From Green Right Now Reports
In a 3-2 vote that fell along party lines, the U.S. Securities and Exchange Commission yesterday decided to issue new interpretive guidance that clarifies what publicly traded companies must disclose to investors in terms of climate-related “material” effects on business operations. Information covered includes the impact of new emissions management policies, the physical impacts of changing weather or business opportunities associated with the growing clean energy economy.
The guidance, the first economy-wide climate risk disclosure requirement in the world, was approved in a formal vote by SEC Commissioners meeting in Washington. Chairman Mary L. Schapiro and the two Democrats on the commission supported the new requirements, while the two Republican members voted no.
“I can only conclude that the purpose of this release is to place the imprimatur of the commission on the agenda of the social and environmental policy lobby, an agenda that falls outside of our expertise and beyond our fundamental mission of investor protection,” Republican commissioner Kathleen L. Casey told The Washington Post.
But the decision followed formal requests by many leading investors for the SEC to require full corporate disclosure of wide-ranging climate-related business impacts — and strategies for addressing those impacts — in financial filings. More than a dozen investors managing more than $1 trillion in assets, plus Ceres and the Environmental Defense Fund, requested formal guidance in a petition filed with the Commission in 2007, in addition to supplemental petitions in 2008 and 2009. Ceres is a coalition of investors, environmental groups and public interest groups working with companies to address sustainability issues.
Those investors hailed the new guidance and said it goes a long way to meeting disclosure needs outlined in their petition.
“We’re glad the SEC is stepping up to the plate to protect investors,” Anne Stausboll, chief executive officer of the California Public Employees Retirement System (CalPERS), said in a statement. ”Ensuring that investors are getting timely, material information on climate-related impacts, including regulatory and physical impacts, is absolutely essential. Investors have a fundamental right to know which companies are well positioned for the future and which are not.”
CalPERS is the nation’s largest public pension fund with more than $205 billion in assets under management.
Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, said the vote is “a clarion call about the vast risks and opportunities climate change poses for U.S. companies and the urgency for integrating them into investment decision making.” The Investor Network on Climate Risk is a network of 80 institutional investors with $8 trillion in collective assets.
“The business risks of climate change cannot be ignored. With this guidance investors can make more sound decisions based on better information — and businesses will have a level-playing field with clear standards and expectations for disclosure,” Lubber said.
The SEC decision is one of a series of major policy actions over the past year that require greater climate risk disclosure across various industry sectors, including:
- The Environmental Protection Agency’s new mandatory greenhouse gas (GHG) reporting rule, requiring some 10,000 facilities that are large sources of GHGs to report those emissions to EPA, beginning data collection on January 1, 2010.
- The National Association of Insurance Commissioners’ (NAIC), the organization of insurance regulators for the 50 states, unanimously approved a mandatory requirement for insurers with annual premiums of $500 million or more to disclose climate risks to regulators, shareholders and the public beginning in May 2010.
- A growing spate of climate disclosure related litigation, as well as subpoenas by New York’s Attorney General to five of the nation’s largest power companies regarding their climate disclosure in SEC filings. Three of those cases have been settled, including a major settlement in November, after the companies agreed to boost their disclosure.
- A record number of shareholder resolutions seeking information on companies’ contribution and responses to climate change.
Comprehensive climate protection legislation also is moving through Congress. The House in June passed legislation that caps greenhouse gas emissions and similar legislation is under consideration in the Senate.
The SEC is also evaluating another formal request from investors that companies be required to disclose material ESG (environmental, social and governance) risks. The Commission is awaiting a recommendation from its SEC Investor Advisory Committee before considering the request.
Here is a list of investors and other groups who signed the climate disclosure petitions with the SEC:
- British Columbia Investment Management Corporation (Canada)
- California Public Employees’ Retirement System
- California State Controller John Chiang
- California State Teachers’ Retirement System
- California State Treasurer Bill Lockyer
- Connecticut State Treasurer Denise L. Nappier/Connecticut Retirement Plans and Trust Funds
- Environmental Defense Fund
- F&C Management
- Florida Chief Financial Officer Alex Sink
- Friends of the Earth
- Former Kentucky State Treasurer Jonathan Miller
- Laborers’ International Union of North America
- Maine State Treasurer David G. Lemoine
- Maryland State Treasurer Nancy K. Kopp
- The Nathan Cummings Foundation
- New Jersey State Investment Council
- Former New York City Comptroller William C. Thompson, Jr.
- New York State Attorney General Andrew M. Cuomo
- New York State Comptroller Thomas P. DiNapoli
- North Carolina State Treasurer Janet Cowell
- Former North Carolina State Treasurer Richard Moore
- Oregon State Treasurer Ben Westlund
- Former Oregon State Treasurer Randall Edwards
- Pax World Management Corporation
- Rhode Island General Treasurer Frank T. Caprio
- Vermont State Treasurer Jeb Spaulding