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While the SEC Ignores Climate Change Risks, Others Step Up

Only SEC action can raise the baseline of climate reporting to protect investors, and prevent laggards like Buffett's Berkshire Hathaway from claiming--with little evidence to back up their claims--that they do not face climate risks.
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In 2010, the Securities and Exchange Commission took one giant step towards acknowledging climate change as a financial risk and opportunity for markets, and not simply the major environmental threat of our time.

The SEC's formal guidance on climate risk disclosure, issued in response to an investor petition, details how material climate risks must be disclosed by companies in their financial filings. The guidance discusses climate risks related to the oil and gas, electric power, insurance, agriculture and other industries, how these issues could be material, and how they should be disclosed.

Six years later, the SEC under Mary Jo White's leadership has done almost nothing to enforce that guidance. The SEC sends thousands of "comment letters" each year to corporations about improving their financial reporting on a variety of topics, but climate change is barely mentioned.

In fact, since Chair White started her term in April 2013, the SEC has issued just eight comment letters mentioning the term "climate change." None have gone to the large companies facing the biggest climate risks and none have been released since November 2014. And the SEC's enforcement division has not conducted any investigations into possible violations of the securities laws from inadequate climate risk disclosure.

A recent Government Accountability Office report, responding to a request from Congressman Matt Cartwright, (D-PA) to review the management of climate-related risks to supply chains, found that the SEC had no immediate plans beyond the 2010 guidance to determine whether actions to improve climate-related disclosures are required, and no plans to develop subject matter expertise in reviewing the adequacy of climate-related disclosures.

Contrast this with the 49 climate-related comment letters the SEC issued in 2010 and 2011, and with the New York Attorney General's investigations and settlements with companies like coal giant Peabody and power giant AES regarding inadequate disclosure of climate risk information.

Because the SEC hasn't acted, others have stepped up:

  • The California and New York Attorneys General are investigating many years' worth of ExxonMobil's records and financial disclosures to see if the company committed fraud by misleading investors about climate risks, including business impacts from carbon-reducing regulations that are spreading globally.

  • The G20 nations asked the Financial Stability Board (FSB), which was set up in 2009 to strengthen financial systems and increase the stability of international financial markets, to develop recommendations for improving climate risk disclosure in financial filings worldwide.
  • The FSB responded by setting up its Task Force on Climate-related Financial Disclosures, chaired by Michael Bloomberg with guidance from former SEC Chair Mary Schapiro, which will release guidance for improving climate disclosure in financial filings by the end of this year.
  • US Senator Jack Reed, D-RI, and Rep. Matt Cartwright introduced identical bills that would require the SEC to improve climate risk reporting by oil and gas and mining companies.
  • In late March, 17 state attorneys general announced an unprecedented effort to work together on climate change-related initiatives, such as "ongoing and potential investigations into whether fossil fuel companies misled investors and the public on the impa ct of climate change on their businesses."
  • In the meantime, more companies are disclosing climate-related responses in their annual SEC filings. Coca-Cola recently disclosed its commitment to "'reduce the absolute carbon footprint of our core business operations by 50 percent' by 2020." Engine manufacturer and power generation company Cummins adopted its first comprehensive sustainability plan in 2014, including initial goals to "reduce energy use and greenhouse gas emissions [in its facilities] by 25 percent and 27 percent, respectively, by 2015 against a 2005 baseline."

    Other companies, however, are still disclosing unhelpful generic information about climate risks, or no information at all. And some of the worst performers in this regard are U.S. companies facing the biggest risks-- fossil fuel and insurance companies. Incredibly, Warren Buffett claims in his annual letter to shareholders that while "it seems highly likely to me that climate change poses a major problem for the planet, . . . as a shareholder of a major insurer, climate change should not be on your list of worries."

    Only SEC action can raise the baseline of climate reporting to protect investors, and prevent laggards like Buffett's Berkshire Hathaway from claiming--with little evidence to back up their claims--that they do not face climate risks.

    No more delays or excuses. The time for SEC action on climate risk disclosure is now.

    Mindy Lubber is president of the nonprofit group Ceres which is mobilizing many of the world's largest investors and companies to take stronger action on climate change, water risks and other global sustainability challenges. Ceres directs the Investor Network on Climate Risk, a network of 120 institutional investors that filed the petition requesting SEC action to require stronger climate risk disclosure. For details, visit or follow on Twitter @CeresNews.

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