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Friday, June 12, 2009

Better Climate Risk Disclosure Needed

Two recent reports by the Environmental Defense Fund (EDF) indicated that the SEC needs to require better climate risk disclosure from companies. One of the reports, Reclaiming Transperancy characterizes itself as the “most exhaustive empirical analysis of climate disclosure conducted to date." The report consisted of a systematic analysis of almost 6,400 10K filings by S&P 500 companies from 1995 to the present. According to the report, "there is an alarming pattern of non-disclosure by corporations regarding climate risks."

Some of the key findings of the report are as follows:

  • 76.3% of annual reports filed by S&P 500 companies in 2008 failed to include any mention of climate change
  • Only 5.5% of annual reports filed by the S&P 500 in 2008 identified at least one risk posed by climate
  • Less than 10% of S&P 500 companies in the financial sector discussed climate change 10K reports filed in 2008
  • Only 3.2% of utilities sector companies failed to mention climate change in 10K reports filed in 2008
The second report, Climate Risk Disclosure evaluated climate risk disclosure by 100 global companies in five sectors: electric utilities, coal, oil and gas, transportation, and insurance. The report found that there is "very little disclosure." In fact, 59 of the companies surveyed did not mention their greenhouse gas emissions or their position on climate change, and 52 did not mention their actions to address climate change.

Although all six coal companies surveyed included some disclosure of climate risk, only one achieved a fair score in any of the three analyzed categories. Oil and gas companies did not do much better. While most of the 23 companies surveyed did provide some disclosure on climate risk, none of them achieved a fair ranking.

Transportation companies fared better. Five out of 19 transportation companies disclosed their GHG emissions, and none of them were ranked fair. Sixty-eight percent provided some disclosure in each of the analyzed categories.

The insurance companies surveyed provided the least amount of disclosure in all categories. Eighteen out of 27 companies did not mention climate change in their SEC filings. Twenty-three of the companies did not disclose their emissions or a statement on climate change, and 24 of them did not disclose their actions to address climate change.

"These findings are a clarion call for quick SEC action to require better climate risk disclosure from publicly-traded companies,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk. "Climate change is a bottom line issue and investors have a right to know which companies are best positioned for the emerging clean energy global economy."

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