The New York’s Securities and Exchange Commission (SEC) is considering recommendations for all publicly traded companies to include the physical impacts of climate change – as well as the economic impacts of domestic and international greenhouse gas emissions-reduction rules – when disclosing risks to investors.
The interpretive guidance, approved by a 3-2 vote at SEC’s Washington headquarters, does not create new legal requirements for companies, yet. Rather, it will ensure consistent disclosure of bottom-line risks to shareholders, SEC Chairwoman Mary Schapiro said.
“It is neither surprising nor especially remarkable for us to conclude that of course a company must consider whether potential legislation — whether that legislation concerns climate change or new licensing requirements — is likely to occur,” Schapiro said. “If so, then under our traditional framework, the company must then evaluate the impact it would have on … liquidity, capital resources or results of operations and disclose to shareholders when that potential impact will be material.”
Similarly, a company must disclose the opportunities and risks it faces from severe weather, rising sea levels and changing demand for products based on their carbon footprint.
Such informations would then be posted on the SEC Web site and published in the Federal Register. They would also be used by the agency’s Division of Corporation Finance when reviewing company filings.
The progressive investor coalition Ceres, which has petitioned SEC to issue climate disclosure guidance several times in recent years, applauded today’s vote.
“With this guidance, investors can make more sound decisions based on better information — and businesses will have a level playing field with clear standards and expectations for disclosure,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, a group of 80 institutional investors with $8 trillion in collective assets.
Other voices came up to express discontent and disagreement about the SEC’s decision, though. Commissioner Kathleen Casey, one of two Republicans on the panel who voted against issuing the climate guidance, called it a misuse of agency resources.
“I can only conclude that the purpose of this release is to place the imprimatur of the commission on the agenda of the social and environmental policy lobby, an agenda that falls outside of our expertise,” Casey said.
The agency’s authority to issue such guidance has been disputed by House Energy and Commerce Committee ranking member Joe Barton (R-Texas) and fellow committee Republican Greg Walden of Oregon in a letter they wrote to Schapiro. The lawmakers asked how many environmental scientists SEC employs and whether the agency was shifting its oversight from investment matters to corporate participation in global warming abatement.
“We would be troubled by an undertaking which seems so transparently political and such a breathtaking waste of the commission’s resources,” the lawmakers added.
Cautioned by the questioning, Schapiro appeared mindful of such criticisms and tried to make it clear the guidance should not be interpreted as an agency statement regarding the facts of climate change.
“We are not opining on whether the world’s climate is changing, at what pace it might be changing, or due to what causes,” Schapiro added.