Monday, November 23, 2009

Investor Groups Petition SEC Regarding Climate Risk Disclosure

Nov 23: A supplemental petition submitted to the Securities and Exchange Commission by a broad coalition of 20 institutional investors explains that "it’s impossible for investors to adequately assess the risk to their investment money if companies don’t tell them how much climate change and its impacts might affect their financial performance." The petition asks the SEC to provide interpretive guidance outlining climate-related "material risks" -- such as new regulations, physical impacts, new economic and business opportunities and other climate-related trends -- that companies should be disclosing to investors.

Some of the 20 signatories to the petition include leading U.S. and Canadian institutional investors managing more than $1 trillion in assets, including the California Public Employees’ Retirement System (CalPERS), British Columbia Investment Management Corporation of Canada, Pax World Management Corporation, state treasurers from Oregon, North Carolina, Connecticut, Maryland and Vermont and Florida’s Chief Financial Officer.

Mindy Lubber, president of Ceres and director of the $8 trillion Investor Network on Climate Risk, which includes many members who submitted the petition said, “Climate change is without question a material risk to businesses, and ignoring it is a disservice to investors. We need to measure and disclose these risks so that both investors and companies can make financially-sound decisions.”

A release from the groups indicates that the petition echoes several earlier requests to the SEC for guidance on climate risk disclosure. But, they said, "what makes this submission different is a spate of recent regulatory, legislative and scientific developments - including the Environmental Protection Agency’s new mandatory greenhouse gas reporting rule – and new economic opportunities that dramatically change the landscape of corporate climate risk disclosure. Congress is also hard at work on climate legislation that would set specific limits on greenhouse gas emissions from power plants and other large company facilities. A climate and energy bill was approved by the House in June and is now before the Senate."

The groups indicated that SEC took a large step toward greater corporate disclosure of climate risks last month. It decided then to allow shareholder resolutions seeking information from companies on the financial risks they face from social and environmental issues including climate change. The decision, outlined in SEC Staff Legal Bulletin No. 14E (CF) reverses an SEC rule that prevented investors from directly asking companies about the impacts of climate change and other pressing concerns on their financial bottom lines. The groups said 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.”

Access a release from the groups and link to the petition supplement, full petition, the full list of signers and related information (
click here). Access the SEC bulletin (click here).