A loosely knit coalition of state leaders and environmental activists petitioned the Securities and Exchange Commission (SEC) in late 2007 for interpretive guidance on the corporate obligation to disclose material information about all aspects of climate change. The petitioners received what they asked for and a little bit more.
Total Transparency Is the Rule
Open markets must be transparent in order to operate efficiently. Corporate officers, under SEC regulations, are required to disclose material information about the management and operation of a corporation so shareholders can make rational investment decisions. In 2007 a coalition of institutional investors plus state treasurers, attorneys general, and environmental groups — including such notables as the California Public Employees’ Retirement System, Environmental Defense Fund, and New York State Attorney General Andrew Cuomo — filed a petition with the SEC to clarify what information related to the risk of climate change a corporation must divulge in SEC filings. The petition states these new findings "trigger the obligation for companies to assess and disclose material emissions data and their analysis of climate risks and opportunities."
On January 27 the SEC voted to provide the guidance that the petitioners requested, and more. The SEC occasionally provides non – legally binding guidance to companies on how to interpret the disclosure rules in the interest of consistent reporting in SEC disclosures on specific topics. In general, the SEC guidance on reporting the corporate risks of climate change should "cover a company’s risk factors, business description, legal proceedings, and management discussion and analysis." That guidance seems quite reasonable and allows a corporation to make a reasonable assessment based on its view of the risks.
SEC Chairman Mary Schapiro showed remarkable insight when issuing the guidance by removing the political gamesmanship from the process. "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," said Schapiro. "Today’s guidance will help to ensure that our disclosure rules are consistently applied."
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Double-Edged Sword
I've always appreciated your editorials; but this one confused me.
I've assume power industry CEOs that support climate change legislation do so to reduce the uncertainty that hinders their ability to make business decisions. Or they see direct business benefits like Exelon's potential wind fall from cap and trade reported by some industry analysts. Either reason would seem to benefit their stock price.
Why would they support something that would not benefit their Co.?
Lee Kupfer
Black & Veatch