Disclosure in Financial Filings
Financial filings, such as those required by the Securities and Exchange Commission (SEC) and state securities regulators, are an important opportunity for companies to disclose material sustainability issues.
Although the Utilities sector is heavily affected by climate-related regulations, many companies go beyond regulatory disclosure by also discussing physical risks, especially to vulnerable infrastructure. CMS Energy and NextEra Energy go even further, disclosing strategies for future profitability in a low-carbon economy through investments in renewable energy, smart grid technologies and demand-side energy efficiency programs.
Standout companies overall include:
- Brown-Forman, a major distributor of wine and spirits, manufactures products whose basic ingredients are both climate-sensitive and water intensive. In its 10-K filings the company reveals that it sees sustainability as a way to build consumer relationships and enduring brands. It cites climate change, water scarcity and water quality as significant business risks.
- Insurance companies, especially property insurers, have long been aware that they face growing liability risks as climate change increases the number, severity and financial losses of extreme weather events. Accordingly, we are seeing improved disclosure of climate and other sustainability risks by insurers. The Travelers Companies is a leader in such disclosure; it explicitly addresses sustainability risks in financial filings and how the company integrates such risks into modeling of potential liability. Further, the company discloses that it studies the impact of sustainability issues, specifically climate change and water scarcity, on the creditworthiness of companies it invests in, especially bond issuers in the southwestern U.S. where water scarcity is expected to have major economic implications.
- In its financial filings, EMC Corporation states that investing in sustainability makes the company stronger, builds long-term shareholder value, and creates immediate financial benefits, for example, by making operations and products more efficient and revealing new business opportunities. The company also discusses how the integration of sustainability principles into product design, operations and business decision-making enhances its resilience and agility in the global economy and helps attract and retain motivated employees.