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Yale Initiative on Sustainable Finance (YISF)

Our Publications

Corporate Sustainability Disclosures in American Case Law: Purposeful Or Mere “Puffery”?

Forthcoming in Berkeley Ecology Law Quartely

Recent years have shown an uptick in lawsuits involving sustainability disclosures, or lack thereof, by companies. In the United States,there seems to be a difference in the latitude given to plaintiffs with respect to “materiality” and “reliance” based on one, or a combination of, three factors: (1) the statutory scheme and the type of plaintiff interest being protected (i.e., investors versus consumers); (2) the location in which sustainability-related disclosure occurs or should have occurred (i.e., formal financial filing versus less formal sustainability statement), or; (3) the form in which the sustainability disclosure is presented to the public, for example, whether information looks more like an affirmative statement of fact, or an aspirational, vague promise to engage in sustainable practices. Based on a close examination of existing case law in the United-States, this paper takes the position that the third factor seems most important to judges when deciding if liability may be imposed in a sustainability case. As sustainability disclosure liability seem to stem from the form in which disclosures are presented, meaningful criteria will be needed to distinguish a “concrete” or “affirmative” sustainability disclosure from one that is merely “prospective” and “aspirational”.

Data-Driven Green Bond Ratings: A Market Catalyst

Journal of Investing, Forthcoming

The authors diagnose the problems with the current green bonds market, and propose a solution: data-driven environmental performance ratings. Green bonds should be understood as an eco-label for a credence good. The current lack of a premium for green labeled bonds is due to a lack of investor confidence ('credence') in the environmental attributes of bonds. To solve this dilemma, the market should shift its mindset from verifying the type of bond to assessing the environmental performance of the bond. The authors provide a framework to help investors or rating agencies do so feasibly.

Incentivizing the Direction of Multi-capital Toward Inclusive Capitalism

Journal of Sustainable Finance & Investment

The financial system has been extraordinarily successful at moving capital to where it can create more financial value. But it has not been successful at moving capital to create social or environmental value. The result is large swaths of society and the environment that continue to need capital even as our global economy grows year over year. The resulting tension between those that have and those that need capital is leading to new frameworks for how capital can be conceived, measured and balanced. These multi-capital approaches bear the potential to create more responsible and sustainable companies. However, too frequently, multi-capital approaches are presumed to lead to inclusive or equitable distribution. This is a problematic presumption as one does not necessarily lead to the other and unless mechanisms are put into place to guide the development of multi-capital frameworks, the potential exists to exacerbate the disproportionate concentration of social and natural resources toward more wealthy groups of people. This paper explores the link between evolving multi-capital (financial, manufactured, social, intellectual, environmental and human capital) approaches and our ability to create more inclusive and equitable distribution of wealth and argues that in order to link multi-capital and inclusive capitalism, a series of fundamental reforms in shareholder agency will need to be adopted.


State of ESG Data and Metrics

The Journal of Environmental Investing, volume 8, no. 1

It is with great pride that we bring you this special issue of the Journal of Environmental Investing, looking for the first time at the State of ESG Data and Metrics, marking our 8th year of publication, and hosted for the first time by two leading academics at Yale, Professors Dan Esty and Todd Cort.

Guest Editors

Corporate Sustainability Metrics: What Investors Need and Don’t Get

The Journal of Environmental Investing, volume 8, no. 1

Traditional socially responsible investors use environment, social, and governance (ESG) metrics to exclude “bad actor” companies from their portfolios with little regard to the impact on returns. But new interest in sustainable investing has emerged from mainstream investors who hope to match or beat market results. The prevailing wisdom among mainstream investors suggests, however, that corporate sustainability leadership only rarely translates into financial success. This article challenges that conclusion. It argues that a “next generation” ESG framework could provide the rigor, integrity, and flexibility needed to meet diverse investor needs and might well demonstrate that some aspects of sustainability (but not all) deliver business gains.

The State of Corporate Disclosure on Well-being: A Review of Corporate Reporting Practices in the Food and Agriculture Sector in 2018

Presented at the 6th OECD World Forum on Statistics, Knowledge and Policy

Our paper reviewed the current state of corporate disclosure on well being. To do so, we mapped the information and metrics disclosed by forty-eight agricultural companies by stakeholder impacted, Sustainable Development Goal fulfilled, and the seven categories of the Sen, Fitoussi and Stiglitz definition of"quality of life". The current reporting framework appears to lack rigor and to leave many well-being issues uncovered. We observe that companies disclose mostly "effort-driven narratives" and metrics, informing about actions and strategies. Little information is provided on corporate impact on stakeholders’ well-being and no rigorous set of indicators emerges from the analysis. We identify critical disclosure gaps for the well-being of all stakeholder groups. Local communities disclosure, in particular, suffers from major limitations. First, the disclosure on corporate influence over national communities, through lobbying and tax payment (SDG16, Peace, Justice and Strong Institutions) is weak in coverage and in depth. Second, corporate measures of local communities’ environmental protection (and therefore health) just emerged. Disclosure on employees’ well-being, on the other hand, benefits from a more robust disclosure, as most of the information lay in the human resources department. Few best-practices are presented in this paper, along with discussions on emerging metrics. We argue that corporate reporting would benefit from a more rigorous reporting framework assessing the various dimensions of well-being.