SEC Stops Prodding Companies to Detail Climate Change Impacts

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By Alexandra Semenova

Investors are pressing for more specific information on how climate issues affect corporate operations, a concern that’s heightened since the SEC has stopped prodding companies on climate-related disclosures.

The Securities and Exchange Commission last issued a climate change-related public comment letter in September 2016, when it asked Chevron Corp. to expand its risk factor disclosure related to California’s greenhouse gas emission regulations. Typically, the SEC issues such letters to companies with suggestions on how they can fill in gaps. But the agency has been silent during this administration.

European countries have been more aggressive about forcing companies to disclose the physical and economic impacts of climate change and weather disruptions on their operations, according to Emilie Mazzacurati, founder and CEO of Four Twenty Seven, a market intelligence and advisory firm that specializes in assessing climate change risks.

“U.S. regulators are losing relevance in a way because they’re so behind the curve,” Mazzacurati said. “The rest of the world is moving forward.”

The U.K. signaled this year that it intends to force companies to disclose climate change-related risks, three years after Bank of England Governor Mark Carney established a task force that issued voluntary reporting guidelines.

Vague Language

U.S. companies have largely stuck to vague language in disclosing the impact of climate change and haven’t faced any pressure from the SEC to be more specific.

“Climate change should be looked at like any of the present or potential financial risks, like currency or inflation,” said Mindy Lubber, president of the nonprofit sustainability group Ceres. “There’s a lot of boilerplate language that is general and useless to investors looking for the information.”

In all, the Obama-era SEC issued 44 climate change-related comment letters, starting at a high of 20 in 2010 to a low of three in 2016. The SEC under Chairman Jay Clayton hasn’t issued any.

The SEC didn’t respond to multiple requests for comment.

Obama’s SEC also issued guidance on climate change disclosure in 2010 in response to an investor petition led by two environmental advocacy groups, including Ceres, as well as the financial officers of 10 states and New York City. The guidance directed companies to report how regulations around climate change affect their operations. Advocates said the guidance lacks specificity and focuses on regulatory risks rather than the overall potential risks of climate change.

Before he became SEC chairman, Clayton urged clients at Sullivan & Cromwell in multiple memos to make more climate change disclosures. He pointed to the 2010 guidance, suggesting companies provide descriptions “where detailed discussion of impacts of climate change would be appropriate.” Clayton also emphasized the legal scrutiny faced by companies such as Exxon Mobil Corp. and Peabody Energy when they failed to do so.

Bottom Line?

Climate change and increasing volatility of weather appeared in the top 10 global business risks for the first time this year, the financial services firm Allianz reported in its 2018 Risk Barometer. The survey identified corporate perils based on responses from almost 2,000 risk experts across more than 50 countries. This is the eighth report Allianz has issued.

Natural catastrophe ranked third among global risks. Climate change ranked 10th globally and ninth among U.S. risks.

Still, some companies don’t explain to investors how weather events associated with climate change could hurt their assets even though they may state that regulations around climate change or greenhouse gas emissions may affect their business.

Investors want more information about what companies have done to understand the risks that both climate regulations and weather events pose to their businesses and whether they are equipped to mitigate them, Mazzacurati said.

“What experts are calling for is much more precise disclosures on how many of a company’s assets are exposed to such hazards and what the implications are on revenue and capital,” Mazzacurati told Bloomberg Law. “Have they thought about changes in the market and customer preferences in changing environments?”

Companies may be reticent about listing climate as a risk because it can be difficult to draw the connection between weather catastrophes and climate change or global warming. “It’s a very nuanced science,” she said.


Some experts have said companies don’t want to list climate as a corporate risk prematurely, without the right data to link losses to climate, especially when they have other risks to mitigate, such as cybersecurity.

“Disclosures that are potentially made associated with climate change are uncertain and speculative when compared to other disclosures made by publicly traded companies,” said Stuart Kaplow, a real estate and environmental law attorney focused on green building and sustainability.

“The quality of data and the absence of data is one of the challenges,” Francis Condon, a senior sustainable investment research analyst at UBS Asset Management, told Bloomberg Law. “Whatever we have now, the scale of risks is expected to increase going forward.”

There may be other risks. For beverage makers, that includes water-related risks. Two states in India banned PepsiCo and Coca-Cola last year after retailers boycotted their products to protest the companies’ straining of water resources.

Pepsi updated the language in its SEC filings to include water risk after a 2015 protest by farmers in India opposing the use of Thamirabarani River water for the creation of the company’s soft drinks. It added “water scarcity” to its climate disclosure in addition to the language of prior years, when it listed “climate change, or legal, regulatory or market measures to address climate change,” as corporate risks.

Exxon Mobil also made new disclosures after a majority of its shareholders, including the conservative Vanguard mutual fund, voted in 2017 for the company to publicly state how climate change could affect its long-term business and bottom line.

The energy giant responded by publishing a report in February stating climate change regulations may decrease the demand for oil in the future. “The challenge of meeting global energy needs and managing the risks of climate change is real — and daunting,” the company wrote in the report.

— With assistance from Andrea Vittorio.

To contact the reporter on this story: Alexandra Semenova at

To contact the editor responsible for this story: Fawn Johnson at

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