Washington, D.C. – A new report by Friends of the Earth shows how companies are hiding climate change-related risks from their investors in violation of Securities and Exchange Commission (SEC) disclosure rules. The report, which is an update of a survey released one year ago, reviewed climate change disclosure in 2002 SEC filings of companies likely to be impacted by climate change. It found that the overall rate of climate change reporting has increased to 38 percent (up by 10 percent compared with last year), and that the quality of climate disclosure also generally has improved.

“Climate change and climate policies are a bottom-line issue for companies and investors,” said Michelle Chan-Fishel, coordinator of Friends of the Earth’s Green Investments Program. “A growing number of companies are complying with SEC disclosure rules and are admitting this risk to shareholders. But many corporations are taking an all-too familiar approach of painting a rosy picture of themselves while hiding their true risks and liabilities.”

The survey, available at www.foe.org/camps/intl/corpacct/wallstreet/secsurvey2003.pdf, was released at the Institutional Investors’ Summit on Climate Risk in New York City on Nov. 21, 2002. At the summit, ten state treasurers, state and city comptrollers, and labor pension funds called on the SEC to enforce securities disclosure laws that would compel companies to material trends and uncertainties, such as climate risk, to investors. (See Investor Network on Climate Risk at www.incr.com)

While overall reporting rates are low, the survey finds that a majority of integrated oil and gas companies and large electric utilities now provide climate reporting to investors. Large automobile, petrochemicals and insurance companies report at lower rates. Among reporting companies, 40 percent forecast that climate risks will adversely impact their firms, while 15 percent maintain that global warming poses little to no risks. About 27 percent state that the impact of climate change cannot be estimated, while 18 percent of reporting companies avoid addressing the issue of financial risk altogether. Possible explanations for this increase in reporting include improved reporting due to the Sarbanes-Oxley Act, unprecedented shareholder interest in climate change, and potential monitoring by the SEC.

“Under Sarbanes-Oxley, corporate directors, especially audit committees, must guarantee that companies have adequate internal controls to identify, manage and disclose material risks,” said Chan-Fishel, “Boards that fail to ensure appropriate climate reporting – particularly when a company’s competitors are coming clean -- may be in breach of Sarbanes-Oxley and their fiduciary duty.”

The survey supports recent evidence that environmental disclosure among publicly traded companies in the United States is weak and poorly enforced. An SEC review of Fortune 500 companies’ 2001 10-K filings found that many companies did not provide adequate disclosure on environmental issues. Similarly, a 1998 study by the Environmental Protection Agency found that 74 percent of companies do not report legal proceedings contemplated and/or initiated by environmental agencies that are likely to result in monetary penalties of over $100,000, despite clear SEC rules requiring this disclosure.

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