A broad coalition of investors and major environmental groups have repeated their call to the US Securities and Exchange Commission (SEC) to address the obligations of publicly-traded companies to assess and fully disclose the material economic opportunities and risks from climate change. The 20 signatories to the letter include leading US and European institutional investors such as CalPERS, CalSTRS, F&C Asset Management and the Maryland, New York, New York City, New Jersey, North Carolina and Oregon public pension funds.
In a supplement to their landmark petition last fall requesting formal guidance from the SEC on climate–related risks and economic opportunities companies should be disclosing, the groups filed new evidence today indicating the need for an immediate SEC response to the petition. Today’s filing cites a growing body of state, federal and international laws and regulations to limit greenhouse gas emissions that provide extensive economic opportunities for U.S. companies developing climate-friendly solutions and pose material risks to U.S. companies that decline to innovate.
The emerging carbon limits support the petition’s central contention that climate-related opportunities and risks are material to shareholder investment decisions and must be disclosed under existing law. Consistent, regulated disclosure practices are critical for investors to make informed decisions. Issuing clarifying guidance on climate-related disclosure is fundamental to the SEC’s core mission: “to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.”
Since the petition was filed in September 2007, the SEC has received numerous supportive comments from more than 50 additional investors representing over $5.5 trillion. Key Senate Banking Committee leaders, Senator Christopher Dodd and Senator Jack Reed, also supported the petition in a letter sent to the SEC last December.
“The SEC needs to do more to protect investors from the risks companies face from climate change, whether from physical impacts or new regulations that that will make CO2 emissions more costly,” said Mindy S. Lubber, president of Ceres and director of the Investor Network on Climate Risk, a network of 65 institutional investors with $5 trillion in assets.
“We urge the SEC to issue guidance on climate risk disclosure,” said Anne Stausboll, acting chief investment officer of the California Public Employees’ Retirement System (CalPERS), the nation’s largest pubic pension fund. “CalPERS is supporting other efforts to improve climate risk disclosure, including state legislation in California and a National Association of Insurance Commissioners proposal to improve climate-related disclosure. But SEC guidance for all publicly-traded companies is needed to protect investors.”
'Companies across America are working to solve climate change and protect our families from rising energy prices. Investors have a right to know which ones are planning for a clean energy future and which ones are lagging behind,' said Fred Krupp, president of Environmental Defense Fund.
According to the original petition filed last year, climate change affects corporate performance in ways ranging from physical damage to facilities and increased costs of regulatory compliance, to opportunities in global markets for climate-friendly products and technologies that emit little or no global warming pollution. The petition states that those risks fall squarely into the category of material information that companies must disclose under existing law to give shareholders a full and fair picture of corporate performance and operations.
The petition asks SEC to clarify that, under existing law, companies should disclose material information related to climate change. Depending on the circumstances, this obligation may require disclosure of the following information:
Physical risks associated with climate change that are material to the company's operations or financial condition;
Financial risks and economic opportunities associated with present or probable greenhouse gas regulation;
Legal proceedings relating to climate change.
Despite increasing demands from investors for more disclosure on climate risks, including a record 55 climate-related shareholder resolutions filed this year, corporate disclosure remains uneven and inconsistent. For example, Progressive Insurance, a major home and auto insurance company, failed to include any mention of climate change in its most recent annual filing, despite its admittance that “[m]ost of our past catastrophe-related claims have resulted from severe storms.”1 Exxon Mobil, the world’s largest private petroleum and petrochemical enterprise, made only one cursory reference to climate change in the 125 pages of its latest annual filing.
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