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SEC Issues Guidance On Climate Change Risk Disclosure

Gina-Marie Cheeseman
| Thursday January 28th, 2010 | 3 Comments

The Securities and Exchange Commission (SEC) voted yesterday to issue interpretative guidance on what public companies must disclose to investors concerning climate change risks. A press release issued by the SEC states that the interpretative guidance is meant to clarify “certain existing disclosure rules that may require a company to disclose the impact that business or legal developments related to climate change may have on its business.”

SEC Chairperson Mary Schapiro said in a speech before the vote that an interpretative release “does not create new legal requirements or modify existing ones — it is merely intended to provide clarity and enhance consistency.” Schapiro added that the SEC “is not making any kind of statement regarding the facts as they relate to the topic of climate change or global warming.”  

The following areas are cited in the SEC press release as examples of where climate change may trigger disclosure requirements:

  • Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material.
  • Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.
  • Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies.
  • Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.

“We’re glad the SEC is stepping up to the plate to protect investors,” said Anne Stausboll, CEO of the California Public Employees Retirement System (CalPERS), in a prepared statement. “Investors have a fundamental right to know which companies are well positioned for the future and which are not.”

Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, a network of 80 institutional investors with $8 trillion in collective assets, call the vote “a clarion call about the vast risks and opportunities climate change poses for US companies and the urgency for integrating them into investment decision making.”

“Investors have a right to know which companies are planning to be part of the clean energy future and which are lagging behind,” said Environmental Defense Fund president Fred Krupp.

EDF & Ceres led the fight for SEC guidance

In 2007, EDF, Ceres, and over a dozen investors managing more than $1 trillion in assets, filed a petition with the SEC which requested formal guidance on disclosure of climate change risks. Supplemental petitions were filed in 2008 and 2009.

Last summer, EDF and Ceres commissioned The Corporate Library, an independent research firm, to conduct a study of 100 global companies in five sectors: coal, oil and gas, transportation and insurance. The study found that 59 of the 100 companies did not mention their greenhouse gas emissions or their position on climate change, 28 did not discuss climate risks they face, and 52 did not disclose actions to address climate change.

The study said, “Even more telling, the very best of disclosure for any of the companies could only be described as ‘Fair’—and only a handful of companies achieved this ranking.”


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