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SEC Climate Risk Disclosure Effort Under Serious Attack from Congress

The lifeblood of financial markets is accurate information, and a major part of the SEC’s mission is to ensure that publicly traded companies provide investors with information material to their performance. A misguided proposal countering these needs is becoming part of recent federal funding negotiations.
by Mindy LubberForbes Sustainable Capitalism Blog Posted on Jul 19, 2016

What’s old is new again.

As he did in both 2010 and 2012, Congressman Bill Posey, R-Fla, has introduced legislation to block common sense SEC reporting guidance on climate change risks for publicly traded companies. His proposals have gone nowhere in the past, but given the partisanship in Congress and the uncertain election ahead this time things are different.

This month, the U.S. House of Representatives passed a financial services spending bill that included Congressman Posey’s amendment, which would bar the SEC from enforcing its 2010 climate risk disclosure guidance. In previous years, Congressman Posey attached this proposal to legislation that President Obama immediately threatened to veto. This misguided proposal will become a part of the larger negotiations to fund the federal government. In these high stakes situations, the President and the Senate are faced with a far greater number of tradeoffs to make – and a proposal like this could slip through.

My nonprofit organization, Ceres, with leading members of our $14 trillion Investor Network on Climate Risk (INCR), were instrumental in petitioning the SEC to issue this guidance. The guidance helps investors large and small assess growing risks that companies face due to climate impacts.

This is basic stuff. It’s not red tape, and its not bureaucratic overreach. In fact, it’s quickly becoming standard practice all around the world.

The lifeblood of financial markets is accurate information, and a major part of the SEC’s mission is to ensure that publicly traded companies provide investors with information material to their performance. More than ever, climatic changes, water shortages, resource depletion and other related impacts meet this threshold of material financial risks. Investors have a right to know this information.

It’s considered so important to investors that the international Financial Stability Board, at the request of G20 nations, has organized a climate risk disclosure task force chaired by Michael Bloomberg and staffed by former SEC Chair Mary Schapiro.  We all know that proper risk disclosure of the regulatory and physical risks of climate change is critical to investors, and this year that knowledge has gone completely mainstream, especially as scientific evidence of climate warming has grown and world leaders have come together to curb carbon pollution under the historic Paris Climate Agreement.

The SEC’s enforcement of the 2010 guidance is not perfect. I’m the first to say so, as are investors who recently sent a letter to the SEC on this topic - but that’s an entirely different matter than legislators attacking well thought out disclosure rules that protect investors.

If passed, this amendment would take away any discretion on the part of the SEC and further set back efforts to provide investors with the information they need to make sound decisions.

This cannot happen.  Ceres and many INCR members will mount a comprehensive effort to ensure that key Republicans and Democrats understand that this proposal serves no one and harms investors – each and every one of us.

Read the post at Forbes Sustainable Capitalism Blog

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Meet the Expert

Mindy S. Lubber JD, MBA

Mindy S. Lubber is the President and a founding board member of Ceres, a non-profit organization that is mobilizing many of the world’s largest investors and companies to take stronger action on climate change, water scarcity and other global sustainability challenges. She directs Ceres’ Investor Network on Climate Risk (INCR), a group of 120 institutional investors managing about $14 trillion in assets focused on the business risks and opportunities of climate change. Mindy also oversees engagements with 100-plus companies, many of them Fortune 500 firms, committed to sustainable business practices and the urgency for strong climate and clean energy policies.

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