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October 29, 2009

SEC: Traded Firms May Have to Disclose Climate Change Risks

U.S.-traded companies may have to disclose their exposure to financial risks relating to climate change and emerging policies under a new U.S. Securities Exchange Commission (SEC) staff guidance, reports Nasdaq (via Dow Jones Newswires).

The Staff Legal Guidance said it’s changing how it analyzes companies’ “no-action” requests on shareholder proposals relating to environmental, financial or health risks, according to Nasdaq.

The decision, outlined in SEC Staff Legal Bulletin No. 14E (CF), reverses an SEC rule that prevented investors from directly asking companies about the impacts of climate change and other issues on their financial bottom lines, according to Ceres, a network of investors and environmental organizations that represent around $8 trillion in assets.

Mindy Lubber, president of Ceres, said investors will now be able to inquire about the financial implications of critical issues such as climate change.

In the past, the SEC allowed companies to reject shareholder resolutions, as a “no action” request if the resolution linked environmental or social issues to the company’s evaluation of risks, according to Ceres.

The SEC guidance follows a series of investor lawsuits against emissions-intense companies demanding that they reveal the potential impact of climate policies on their operations, reports Nasdaq.

Earlier this year, several investor groups, including Ceres and the Investor Network on Climate Risk (INCR), requested the SEC to address the lack of corporate disclosure of climate change and other material environmental, social, and governance risks in securities filings.

Two recent studies, by Ceres, Environmental Defense Fund and the Center for Energy and Environmental Security (CEES), found that climate change-related disclosure was nearly nonexistent in SEC filings of global companies with the most at stake in preparing for a low-carbon global economy.

SEC Commissioner Elisse Walters also said the agency is considering new guidance requiring greater carbon disclosure in regular filings with the Commission, reports Nasdaq.

Dan Bakal, Ceres’ director of electric power programs, said in that article that although approved shareholder requests aren’t binding, they send a strong signal to the company that they need to take action on an issue.

As Congress and the Obama administration move toward federal regulation of greenhouse gas emissions, major industry sectors are likely to see their bottom lines impacted by new climate regulations, reports Nasdaq.

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