Big investors push SEC to make companies disclose climate risks

ClimateWire, 23 November 2009 - Institutional investors managing more than $1 trillion in assets have asked the U.S. Securities and Exchange Commission to spell out the climate-related financial risks corporations should disclose on their financial forms.

U.S. and Canadian fund managers signing onto the petition included the California Public Employees' Retirement System (CalPERS); top state financial officers in Oregon, North Carolina, Connecticut, Maryland, New York and Florida; British Columbia Investment Management Corp.; the Laborers' International Union of North America; and Pax World Management Corp.

Their chief complaint is that the SEC requires public companies to disclose "material risks" to investors, but the agency has offered no guidance for reporting financial risks tied to global warming. The investor groups say there is a panoply of climate-related issues affecting long-term corporate finances, including a pending batch of greenhouse gas reporting requirements from U.S. EPA, worsening environmental conditions and the prospect that Congress will mandate reductions in carbon dioxide emissions.

"Many companies haven't examined these risks," said CalPERS CEO Anne Stausboll in a statement. "The SEC should strengthen and enforce its current requirements so investors' decisions fully account for climate change's financial effects."

N.Y. forces disclosure

Companies and the SEC have faced increasing pressure from shareholder groups, regulators and state attorneys general asking for more public disclosure of climate-related risks. On Thursday, the office of New York Attorney General Andrew Cuomo (D) announced a settlement with AES Corp. that requires the utility giant to tell investors more about risks posed by climate change. Arlington, Va.-based AES owns 34 power plants in North America and is one of the biggest electricity companies in the world.

Under that agreement, AES must disclose in its 10-K SEC filings risks from "present and probable" climate-related regulations and legislation, litigation and the physical impact global warming could have on utility assets. The state reached similar settlements with power provider Dynegy Inc. and Xcel Energy last fall.

AES also agreed to a number of other disclosures, including turning over data on carbon emissions and disclosing information about projected emissions increases because of planned coal-fired power plants and the company's strategies for cutting and managing those emissions.

"As efforts to curb climate change continue," Cuomo said, "it is important that the investing public know the financial risks of companies that produce large quantities of global warming pollution."

Issue gains momentum within SEC

Cuomo subpoenaed five companies last year to determine whether their efforts to build new coal-fired generation posed risks that were not disclosed to investors, including litigation and costs of regulatory compliance.

This issue might be ripe for SEC action. The SEC in late October ruled that investors can directly call on public companies to describe climate-related risks. The SEC staff bulletin reversed a Bush administration policy of tossing out climate change-related resolutions. Now, investors can force boards of insurance companies, banks and industrial giants to respond to concerns expressed in annual corporate proxy proposals about emissions, regulations, rising commodity prices, property damage and long-term costs.

In the petition filed early today, the investor groups emphasized that EPA has taken concrete steps on the carbon emissions front that will affect corporate bottom lines. "Regulatory limits on global warming pollution are a known trend that is gaining momentum," the petition said.

EPA has finalized a mandatory greenhouse gas reporting rule that starting in 2010 will require major emitters to report those emissions. That data collection is the building block for any future cap-and-trade program that requires reductions over time. "When EPA's reporting rule takes effect, no corporation that emits substantial amounts of greenhouse gases can say it does not have the data to undertake the analysis that investors have increasingly sought," said the petition.

The large institutional investors also pointed to EPA's proposed "endangerment finding," which could open the door to comprehensive greenhouse gas regulations under the Clean Air Act. In addition, they said, EPA and the U.S. Transportation Department have proposed emissions standards for cars and trucks, a step up from previous efforts to increase fuel economy standards. In addition, states are putting programs in place to cut carbon dioxide emissions.

Author Joel Kirkland Publication Date 23 Nov 2009 Document Type News articles Issue/Topic Business Role/CSR Energy & Climate Source ClimateWire Include In RSS Business & Sustainable Development News Corporate Social Responsibility News Energy & Climate News