Effort to Get Companies to Disclose Climate Risk

NY Times
September 18, 2007

http://www.nytimes.com/2007/09/18/business/18disclose.html?_r=1&partner=rssnyt&emc=rss&oref=slogin

By FELICITY BARRINGER

Two environmental groups and the financial officers of 10 states and New York City are asking the Securities and Exchange Commission to require companies to disclose the risks that climate change may pose to their bottom lines. The petition is expected to reach the S.E.C. today, representatives of the groups said.

The action by Ceres, a coalition of environmental activists and investors, along with Environmental Defense and investors managing $1.5 trillion in assets is the second in recent days to focus attention on the potential impact on Wall Street of climate change.

On Friday, Attorney General Andrew M. Cuomo of New York started an investigation of five energy companies to determine if they had adequately disclosed any financial risk they might face from their ownership stake or operations of coal-fired power plants. Scientists believe that carbon dioxide, the main emission from these plants, is a leading cause of recent global warming.

Mindy S. Lubber, president of Ceres, said in an interview, “We need this because right now more than half of the S.& P. 500 are not disclosing their climate risk, which we would consider a material risk in this day and age.”

A fact sheet prepared by Ceres and Environmental Defense said that regional, state and local initiatives to reduce greenhouse-gas emissions now apply in areas representing 58 percent of the country’s gross domestic product and 54 percent of its population.

The fact sheet also said that Allstate, one of the country’s leading insurers, “did not mention climate change, global warming greenhouse gases or carbon dioxide” in its most recent annual report.

Rich Halberg, a spokesman for Allstate, said he was puzzled by that statement. “The very first risk factor we report on Page 1 are significant losses we may face from catastrophes and severe weather,” he said. He added that the company’s social responsibility report, issued separately from the annual report, deals with climate issues.

Ceres has pushed the question of corporate financial disclosure of climate risk, usually in the context of shareholder resolutions, for about five years. This week’s escalation comes as the Democratic majorities in both houses of Congress try to fine-tune a legislative approach to energy and climate-change issues.

Joel Seligman, an expert on securities law who is also president of the University of Rochester, wondered whether the agency really needed to cast a wider net in its financial disclosure requirements.

But he also noted that the need to account for material environmental risks, even those that are not easily quantifiable, has long been recognized in the context of the Superfund law, which left companies potentially liable for hundreds of millions of dollars’ worth of cleanup costs for toxic contamination.

Ms. Lubber of Ceres, when asked if it was possible to quantify a risk that might arise from federal legislation that remains unapproved, echoed that point: “You don’t have to put an exact number on it. If federal regulation puts a cap on carbon, it means businesses will have to change their technology, maybe buy new equipment. It needs to be noted.”

Aside from Ceres and Environmental Defense, the petition was joined by Mr. Cuomo and the comptrollers of New York State and New York City; the California state comptroller and the huge California state government and teachers’ pension funds; and Florida’s chief financial officer.

Others involved included financial officials from North Carolina, Oregon, Vermont, Rhode Island and Maine, and the New Jersey State Investment Council.