The Duty to Update Corporate Emissions Pledges

Vanderbilt Law Review Volume 74 Issue 4 May 2021 Article 1 5-2021 The Duty to Update Corporate Emissions Pledges Nathan Campbell Follow this and additional works at: https://scholarship.law.vanderbilt.edu/vlr Part of the Environmental Law Commons Recommended Citation Nathan Campbell, The Duty to Update Corporate Emissions Pledges, 74 Vanderbilt Law Review 1137 (2021) Available at: https://scholarship.law.vanderbilt.edu/vlr/vol74/iss4/1 This Note is brought to you for free and open access by Scholarship@Vanderbilt Law. It has been accepted for inclusion in Vanderbilt Law Review by an authorized editor of Scholarship@Vanderbilt Law. For more information, please contact [email protected]. DATE DOWNLOADED: Tue Aug 24 13:20:16 2021 SOURCE: Content Downloaded from HeinOnline Citations: Bluebook 21st ed. Nathan Campbell, The Duty to Update Corporate Emissions Pledges, 74 VAND. L. REV. 1137 (2021). ALWD 6th ed. Campbell, N. ., The duty to update corporate emissions pledges, 74(4) Vand. L. Rev. 1137 (2021). APA 7th ed. Campbell, N. (2021). The duty to update corporate emissions pledges. Vanderbilt Law Review, 74(4), 1137-1186. Chicago 17th ed. Nathan Campbell, "The Duty to Update Corporate Emissions Pledges," Vanderbilt Law Review 74, no. 4 (May 2021): 1137-1186 McGill Guide 9th ed. Nathan Campbell, "The Duty to Update Corporate Emissions Pledges" (2021) 74:4 Vand L Rev 1137. AGLC 4th ed. Nathan Campbell, 'The Duty to Update Corporate Emissions Pledges' (2021) 74(4) Vanderbilt Law Review 1137. MLA 8th ed. Campbell, Nathan. "The Duty to Update Corporate Emissions Pledges." Vanderbilt Law Review, vol. 74, no. 4, May 2021, p. 1137-1186. HeinOnline. OSCOLA 4th ed. Nathan Campbell, 'The Duty to Update Corporate Emissions Pledges' (2021) 74 Vand L Rev 1137 Provided by: Vanderbilt University Law School -- Your use of this HeinOnline PDF indicates your acceptance of HeinOnline's Terms and Conditions of the license agreement available at https://heinonline.org/HOL/License -- The search text of this PDF is generated from uncorrected OCR text. -- To obtain permission to use this article beyond the scope of your license, please use: Copyright Information NOTES The Duty to Update Corporate Emissions Pledges Facing both internal and external market pressures, a rapidly growing number of private companies are making public, voluntary, and ambitious pledges to reduce or outright eliminate by a certain date or benchmark their greenhouse gas emissions. Yet, ambition and necessity notwithstanding, nonfulfillment of these emission reduction targets ("ERTs") is a looming, if not an already realized, concern for markets, which are noticeably and increasingly attuned to the long-term value and climate performance of companies. In the absence of a comprehensive disclosure regime for climate performance and risk, this Note highlights the duty to update-a judicial doctrine that polices forward-looking statements, like ERTs, that become misleading over time-as a bulwark against unfulfilled ERTs that linger in the market and have the potential to mislead investors concerning a company's climate performance or reputation. In fact, ERTs-which convey clear expectations regarding the quantity of emissions to be reduced, the steps needed to achieve those reductions, and the timeframe of achievement-are uniquely suitable for the duty to update. INTRODUCTION.............................................................................. 1138 I. CORPORATE EMISSION REDUCTION TARGETS .................... 1142 A . Proliferation ........................................................... 1143 B . Term inology ........................................................... 1146 1. Scopes of Em issions .................................... 1147 2. Net Zero, Zero, and Negative Emissions .... 1148 3. Emission Intensity vs. Absolute Emissions.................................................... 1149 4. B ase Y ears .................................................. 1150 C. Im plem entation ...................................................... 1151 1. Board Composition and Executive Compensation ............................................. 1151 2. Internal Carbon Pricing.............................. 1154 1137 1138 VANDERBILT LAW REVIEW [Vol. 74:4:1137 3. Renewable Energy Procurement ................ 1155 4. Carbon Offsets, Capture, and Removal......1156 D . Nonfulfillm ent........................................................1157 1. The Risk of Nonfulfillment ......................... 1158 2. The Potential Market Effects of Nonfulfillment......................................... 1161 II. U.S. SECURITIES LAW AND THE DUTY TO UPDATE ............. 1163 A. DisclosureDuties and the Duty to Update.............1165 B. The Contours of the Duty to Update ...................... 1168 1. Alive in the Minds of Investors .................. 1168 2. Clear and Verifiable Expectations ............. 1170 3. Fundamental Changes................................ 1173 C. Materiality ............................................................ 1174 D. The Effect of Cautionary Language ....................... 1178 III. THE INTERSECTION OF ERTS AND THE DUTY TO U PDATE ............................................................... ..... 1180 A. The Duty to Update as a Judicial Stopgap for Unfulfilled ERTs.................................................... 1180 1. ERTs Are "Alive" in the Minds of Investors ................................................. 1180 2. ERTs Set Clear, Verifiable Expectations ... 1181 3. ERTs Pertain to Fundamental Changes in Many Industries ..................................... 1183 B. Normative Arguments for a JudicialRemedy ....... 1184 C ONCLUSION ............................................................. ..... ...... 1185 INTRODUCTION Anthropogenic climate change is undeniably an era-defining challenge, with assessments of its causes and impacts growing evermore definitive.1 Meanwhile, the window to avoid the worst effects 1. See, e.g., LENNY BERNSTEIN ET AL., INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, CLIMATE CHANGE 2007 SYNTHESIS REPORT 5 (Core Writing Team, Rajendra K. Pachauri & Andy Reisinger eds., 2008), https://www.ipcc.ch/site/assets/uploads/2018/02/ar4_syr_fillreport.pdf [https://perma.cc/NFB7-NPUV] ("Most of the observed increase in global average temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic GHG concentrations."); INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, Summary for Policymakers, in CLIMATE CHANGE 2014 SYNTHESIS REPORT 2, 4, 8 (2014), https://www.ipcc.ch/pdf/assessment- report/ar5/syr/AR5_SYR_FINALSPM.pdf [https://perma.cc/78ZV-LB6R] (noting that anthropogenic greenhouse gas emissions "ha[ve] led to atmospheric concentrations of carbon dioxide, methane and nitrous oxide that are unprecedented in at least the last 800,000 years" and "[c]ontinued emission of greenhouse gases will cause further warming and long-lasting changes ... increasing the likelihood of severe, pervasive and irreversible impacts for people and ecosystems"). There are assuredly many other reports issued by governments, academia, nongovernmental organizations ("NGOs"), and the private sector that highlight the connection 2021] DUTY TO UPDATE CORP. EMISSIONS PLEDGES 1139 of climate change is quickly closing. 2 With the outlook admittedly bleak, the 2015 Paris Agreement provided a glimmer of hope, as almost two hundred nations made commitments to "hold[ ] the increase in the global average temperature to well below 2 *C above pre-industrial 3 levels and pursu[e] efforts to limit the temperature increase to 1.5 1C." At the time, the United States was viewed by many as a progressive player in the negotiations, pushing for more ambitious international targets, 4 a noticeable and game-changing departure from the country's prior reluctance to fully commit to similar international agreements. 5 This glimmer of hope was dimmed-if not outright extinguished-when the Trump Administration reversed course by between human activities and climate change. But the question of climate change has long ceased to be one of problem definition, and lending credence to a nonexistent debate would only detract from devising and implementing necessary and aggressive climate action. 2. See MYLES ALLEN ET AL., INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, Summary for Policymakers, in SPECIAL REPORT: GLOBAL WARMING OF 1.5*C 1, 12 (V. Masson-Delmotte et al. eds., 2018), https://www.ipcc.ch/srl5/chapter/spm/ [https://perma.cc/NXP9-KRLH] (stating that in order to have a reasonable chance of not exceeding a 1.5'C temperature increase, emissions must decrease "45% from 2010 levels by 2030"). 3. United Nations Framework Convention on Climate Change, Paris Agreement, in Rep. of the Conf. of the Parties on the Twenty-First Session, U.N. Doc. FCCC/CP/2015/10/Add.1 (Dec. 12, 2015). It should be noted that the differences between a 1.5*C and a 2*C scenario are stark, to say the very least: heatwave duration (1.1 months vs. 1.5 months), reduction in freshwater availability in the Mediterranean and similar regions (9% vs. 17%), increase in global heavy precipitation intensity (5% vs. 7%), total global sea level rise by 2100 (40 cm vs. 50 cm), rate of sea level rise between 2081 and 2100 (4 mm/year vs. 5.5 mm/year), fraction of global reefs at risk of annual bleaching by 2050 (90% vs. 98%), decrease in global maize production (1% vs. 6%). Carl-Friedrich Schleussner et al., Differential Climate Impacts for Policy-Relevant Limits to Global Warming: The Case of 1.5 "C and

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