Financial Disclosure of Material Environmental Information in the North American Hard Rock Mining Industry
In a report written for the Yale School of Forestry and Environmental Studies, Robert Repetto investigated the adequacy of Canadian and US mining companies' disclosures of material environmental information. Disclosures were found to be deficient, especially in the disclosure to investors of known material environmental risks and liabilities.
Full disclosure of material information by publicly owned companies is obviously crucial for the efficient functioning of capital markets and for the protection of investors, as recent corporate scandals have underscored, and therefore has long been the foundation of U.S. and Canadian securities law and regulation.
Environmental disclosure rules are particularly applicable to hard rock mining companies because their operations typically have significant environmental impacts and require extensive reclamation when concluded. In the past, mining companies have understated environmental risks and liabilities, such as closure and reclamation costs, and have declared bankruptcy when mining has ceased, leaving costly environmental clean-up to the public sector.
The study reported here investigated the adequacy of Canadian and US mining companies' disclosures of material environmental information. Disclosures were found to be deficient, especially in the disclosure to investors of known material environmental risks and liabilities.
This finding lends weight to recent calls for stricter enforcement by securities regulators of existing environmental disclosure requirements and for better compliance by publicly listed companies of current environmental disclosure rules.
