“Lots of people think it’s a no-brainer to require companies to publicly disclose plans and progress toward meeting environmental, social, and governance (ESG) goals. But despite the substantial potential benefits, new research spotlights substantial risks. Chicago Booth’s Christian Leuz and Hans Bonde Christensen examine the economic effects of such mandates, focusing on direct consequences like the burden of enforcement and the unintended consequences like stifling innovation if firms must disclose proprietary information. As regulators consider their role in mandated reporting, this research urges a realistic approach for what standards alone can achieve.”
This text first appeared in issue 21 of The Rustandy Monthly, a publication of the Rustandy Center for Social Sector Innovation at the Chicago Booth School of Business.