THE IMPACT OF THE EPA MANDATE REQUIRING PUBLIC REPORTING OF GREENHOUSE GAS EMISSIONS ON FIRMS’ CLIMATE-RELATED DISCLOSURES

Abstract

This honors thesis seeks to investigate the implications of Environmental Protection Agency (EPA) legislation mandating firms to publicly disclose greenhouse gas (GHG) emissions on climate-related disclosure decisions made by management. The Securities and Exchange Commission (SEC) proposal requiring such disclosures in 2010 came in the form of an interpretive release providing Guidance Regarding Climate-Related disclosures, which became the first formalized document clarifying existing climate-related disclosure requirements for stakeholders. Shortly after the SEC’s release of the interpretive guidance in February 2010, the EPA began mandating large GHG emitters to report their emissions. These coinciding events create an ideal setting to investigate the role of legislation requiring public reporting of emissions on management’s disclosure decisions of climate-related matters. As environmental, social, governance (ESG) practices of firms have received the attention of lawmakers and regulators, related metrics will influence investor decisions. This paper seeks to support a stronger understanding of the impact of GHG emissions-reporting on management decisionmaking when making climate-related disclosure decisions. The results of this study suggest that managers are more forthcoming about certain climate matters and increase climate-related disclosures when actual emissions amounts are higher. Interestingly, EPA legislation requiring emissions-reporting is not associated with an increase in disclosures.