SEC Mandates Disclosure for Climate Risks

While utilities that have high emissions of carbon dioxide stand to lose, SWFs and pension funds look at legislation as an opportunity to gain. 

(January 28, 2010) – Under a new Securities and Exchange Commission decision, companies will be required to disclose the effects of global warming and efforts to mitigate climate change in their financial reports to investors.

The requirement will enhance the consistency of companies’ financial reporting, said SEC chairwoman Mary L. Schapiro, according to Pensions & Investments. “I do not believe that public companies today are doing the best job they possibly can do with respect to their current mandated disclosures,” said Schapiro, who was appointed by President Obama.

Utilities that have high emissions of carbon dioxide may face increased costs from efforts to slow down the effects of climate change. Alternatively, investors looking to benefit from increased data from companies on environmental risks include The California State Teachers’ Retirement System (CalSTRS).

Other investors that may view the new climate-change disclosure standard as an opportunity are sovereign wealth funds. With two-thirds of their wealth coming from oil and gas interests, SWFs may have an intrinsic role toward achieving a clean-tech future and closing the world’s annual funding gap of around $150 billion on projects to cut carbon dioxide emissions, Reuters reported.

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The SEC requirement was approved by a 3-2 commissioner vote along party lines — all three Democrats voted for it and two Republicans, Kathleen Casey and Troy Paredes, rejected the proposal, asserting that scientific claims that man-made emissions lead to climate change are “unsettled,” according to Bloomberg. They said the legislation could bury investors with unnecessary information.

The SEC guidelines are provided partly in response to investors who said companies aren’t providing sufficient data on the potential business risks from environmental protection laws.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742