Inadequate Action by Securities & Exchange Commission on Climate Change, Report Says

Corporate disclosure of climate risks and opportunities lags despite 2010 requirement
Feb 6, 2014 11:00 AM ET

BOSTON, Feb. 6, 2014 /3BL Media/ – The U.S. Securities and Exchange Commission (SEC) has not adequately addressed the climate disclosure deficiencies of publicly traded corporations, despite four-year-old formal guidance requiring companies to disclose material climate change risks, according to a report published by Ceres today. 

The report, Cool Response: The SEC and Climate Change Reporting, is based on a survey of more than 40,000 SEC comment letters sent to companies in the last four years and an analysis of the state of S&P 500 company reporting on climate disclosure through the end of 2013.  It found that the majority of financial reporting on climate change is too brief and largely superficial, and that most companies are failing to meet SEC requirements.

“Investors want greater transparency on the business risks of climate change as a means to protect and increase shareholder value,” said Ceres President Mindy Lubber. “Yet the SEC is not adequately enforcing its own requirements.”

The SEC requires material climate change disclosure related to domestic and international regulatory risks; indirect effects of regulation or business trends; and physical risks, and evaluates companies’ filings to ensure compliance.  Where a filing is not in compliance, the SEC discusses the issue in a comment letter sent to the company.  Despite the low quality of corporate reporting on climate risk, however, the SEC sent climate-related comment letters to just three companies in 2012 and did not send any such letters in 2013. Following the issuance of the guidelines in 2010-2011, however, 49 comment letters were sent by the SEC.

“The fact that the SEC is slipping backward rather than driving progress on climate risk disclosure is troubling, especially since a large number of companies failed to say anything at all about climate change in their annual filings last year,” said Maryland State Treasurer Nancy Kopp.  “Climate risks and opportunities are greater than ever before, yet it seems the Commission is paying less attention than when formal guidance was issued. It is my hope that the Commission will once again demonstrate leadership on this critical issue.”

Over 100 institutional investors around the world representing $7.6 trillion in assets formally supported the SEC’s issuance of guidance on climate risk disclosure in 2010, seeking to understand the material risks and opportunities for companies in various sectors.   The report calls on the SEC to prioritize the disclosure of material climate risks, focusing on companies in the most at-risk sectors and on recent regulatory developments.

“We need robust reporting from companies about the investment risks posed by climate change, whether due to physical impacts or regulations that affect the market,” said Anne Stausboll, Chief Executive Officer of the California Public Employees’ Retirement System and co-chair of the Ceres Board of Directors.  “The Commission’s enforcement of its climate disclosure guidance will help investors make smarter decisions, and will help companies understand and mitigate the risks climate change poses to their long-term competitiveness.”

The report also calls on the SEC to:

  • Issue more comment letters to companies with inadequate disclosure of material climate risks. 
  • Focus on the adequacy of disclosures concerning recent, major regulatory developments.
  • Create a federal interagency task force focused on the business risks of climate change, and an SEC task force to focus on reviewing climate change disclosures.

Download the report

Download the fact sheet

About Ceres

Ceres is a nonprofit organization mobilizing business and investor leadership on climate change, water scarcity and other sustainability challenges. Ceres directs the Investor Network on Climate Risk (INCR), a network of over 100 institutional investors with collective assets totaling more than $12 trillion. Ceres also directs Business for Innovative Climate & Energy Policy (BICEP), an advocacy coalition of nearly 30 businesses committed to working with policy makers to pass meaningful energy and climate legislation. For more information, visit or follow on Twitter @CeresNews.