Blog Post

Should the SEC Crack Down on Climate Reporting?

Climate change, and policies coming down the pike to address it, present real risk for businesses and their investors. The environmental and advocacy groups as well as institutional investors that make up Ceres want a detailed reporting of it from publicly traded companies. The best way to make that happen, according to two reports issued this week by Ceres, the Environmental Defense Fund and the Center for Energy and Environmental Security, is to have the SEC crack down on climate-related disclosure. As it stands now, Ceres said in a release yesterday, this disclosure “continues to be weak or altogether nonexistent in SEC filings of global companies with the most at stake in preparing for a low-carbon global economy.”


For one of the reports, “Climate Risk Disclosure in SEC Filings,” researchers looked at the SEC filings of 100 global companies since the first quarter of 2008 and found that 59 made no mention of their greenhouse gas emissions or their position on climate change; 52 did not disclose how they’re addressing climate change; and 28 did not discuss their climate risks — despite the filing of “hundreds of shareholder resolutions with individual companies seeking better climate risk disclosure.” According to the report:

The very best of disclosure for any of the companies could only be described as “Fair”— and only a handful of companies achieved this ranking.


These findings, combined with those detailed in a second paper on “Reclaiming Transparency in a Changing Climate” — a review of more than 6,000 filings by S&P 500 companies between 1995 and 2008 — amount to a “clarion call for quick SEC action to require better climate risk disclosure from publicly traded companies,” according to Ceres President Mindy Lubber, who also directs the group’s Investor Network on Climate Risk.

But when it comes to electric utilities — a sector that Ceres finds has “widespread but minimal” disclosure, as well as the three most transparent companies on climate risk (AES, Xcel and PG&E) — not everyone agrees on who should police businesses’ climate risk disclosure. Earlier this year, Richard Sedano of the Regulatory Assistance Project, speaking at the Ceres conference in San Francisco, called for better communication among Wall Street credit rating agencies and state-level utility regulators to promote smarter long-term investments in efficiency — without involving the SEC. The way Sedano sees it, rating agencies effectively regulate “the behavior and options of utilities” because utilities keep credit ratings top of mind when considering investments.


Graphics courtesy Ceres, EDF and CEES reports