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New Report Helps Green Investors To Identify Climate Related Risks and Opportunities

By Franziska Scheven
Institutional Investor
The greener a company, the more profitable. This is at least, what many investors believe these days. The SEC knows that, and issued a guidance for companies last year that identifies risks related to climate change material such as energy waste, carbon emissions and other polluting activities.


The greener a company, the more profitable. This is at least, what many investors believe these days.

The SEC knows that, and issued a guidance for companies last year that identifies risks related to climate change material such as energy waste, carbon emissions and other polluting activities.

But the problem is that not all companies seem to have the same understanding of what to disclose and how to do it.

As a result, Ceres, a network of investors, public interest groups and environmental groups, came out with a report entitled Disclosing Climate Risks and Opportunities in SEC Filings: A Guide For Corporate Executives, Attorneys and Directors on Friday, February 25, to help companies understand how to be more transparent and to reach a certain quality standard in their disclosure of climate change risk related material. At the same time, it shows investors how to identify risks and opportunities.

“The Ceres report helps clarify what is going on and gives a nice framework to help to identify, disclose and understand what the real risks are,” says Bruce M. Kahn, Senior Investment Analyst at Deutsche Asset Management that has over $700 billion under management. “The key to disclosure is specificity and accountability.“

The report states that some companies such as Siemens and Xcel Energy did a satisfying job in disclosing climate change related material, whereas American National Insurance Company and Dean Foods Company were short on providing sufficient information. It also includes steps for companies on how to improve corporate disclosure in annual 10-K filings.

This will involve additional costs for companies related to climate change coverage to corporate insurance policies or consulting fees on how to deal with the new requirements, as Institutional Investor reported. “Companies should bear in mind that climate risk is but one of many environmental, social and governance (“ESG”) risks that have financial impacts,” says Mindy Lubber, president of Ceres, in the report.

Companies have had to disclose material risks, such as law suits, since the 1940s. The SEC guidelines and other reports and studies released by Deutsche Bank, CERES or the consulting firm Mercers underline the increasing importance of including climate change as a material disclosure, since it can impact investment portfolio risks. “This is just lending more and more credence to the idea that climate change is a material risk and needs to be disclosed,” Kahn says.

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