Investors Push Congress for Full Corporate Disclosure on Climate Change Risks

Leading investors and legal experts told a Senate Subcommittee today that the Securities and Exchange Commission needs to take action to require better disclosure by U.S. companies on the financial risks they face from global climate change.

"There are many companies that do not provide voluntary disclosure of their climate risk," said Russell Read, chief investment officer of the California Public Employees' Retirement System, the nation's largest public pension fund with $250 billion in assets, testifying before the Senate Banking Subcommittee on Securities, Insurance and Investment. "Improved environmental disclosure is required in order for investors to properly assess the material impact of companies' climate risk and opportunities in their portfolios."

"Information companies are providing on climate change is not adequate and is not at the levels investors need to make informed investment decisions," added Mindy S. Lubber, president of Ceres and director of the Investor Network on Climate Risk, which includes $4 trillion in investors. "Action is needed by the SEC to rectify the situation,"

The hearing, convened by subcommittee chairman U.S. Senator Jack Reed (D-RI), comes after 18 leading investors, including CalPERS, filed a petition asking the SEC to require companies to assess and disclose "material" financial risks from climate change. Material risks can include financial impacts from emerging carbon-reducing regulations, extreme weather and other climate-related physical events, or growing global demand for low-carbon technologies and products.

The petitioners included $1.5 trillion of investor assets, including pension funds in California, Florida, New Jersey, New York, North Carolina and Rhode Island. The petition requests that the commission issue interpretive guidance clarifying that material climate-related information must be included in corporate disclosures under existing law.

Jeffrey A. Smith, an environmental law partner at Cravath, Swaine & Moore and former chair of the American Bar Association's Committee on Environmental Disclosure, testified that voluntary corporate disclosure on climate risks has increased dramatically the past five years. Still, he argued, voluntary-based reporting falls short in meeting the needs of investors and the marketplace.

"It would be a mistake to believe that this voluntary activity, no matter how sophisticated and well intentioned, could be a permanent substitute for mandatory reporting," Smith said in his written testimony.

Smith said the SEC has an opportunity, using its existing authority, to eliminate "the wide variation in the depth, quality and format of formal SEC reporting" by companies on climate change.

"It is important for the SEC to move with deliberate speed to reassert its gatekeeper role for the market and to clarify its expectations," Smith concluded.

Several speakers praised Senator Reed for convening the hearing. "We appreciate Senator Reed's leadership in giving investors the opportunity to share their views on what we believe is a very important issue," Lubber said.

About Ceres

Ceres is a leading coalition of investors, environmental groups and other public interest organizations working with US companies to address sustainability challenges such as global climate change. Ceres also directs the Investor Network on Climate Risk, a network of 60 institutional investors managing $4 trillion in assets focused on the business impacts from climate change. For more information, visit http://www.ceres.org and http://www.incr.com