Climate risk disclosure requirements: Senate Appropriations Committee seeks guidance from SEC
Investors, legislators and others continue their efforts to require that publicly-traded companies enhance their disclosure of material business risks posed by climate change. In one of the most recent examples, the Senate Appropriations Committee’s July 14, 2008 report on the 2009 Financial Services and General Government Appropriations Bill (S. 3260) included language calling on the Securities and Exchange Commission to provide guidance on the appropriate disclosure of climate risk:
The Committee is aware that a petition was filed with the Commission on September 18, 2007, calling for the issuance of an interpretative release clarifying the application of existing law to the disclosure of risks associated with climate change. The Commission is encouraged to give prompt consideration to this petition and to provide guidance on the appropriate disclosure of climate risk.
Report at 108.
The Senate Appropriation Committee’s request to the SEC is set against a backdrop of several years of efforts to expand climate and other environmental risk disclosure obligations. Among the developments in the last 12 months:
- The New York Times reported in a September 16, 2007 article that on September 14, 2007, the New York Attorney General’s office subpoenaed carbon emission information from five of the nation’s largest energy companies, AES Corporation, Dominion Resources, Xcel Energy, Dynegy and Peabody Energy. The subpoenas were accompanied by letters from the New York AG's office expressing concerns that the energy companies had not adequately disclosed to investors the financial risks related to their carbon dioxide emissions.
- On September 18, 2007, a group of state pension funds and institutional investors collectively representing over $1.5 trillion in assets under management joined with environmental groups to petition the SEC to clarify that existing law requires a company to disclose material climate change-related risks to the company’s business. (Public comments on the rulemaking petition are available at SEC File No. 4-547.)
- In a December 6, 2007 letter to SEC Chairman Christopher Cox, Senator Christopher Dodd (Chairman of the Senate Banking, Housing and Urban Affairs Committee) and Senator Jack Reed (Chairman of the Subcommittee on Securities, Insurance and Investment) reported on an October 31, 2007 Committee hearing on “Climate Disclosure: Measuring Financial Risks and Opportunities”. The letter requested that the SEC issue an interpretive release to clarify a registrant’s obligations to disclose climate change-related risks.
- A May 21, 2008 press release from California State Senator Dean Florez announced the approaching California Senate vote on Senate Bill 1550, “Corporations: Climate Risk Disclosure,” introduced by Sen. Florez. According to the press release,
Efforts to get the Securities and Exchange Commission to establish a set of guidelines institutional investors can use to evaluate the environmental policies of companies they put money into have been unsuccessful. Through this measure, California is now looking to lead the nation in encouraging more environmentally responsible investments.
According to a statement released on May 22, 2008 by Ceres, a coalition of investors, environmental groups and other public interest organizations, S.B. 1550 "was approved on the floor of the California State Senate today and now moves to the California Assembly for consideration."
