Investors Push SEC to Require Stronger Climate Risk Disclosure by Fossil Fuel Companies

Apr 17, 2015 10:00 AM ET

BOSTON, April 17, 2015 /3BL Media/ – Just one day after BP adopted a shareholder resolution to support better carbon asset risk disclosures following disappointing global oil demand and low oil prices, 62 institutional investors representing nearly $2 trillion in assets called on the Securities and Exchange Commission to push for better disclosure by oil and gas companies of critical climate change-related business risks that will “profoundly affect the economics of the industry.”

In a detailed seven-page letter to the SEC, organized by the nonprofit sustainability advocacy group Ceres, investors noted that the current low price environment is effectively providing a stress test for the fossil fuel sector of the risks it is likely to face due to climate change, citing a number of material risks facing oil and gas companies – including expanding carbon-reducing regulations, growth of renewable energy and weakening oil demand – that are not sufficiently disclosed in their financial filings. These risks are commonly referred to as “carbon asset risks.”

Given these climate-related trends, investors are especially concerned about the industry’s excessive capital spending on high-cost, carbon intensive projects such as Arctic drilling, ultra deepwater drilling and Canadian oil sands projects.

“We have found an absence of disclosure in SEC filings regarding these material risks, which constitute ‘known trends’ under SEC rules,” the investors wrote to SEC Chair Mary Jo White. “The risk of reduced demand for oil, uneconomic projects and stranded assets… is material to the companies and their investors, as it directly affects the profitability and valuation of the companies.”

The letter, which outlines specific shortcomings in annual financial filings by ExxonMobil, Chevron and Canadian Natural Resources, asks the SEC staff to “closely scrutinize” reporting on carbon asset risks by oil and gas companies and address the problem in “comment letters” to issuers.

Investors’ efforts to engage oil and gas companies have escalated over the past year, as concerns have deepened about strategic planning and risk management in the industry.

“Long-term investors need assurance through adequate disclosure that current business strategies of oil and gas companies reflect the changing nature of demand, emerging technologies and policy interventions which have and will continue to impact the sector,” said Bill McGrew, portfolio manager for the California Public Employees' Retirement System (CalPERS), the largest public pension fund in the country, speaking at BP’s Annual General Meeting yesterday in London. “Business decisions being made now will determine the future sustainability and profitability of the sector, and we look to the boards and management of major oil and gas companies to make these decisions in the long term interests of investors.”

“By failing to hold the fossil fuel industry to the same disclosure standards as other industries, the SEC is allowing the sector to hide its true level of risk and impeding investment capital from flowing to the low-carbon projects we desperately need,” said Mindy Lubber, president of Ceres. “This is unfortunate in a world where an additional trillion dollars per year – a Clean Trillion – is needed in order to curb carbon pollution to prevent the worst impacts of climate change.”

Signatories to the letter include major global investors in the United States and Europe, including public pension funds and state treasurers, foundations, asset management firms and religious groups, such as: CalPERS, the Connecticut Office of the State Treasurer, Legal & General Investment Management, Calvert Investments, the Presbyterian Church (USA) and the Rockefeller Brothers Fund.

Most of the investors signing onto the letter are participating in the Carbon Asset Risk Initiative, through which 75 investors managing more than $4 trillion in assets have called on 45 of the world’s largest fossil fuel companies to assess and disclose how their business plans fare in a world turned upside down by unchecked climate change. The CAR initiative is coordinated by Ceres and Carbon Tracker, with support from IIGCC and IGCC.

According to the letter, “obtaining more information from fossil fuel companies about their capital expenditures and related risks” is critical to investors working to integrate climate risks into their investment strategies.

“While some oil and gas companies have begun discussing carbon asset risks with shareholders, it is vitally important to expand relevant reporting in their SEC filings as well as on their company websites and in sustainability reports,” said Tim Smith, Director of ESG Shareowner Engagement at Walden Asset Management. “Investors urge leadership and more substantive disclosure across the industry." 

The offices of both the New York State and New York City Comptrollers submitted their own similar letter to the SEC today.

These efforts build upon years of work by investors to improve climate change-related reporting in financial filings.  In 2007, Ceres and the Environmental Defense Fund spearheaded a petition, endorsed by investors managing a collective $1.5 trillion, to persuade the SEC to require publicly traded companies to disclose climate-related risks in their 10-K filings.  The SEC issued interpretive guidance for such disclosure in 2010.

For more about the Carbon Asset Risk Initiative, visit

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 institutional investors with collective assets totaling more than $13 trillion. Ceres also directs Business for Innovative Climate & Energy Policy (BICEP), an advocacy coalition of dozens of companies committed to working with policymakers to pass meaningful energy and climate legislation. For more information, visit or follow on Twitter @CeresNews.