Risk assessment is risky and often murky business, and it’s generally acknowledged that the globe’s climate is at risk — so how companies assess the financial impact of climate change in their risk portfolios should be an important consideration, both for shareholders and bottom lines, right?
Maybe not so much, it seems. Ceres, a nonprofit advocacy group that focuses on corporate sustainability, contends that not many companies believe climate change will have a material impact on their business. “Roughly half of the 3,000 biggest publicly traded companies in the U.S. say mum’s the word, reporting zilch in their annual filings to U.S. regulators,” it says.
This startling and somewhat discomfiting information comes by way of a new Ceres and CookESG Research search tool for accessing climate change-related disclosures in company filings with the U.S. Securities Exchange Commission. The search tool allows users to filter and customize company 10-K filing excerpts relating to clean energy, renewables, weather risk, and climate-related regulatory risks and opportunities. It scans company filings, automatically identifies climate-related text, and sorts information into renewable energy, physical impacts and other categories. Users can search by industry, and can search for topics such as “climate and fossil fuel extraction," “energy/fuel efficiency" and “GHG emissions reduction goals.”
Earlier this year Ceres criticized the SEC for not adequately addressing the climate disclosure deficiencies of publicly traded corporations, this despite a four-year-old formal SEC guidance that requires companies to disclose material climate change risks related to domestic and international regulatory risks; indirect effects of regulation or business trends; and physical risks, and evaluates companies’ filings to ensure compliance.
The Ceres report, "Cool Response: The SEC and Climate Change Reporting," is based on a survey of more than 40,000 SEC comment letters sent to companies in the last four years and an analysis of the state of S&P 500 company reporting on climate disclosure through the end of 2013. It found that the majority of financial reporting on climate change is too brief and largely superficial, and that most companies are failing to meet SEC requirements.
“Investors want greater transparency on the business risks of climate change as a means to protect and increase shareholder value,” said Ceres President Mindy Lubber. “Yet the SEC is not adequately enforcing its own requirements.”
Enter the Ceres search tool. Lubber says it’s an “important step in making it easier for investors to analyze corporate data that’s available and what’s still missing."
“Missing” is a key word. One major impediment to disclosure is determining exactly what risks and opportunities are “material.” Groups such as the Sustainability Accounting Standards Board are working to develop industry-specific disclosure standards to be integrated into SEC filings. SASB this year named Michael Bloomberg chairman, former New York Mayor and founder of Bloomberg LP.
Perhaps the transparency and ease of use of Ceres’ search tool -- it's free -- will nudge companies towards greater compliance with the SEC regulation, and also move them to take the material risks of climate change more seriously.
Image credit: Climate Change by Twm via Flickr