US public companies must disclose 'Climate Risk'

The USA's Securities and Exchange Commission has ruled that publicly-listed companies should warn investors of any serious risks that global warming might pose to their businesses. Although the agency has long required companies to reveal possible financial or legal impacts from a variety of environmental challenges, it has never specifically cited climate change as bringing potentially significant business risks or rewards.

John Broder in the New YorkTimes reported that the SEC, on a party-line 3-2 vote, issued “interpretive guidance” to help companies decide when and whether to disclose matters related to climate change. The commission said that companies could be helped or hurt by climate-related lawsuits, business opportunities or legislation and should promptly disclose such potential impacts. Banks or insurance companies that invest in coastal property that could be affected by storms or rising seas, for example, should disclose such risks, the agency said.

SEC chairwoman, Mary L. Schapiro, who was appointed by President Obama, said that the commission was not creating new legal requirements for companies, nor did it intend to endorse any particular scientific or policy view of global warming. She said that including climate risks among other disclosures was a logical step.

“It is neither surprising nor especially remarkable for us to conclude that of course a company must consider whether potential legislation — whether that legislation concerns climate change or new licensing requirements — is likely to occur,” Ms. Schapiro said. “Similarly, a company must disclose the significant risks that it faces, whether those risks are due to increased competition or severe weather. These principles of materiality form the bedrock of our disclosure framework.”

According to an SEC staff paper, the new guidance urges companies to consider, for example, whether any new law or international treaty limiting carbon dioxide emissions might increase operating costs and prompt a disclosure requirement.

Ms. Schapiro and the commission staff were careful to avoid expressing an opinion on the issue of global warming itself. Ms Schapiro emphasized that “we are not opining on whether the world’s climate is changing; at what pace it might be changing; or due to what causes. Nothing that the commission does today should be construed as weighing in on those topics.”