State Treasurer Beth Pearce Urges SEC to Enhance Climate Risk Reporting Requirements

21 July 2016

MONTPELIER, Vt.— Vermont State Treasurer Beth Pearce today called on the Securities and Exchange Commission (SEC) to take additional steps to ensure publicly traded companies and corporations properly disclose climate change risk.

In a letter (see attached) to SEC Chair Mary Jo White and SEC Corporation Finance Division Director Keith Higgins, Treasurer Pearce encouraged the SEC to create standards to assist investors in making informed investment decisions.

“Climate change is real and could impact the profitability of certain companies,” said Treasurer Pearce. “As a fiduciary overseeing the State’s investments, I encourage the SEC to create a publicly accessible database of climate change disclosures. More transparency

will allow companies and investors to work together to better assess climate and carbon risk, and assist the SEC in its mission to create marketplace fairness.”

The letter builds on previous efforts to improve the SEC’s environmental disclosure requirements. In 2007, Vermont partnered with a group of investors representing $1.2 trillion of managed assets to petition the SEC to request certain climate-related information be included in corporate disclosures. The SEC responded in 2010 by issuing updated guidelines that direct companies and corporations to disclose climate change risk in SEC filings.

An analysis by Ceres, a nonprofit organization focused on mobilizing business and investor leadership on climate change, found that the 2010 SEC guidance led to a modest increase in the number of companies disclosing their exposure to climate change risk. To ensure more companies and corporations are compliant with environmental disclosure requirements, Treasurer Pearce’s July 20 letter made several recommendations to enhance the SEC’s efforts:

1) Create an interagency workgroup to review climate risks to businesses;

2) Create an SEC taskforce to review climate change disclosures, as per 2010 guidance;

3) Review best practices for sustainability and climate-related reporting;

4) Evaluate how risk and sustainability factors should be accounted for and disclosed;

5) Better account for carbon costs in baseline reserve analyses; and

6) Increase enforcement and outreach to companies that inadequately disclosure risk.

“I appreciate the SEC’s ongoing efforts to increase transparency. In that spirit, we ask for updated guidance so shareholders, like Vermont, have a clear understanding of how climate change risk could impact our investments. We hope the Commission will consider these recommendations to enhance transparency and accountability,” Treasurer Pearce concluded.

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