In response to a formal review of the Securities and Exchange Commission’s corporate disclosure requirements, dozens of institutional investors have submitted letters to the federal agency requesting quick action to require stronger reporting of sustainability risks such as climate change, water scarcity and global deforestation.
“Based on our experience with these issues, we believe it is critical for the SEC to improve reporting of material sustainability risks in issuers’ SEC filings, both because such disclosure is mandated by current law and because we need it to make informed investment and proxy voting decisions,” wrote 45 investors representing $1.1 trillion in assets under management, including the nation’s largest public pension fund, CalPERS, in a letter submitted today that was coordinated by the nonprofit group Ceres.
“We look to the SEC to require the corporate reporting investors need to both assess risk and opportunity brought by climate change,” said Anne Simpson, Investment Director, Global Governance at the California Public Employees’ Retirement System (CalPERS), the nation’s largest public pension fund with about $300 billion in assets under management. “Voluntary disclosure is swiss cheese – appetizing and full of holes. Investors need robust, mandatory reporting to capture climate change risks across their portfolios.”
The letter specifically references climate change as posing material risks “which we believe are becoming increasingly significant to companies in multiple sectors.” It said that the “business plans of many oil and gas, electric power and coal companies appear to pose material financial risks to investors because they are based on forecasts for increasing demand that fail to take into account the accelerating transition to a low carbon global economy.”
The letters were in response to the SEC’s request for public comments on a wide range of disclosure topics, through a process known as the Concept Release. The SEC occasionally publishes such releases “to solicit the public’s views on securities issues so that [they] can better evaluate the need for future rulemaking.”
It is the first time the SEC has asked for investor input on reporting of critical sustainability and climate risk issues facing companies and investors. The public comment period ends tomorrow July 21.
Among the other investors submitting their own letters to the SEC were BlackRock and the New York State Comptroller.
“SEC Chair Mary Jo White’s recent statements that sustainability disclosure ‘has our attention’ are a real shift in the SEC’s posture,” said Ceres president Mindy Lubber, whose organization has been working with investors for years to improve corporate sustainability reporting. “The Commissioner and its staff should immediately step up efforts to enforce its existing rules to improve sustainability reporting.”
“Investors have a responsibility to management retirement savings for their beneficiaries,” said Nancy K. Kopp, Maryland State Treasurer and Chair of the Maryland State Retirement and Pension System. “Robust SEC disclosure of climate and material sustainability risks is needed for us to avoid hidden risks in our portfolios.”
The letters come as the SEC’s climate disclosure efforts, in particular, have come under close scrutiny from global investors and national lawmakers.
In June, members of Ceres’ Investor Network on Climate Risk (INCR) wrote to the SEC requesting better enforcement of its 2010 guidance to companies on climate risk disclosure they should be providing as part of their financial filings. And earlier this month, House lawmakers passed legislation that would prohibit the SEC from enforcing the guidance altogether. The amendment filed by Congressman Bill Posey (R-FL) was included as part of the Financial Services spending bill.
Last month’s INCR letter asked for better enforcement of the 2010 Commission guidance on climate risk disclosure, and improvements in reporting of water risks in many sectors, and carbon asset risks to oil and gas, electric power and coal companies.
Ceres is a nonprofit group mobilizing many of the world’s largest companies and investors to take stronger action on climate change, water scarcity and other sustainability challenges. Ceres directs the Investor Network on Climate Risk, a network of over 120 institutional investors with collective assets totaling more than $14 trillion. Ceres also engages with 100-plus companies, many of them Fortune 500 firms, committed to sustainable business practices and the urgency for stronger climate and clean energy policies. For more information visit: www.ceres.org or follow on Twitter @CeresNews.
The full and original article can be viewed on Ceres.org
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