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Achieving Full Corporate Transparency on Climate Change

CalPERS joined forces with Ceres and other investors to draft a major petition in 2007 urging the SEC to issue guidance requiring disclosure of climate change risks in corporate filings. As a leading force for improved disclosure, Ceres’ work had already resulted in routine sustainability reporting, but mandatory guidance was needed to make corporate disclosure useful to investors.
Achieving Full Corporate Transparency on Climate Change

Anne Simpson is senior portfolio manager for Global Equity and head of the Corporate Governance Program at the California Public Employees' Retirement System.

At CalPERS protecting our beneficiaries over the long haul is paramount. As the nation’s largest public pension fund, we are concerned with generating sustainable risk adjusted returns to pay pensions. This means we need to understand business risks, including those related to climate change. We want to see robust reporting from companies about these risks, whether due to physical impacts or regulations that affect the market.

The U.S. Securities and Exchange Commission (SEC) was the logical place to raise this concern, because its mission of protecting investors is focused on disclosure. This includes making sure companies disclose material risks they face now and in the future.

CalPERS joined forces with Ceres and other investors to draft a major petition in 2007 urging the SEC to issue guidance requiring disclosure of climate change risks in corporate filings.  As a leading force for improved disclosure, Ceres’ work had already resulted in routine sustainability reporting, but mandatory guidance was needed to make corporate disclosure useful to investors.

The petition led to a Senate hearing where Ceres and CalPERS testimony helped draw public attention to the issue. In 2009 Ceres investor allies, including CalPERS, met with the SEC to explain why climate change risk is a critical issue for investors and companies alike.
The result was a major milestone.  In February 2010, the SEC approved the world's first economy-wide guidance for climate risk disclosure in corporate financial filings.

This guidance, backed by SEC enforcement authority, creates a win-win situation. It helps investors like us make smarter decisions, and it helps companies both understand and start mitigating the risks climate change poses to their long-term competitiveness.

Anne Simpson is senior portfolio manager for Global Equity and head of the Corporate Governance Program at the California Public Employees' Retirement System.

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