March 14, 2011

A Year After SEC Guidance, Investors Expect Better Climate-related Disclosure

Posted on March 14, 2011 by Christopher Davis

Last year, the U.S. Securities and Exchange Commission (“SEC”) issued interpretive guidance on climate change-related disclosure, a significant step towards focusing companies on addressing this important issue and improving the quality of the information available to investors on this subject. While this guidance caused some companies to reevaluate and improve their disclosure practices, overall disclosure of the risks and opportunities presented to companies by climate change remains inadequate.

That is the finding of Disclosing Climate Risks & Opportunities in SEC Filings: A Guide for Corporate Executives, Attorneys & Directors, a new Ceres report intended as a practical guide for companies and their advisors on how they should respond to the SEC disclosure regulations and the interpretive guidance, so that they can ensure they are disclosing all material climate-related information.

Developed with input from members of the Ceres Investor Network on Climate Risk (INCR), which includes 95 investors managing over $9 trillion in assets, the report offers the investor perspective on climate-related disclosure. It closely examines the disclosure practices of over a dozen companies across multiple sectors, highlighting some industry leaders—like electric power company AES Corp. and technology company Seimens—for disclosure that quantifies material climate issues and provides additional important details.

However, in the case of every company examined, there was room for improvement. And the report found that for many companies, disclosure was non-existent or unhelpful boilerplate. The main takeaways from the report are that companies should be doing more comprehensive analysis of climate risks and opportunities applicable to their business, compiling more consistent and quantified information, and that they should be disclosing it where investors look to find it, both in their voluntary reporting and, where material, in their annual mandatory filings.

ACOEL piece on SEC guidance available here

Disclosure report is available here

Tags: Climate

Climate | Energy

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