Obama’s Wall Street Watchdog Does Little To Protect Investors From Climate Risk

Other regulators are stepping up while the SEC ignores climate change.

Investors and the global environment are at risk because the nation's primary securities regulator has done "almost nothing" in recent years to ensure that publicly traded companies properly warn their investors about the threat of climate change, according to a top environmental adviser to U.S. money managers.

The lack of action by the Securities and Exchange Commission under Chair Mary Jo White represents a reversal from the agency's aggressive approach under its previous leader Mary Schapiro, who in 2010 instructed companies to publicly describe the risks they face from climate change, according to Mindy Lubber, president of nonprofit group Ceres.

Since then, Lubber said, the SEC has done little to enforce Schapiro's directive. The agency has sent thousands of letters to companies ordering them to improve their disclosures to investors about a variety of topics, but since White's term began in April 2013 just eight of those letters contain the term "climate change," Lubber said. Of those, none have gone to the largest companies facing the biggest risks from climate change, she added.

Erin Stattel, an SEC spokeswoman, declined to comment.

The criticism comes as regulators elsewhere increasingly push companies to measure the potential risks that climate change poses to their operations and profitability, with some threatening to penalize businesses that mislead their investors.

The Bank of England, under Governor Mark Carney, has warned insurance companies that their solvency could be at risk if they don't start measuring potential losses from payouts on insurance contracts that sour due to the warming planet.

A group of state attorneys general is investigating energy companies over their past disclosures to investors about climate change risk.

And the Financial Stability Board, an international organization of financial regulators, has tasked business leaders with developing standards that companies would follow when reporting the risks they face from climate change.

Improved disclosures are necessary if investors and creditors of companies most exposed to climate change are to convince businesses to change their practices, according to a growing group of business leaders, government officials, and environmental organizations.

Nearly 200 nations agreed in December to aggressively combat climate change, setting a goal of limiting global warming to “well below” 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial levels.

A 2-degree increase in average temperatures is forecast to lead to bigger wildfires, more destructive hurricanes and increased risk of flooding. Warmer temperatures could be disastrous.

Some scientists warn that global warming could cause sea levels to rise by several feet within the next 50 years, putting many of the world's largest cities at risk of catastrophe.

Despite mounting risks -- for example, there are fears that the 2-degree goal will leave many oil and gas reserves stranded underground, unable to be utilized -- the SEC has no public plans to urge companies to further inform investors about climate change.

Congress could be to blame for SEC inaction, according to a January report by the Government Accountability Office, the congressional watchdog.

Officials at the securities agency told federal investigators that the agency's 2010 directive to companies resulted from the chance that Congress would enact a new law limiting greenhouse gas emissions through a so-called cap-and-trade program.

But since that proposal died, Congress has done little on climate change, mostly because many Republicans are skeptical of the scientific consensus that humans are largely responsible for global warming and that emissions must be limited in order to stave off a looming disaster.

The lack of congressional pressure coupled with changing priorities at the securities agency -- for example, the SEC had to develop dozens of new rules in response to the 2010 overhaul of U.S. financial regulation known as Dodd-Frank -- has led the SEC to focus less on climate change, employees told the Government Accountability Office.

Meanwhile, investors in publicly traded companies are left to guess how much of their money may be at risk due to climate change.

"Only SEC action can raise the baseline of climate reporting to protect investors," Lubber said. "No more delays or excuses. The time for SEC action on climate risk disclosure is now."