation in light of growing investor interest in sustainability. Academics and policymakers have long viewed mandatory information disclosure as a powerful regulatory tool for improving corporate environmental performance, with some going so far as to call environmental information regulation the third phase of American environmental law. Current thinking on environmental information regulation has failed, however, to keep pace with recent transformations in the investment community. Over the past decade, sustainable investing has rapidly moved from the fringes of the investment world to the mainstream as an increasing number of investors seek to align their values with the holdings of their portfolios. We argue that environmental information regulation, in the form of a mandatory corporate environmental, social, and governance (ESG) disclosure regime, could significantly facilitate this broader realignment of capital markets with sustainability principles. As we explain, standard models of environmental information regulation are ill-equipped to address the information needs of today’s investment community. Instead, this Article calls for a new design of environmental information regulation capable of harnessing mainstream investor interest in sustainability—and, in doing so, creating a new vector of leverage in support of a sustainable future for our society.