Dynamic Green Disclosure Requirements
Working Paper Author/Authors
Key Finding
Dynamic green disclosure requirements can dominate full transparency in incentivizing firms to transition to greener practices
Abstract
This paper studies the design of green disclosure requirements. We show that dynamic green disclosure requirements that become more stringent over time can dominate full transparency. Less stringent initial requirements can overcome roadblocks in the early stages of the green transition, while more stringent requirements facilitate later stages. Dynamic requirements may slow down the green transition for some firms but can increase the number of firms that eventually reform, highlighting a novel trade-off between the pace and breadth of the green transition. Our results apply to recent policies mandating green disclosures, many of which become more stringent over time.
© Deeksha Gupta, Jan Starmans, 2025
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