Involuntary Disclosures Through Climate Litigations: Impact on Investors and Corporate Policies

I study the role of involuntary disclosures in steering environmental governance. Using a sample of climate litigations filed between 2012 and 2019, I examine whether these litigations shed new light on defendant firms’ climate risks and whether this information is relevant enough to trigger investors’ reactions and impact corporate policies. I find that on average climate litigations have no significant effect on firm value or emissions, and do not lead to divestments by green institutional investors. However, cases that attract investors’ attention do lead to significant reductions in emissions for the defendant firms. In contrast, I find little evidence that climate litigations contribute to self-disciplining effects on non-targeted peer companies.