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Investors Call on SEC to Require Better Disclosure on Climate Change and Other Risks

Submitted by: Ceres

Categories: Finance, Environment

Posted: Oct 23, 2008 – 04:23 PM EST

 

Oct. 23 /CSRwire/ - WASHINGTON D.C. - October 23, 2008 - Fourteen of the nation's largest institutional investors called on the Securities and Exchange Commission yesterday to require improved corporate climate risk disclosure and-for the first time-address a broader range of environmental, social and governance risks, or so-called "ESG" issues, in disclosure requirements.

The letter was sent in response to the SEC's request for public comment on its 21st Century Disclosure Initiative, File No. 4-567, which proposes to modernize the current SEC disclosure system to enhance its usefulness to investors. The 14 signatories to the letter include asset managers and leading U.S. institutional investors such as CalPERS, CalSTRS, and the Maryland, New Jersey, New York City and New York State public pension funds or treasurers. (See full list below)

Citing investors' previous attempts to engage with the SEC on climate risk disclosure, and the growing number of businesses that are disclosing climate risks and climate change impacts on their financial performance and competitiveness, the letter lays out a need for deeper engagement with the SEC on disclosure issues. It also cites the 21st Century Disclosure Initiative as an ideal venue for such engagement.

"What we seek is not radical, but rooted in the SEC's duty to follow the most fundamental investor protection principle there is: the right to know," said California State Treasurer Bill Lockyer. "The consensus recognizing the need for businesses to fully assess and disclose climate risks is growing by the day. It's time for the SEC to update its regulations to account for these risks, and the broader panoply of environmental, social and governance issues."

"Climate change, like subprime mortgages, poses far-reaching hidden financial risks that investors cannot ignore," said Mindy S. Lubber, president of Ceres and director of 70-member Investor Network on Climate Risk. "A modernized SEC disclosure system must address investors' strong and growing need for better corporate disclosure of climate risks."

The investor letter also includes a first-time request for the SEC to consider how material environmental, social and corporate governance (ESG) data could be integrated into registrant's SEC filings. While many companies disclose ESG information in their sustainability reports and on their web sites, investors say that isn't always enough given the financial risks ESG factors can create. For example, ESG information can disclose material risks such as water-related risks from growing water scarcity, as well as labor and supply chain risks such as reduced availability of a trained workforce or a suppliers' failure to follow environmental regulations.

"Action by the SEC to require disclosure of climate risks-as well as additional environmental, social and governance risks-would result in better, more informed decisions for investors," said Nancy Kopp, Maryland State Treasurer.

In addition to asking the SEC to improve climate risk disclosure in SEC filings, and examine how environmental, social and governance data can be integrated into SEC filings, the letter asks the SEC to appoint an investment professional as a member of the Federal Advisory Committee to ensure that investor views on climate risks are represented.

More specifically, the investor calls on the SEC to:

  • Include the goal of improving climate risk disclosure in SEC filings as part of the Federal Advisory Committee's charter;
  • Appoint an investment professional as a member of the committee in order to ensure that investor views on these issues are represented; and
  • Create a subcommittee of the Advisory Committee to consider how material environmental, social and governance (ESG) data can be integrated into registrants’ SEC filings.

Signatories include:

Anne Stausboll, Interim Chief Investment Officer, California Public Employees' Retirement System (CalPERS)
John Chiang, California State Controller
Jack Ehnes, CEO, California State Teachers' Retirement System (CalSTRS)
Bill Lockyer, California State Treasurer
Mindy S. Lubber, President, Ceres & Director, Investor Network on Climate Risk
Karina Litvack, Director, Head of Governance & Sustainable Investment, F&C Management
Nancy K. Kopp, Maryland State Treasurer
Lance E. Lindblom, President and CEO, The Nathan Cummings Foundation
Orin Kramer, Chair, New Jersey State Investment Council
William C. Thompson, Jr., New York City Comptroller
Thomas P. DiNapoli, New York State Comptroller
Julie Gorte, Senior Vice President for Sustainable Investing, Pax World Management Corporation
Frank T. Caprio, Rhode Island General Treasurer
Jeb Spaulding, Vermont State Treasurer

About Ceres

Ceres is a leading coalition of investors, environmental groups and other public interest organizations working with companies to address sustainability challenges such as global climate change. Ceres also directs the Investor Network on Climate Risk, a network of 70 institutional investors with collective assets totaling $7 trillion focused on the business impacts from climate change. For more information, visit www.ceres.org or www.incr.com

About the 21st Century Disclosure Initiative

In June, SEC Chairman Christopher Cox launched a new "21st Century Disclosure Initiative", with a mission of enhancing the usefulness of disclosure to investors. The Initiative will review the existing disclosure system, its objectives, and how disclosure could be improved with modern technology and practices. The SEC solicited public comment and the deadline for submitting comments was yesterday, October 22. The Commission will now appoint members to an Advisory Committee which will review the SEC's plan for the initiative, consider public comments and make recommendations to the Commission. http://www.sec.gov/spotlight/disclosureinitiative.shtml).

History of INCR Engagement with SEC on Climate Risk Disclosure In fall 2007, INCR members submitted a formal petition asking the SEC to issue guidance on climate-related disclosure companies should be providing. INCR members have since met with SEC staff on the petition and a Senate hearing was held on the topic in December, but the SEC has not yet issued formal guidance.

For more information, please contact:

Meg Wilcox Ceres
Phone: 617-247-0700 X148
Website: www.ceres.org

For more from this organization:

Ceres

 

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