Investors Petition SEC for Climate Risk Disclosure

Coalition asks SEC to recognize financial risks of climate change under current material information regulation.

By Danielle Lee

A 22-member coalition of U.S. and European investors, state government officials and organizations, including nonprofit Environmental Defense and investor network Ceres filed a petition with the U.S. Securities and Exchange Commission (SEC) Tuesday seeking to require publicly traded companies to assess and fully disclose financial risks from climate change.

Specifically, the petition calls for the SEC to affirm that climate change is covered under the current regulations concerning material information disclosure, said Sean Donahue, counsel for Environmental Defense.

Petition signers include California State Treasurer Bill Lockyer, Florida Chief Financial Officer Alex Sink, Maine State Treasurer David G. Lemoine, New York State Comptroller Thomas P. DiNapoli, North Carolina State Treasurer Richard Moore and Oregon State Treasurer Randall Edwards, in addition to state officials from Kentucky, Maine, Maryland, New Jersey, Rhode Island and Vermont.

“Climate change is real, it is now, and it poses enormous financial risk for companies and their portfolios,” said Mindy Lubber, Ceres President and Director of the Investment Network on Climate Risk. “No sector is, or will remain, unaffected… Investors need much better information.”

Calvert and Ceres’ “Carbon Disclosure Project” 2007 study found that more than half of the S&P 500 companies are doing a poor job of disclosing such risk to investors.

Lubber placed Dallas-based energy company TXU in that category, noting that the company cancelled the construction of eight out of 11 coal-fired plants earlier this year when risks were found to surpass those initially reported by the company.

Last week, New York Attorney General Andrew M. Cuomo, another signatory on the petition, sent subpoenas to five energy companies to determine whether they had adequately disclosed to shareholders the financial risk of greenhouse emissions from their coal-fired plants.

Conversely, Lubber cited energy providers PG&E and American Electric Power as providing “detailed reports” on climate change risk in their respective SEC filings.

Ceres’ Investment Network on Climate Risk offers a global standard for climate risk disclosure that participating companies have found to be a “comprehensive guideline to give investors what they want,” said Lubber.

Lubber, Donahue and Environmental Defense President Fred Krupp said they expect the SEC to receive the petition favorably. Commission-approved interpretive guidance of the existing law to SEC staff is expected, rather than formal action, said Donahue.

“The significance” of the petition, said Krupp, “is it marks a moment where we go through a portal and enter the new era where companies are much more widely going to be disclosing on the climate change issue, because it now inextricably ties with their financial futures.”