Some of the nation's largest investors have been calling on the Securities and Exchange Commission to require companies to disclose climate risks and other environmental, social, and governance risks. This is not new; see here, here, here, and here for other efforts to require disclosure by large investors. The strategies employed by investors keeps getting more sophisticated, and the urgency seems greater in light of the financial crisis. Note that Maryland is on the vanguard of the disclosure efforts. From a press release at Ceres:
Investors call on SEC to require better disclosure on climate change and other risks
October 23, 2008
WASHINGTON D.C. – Fourteen of the nation’s largest institutional investors called on the Securities and Exchange Commission yesterday to require improved corporate climate risk disclosure and—for the first time—address a broader range of environmental, social and governance risks, or so-called “ESG” issues, in disclosure requirements.
The letter was sent in response to the SEC’s request for public comment on its 21st Century Disclosure Initiative, File No. 4-567, which proposes to modernize the current SEC disclosure system to enhance its usefulness to investors. The 14 signatories to the letter include asset managers and leading U.S. institutional investors such as CalPERS, CalSTRS, and the Maryland, New Jersey, New York City and New York State public pension funds or treasurers. (See full list below)
Citing investors’ previous attempts to engage with the SEC on climate risk disclosure, and the growing number of businesses that are disclosing climate risks and climate change impacts on their financial performance and competitiveness, the letter lays out a need for deeper engagement with the SEC on disclosure issues. It also cites the 21st Century Disclosure Initiative as an ideal venue for such engagement. “What we seek is not radical, but rooted in the SEC’s duty to follow the most fundamental investor protection principle there is: the right to know,” said California State Treasurer Bill Lockyer. “The consensus recognizing the need for businesses to fully assess and disclose climate risks is growing by the day. It’s time for the SEC to update its regulations to account for these risks, and the broader panoply of environmental, social and governance issues.”
“Climate change, like subprime mortgages, poses far-reaching hidden financial risks that investors cannot ignore,” said Mindy S. Lubber, president of Ceres and director of 70-member Investor Network on Climate Risk. “A modernized SEC disclosure system must address investors’ strong and growing need for better corporate disclosure of climate risks.”
The investor letter also includes a first-time request for the SEC to consider how material environmental, social and corporate governance (ESG) data could be integrated into registrant’s SEC filings. While many companies disclose ESG information in their sustainability reports and on their web sites, investors say that isn’t always enough given the financial risks ESG factors can create. For example, ESG information can disclose material risks such as water-related risks from growing water scarcity, as well as labor and supply chain risks such as reduced availability of a trained workforce or a suppliers’ failure to follow environmental regulations.
“Action by the SEC to require disclosure of climate risks—as well as additional environmental, social and governance risks—would result in better, more informed decisions for investors, ” said Nancy Kopp, Maryland State Treasurer. In addition to asking the SEC to improve climate risk disclosure in SEC filings, and examine how environmental, social and governance data can be integrated into SEC filings, the letter asks the SEC to appoint an investment professional as a member of the Federal Advisory Committee to ensure that investor views on climate risks are represented.
More specifically, the investor calls on the SEC to:
- Include the goal of improving climate risk disclosure in SEC filings as part of the Federal Advisory Committee’s charter;
- Appoint an investment professional as a member of the committee in order to ensure that investor views on these issues are represented; and
- Create a subcommittee of the Advisory Committee to consider how material environmental, social and governance (ESG) data can be integrated into registrants’ SEC filings.
Signatories include:
- Anne Stausboll, Interim Chief Investment Officer, California Public Employees' Retirement System (CalPERS)
- John Chiang, California State Controller
- Jack Ehnes, CEO, California State Teachers' Retirement System
(CalSTRS)- Bill Lockyer, California State Treasurer
- Mindy S. Lubber, President, Ceres & Director, Investor Network on Climate Risk
- Karina Litvack, Director, Head of Governance & Sustainable Investment, F&C Management
- Nancy K. Kopp, Maryland State Treasurer
- Lance E. Lindblom, President and CEO, The Nathan Cummings Foundation
- Orin Kramer, Chair, New Jersey State Investment Council
- William C. Thompson, Jr., New York City Comptroller
- Thomas P. DiNapoli, New York State Comptroller
- Julie Gorte, Senior Vice President for Sustainable Investing, Pax World Management Corporation
- Frank T. Caprio, Rhode Island General Treasurer
- Jeb Spaulding, Vermont State Treasurer



