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July 11, 2003
Members of Congress Consider Social and Environmental Disclosure in SEC Filings
    by William Baue

A group of Senators and Representatives summoned a symposium on the need for social and environmental disclosure by companies in their SEC filings.

Yesterday at the U.S. Capitol, Senator Jon Corzine (D-NJ) convened a Congressional symposium to consider the current state of public company disclosure of environmental and social risks in Securities and Exchange Commission (SEC) filings. Symposium co-sponsors specifically placed the event in the context of the broad corporate and securities reforms currently underway in response to recent notorious accounting scandals.

"The socially responsible investment (SRI) community has long believed that superior corporate social and environmental performance is good not only for sustainability, but for long-term shareholder value," said Michelle Chan-Fishel. She moderated part of the symposium in her capacity as chair of the Corporate
Sunshine Working Group
, which helped organize the event. The Corporate Sunshine Working Group is an alliance of investors, environmental organizations, unions, and public interest groups working to enforce and expand SEC corporate social and environmental disclosure requirements.

Ms. Chan-Fishel, who also coordinates the green investments program for Friends of the Earth (FoE), wrote a 2002 report that found only 15 percent of U.S. companies from carbon-intensive sectors discussed climate change risks in their 2001 SEC filings. Another report, issued just this week by the Coalition for Environmentally Responsible Economies (CERES) and written by the Investor Responsibility Research Center, drew similar conclusions.

"All the symposium co-sponsors and speakers have the same belief: that corporate social responsibility (CSR) issues are material--and if they are material, they should be disclosed," she told

Co-sponsors of the event included Senators James Jeffords (I-VT), Joe Lieberman (D-CT) and John McCain (R-AZ), as well as Representatives Lloyd Doggett, Henry Waxman (D-CA), and Barbara Lee (D-CA), among others. Speakers included Commissioner Harvey Goldschmid of the SEC, Doug Cogan, IRRC's deputy director of social issues and author of the CERES report, and Treasurer Denise Nappier of the state of Connecticut.

"In my view, we cannot let the legacy of Enron be limited to reforms in financial accounting, disclosure, and conflicts of interest," said Treasurer Nappier, who is the principal fiduciary of Connecticut's $18 billion public pension fund. "Half a loaf of reform is not enough."

"Corporate transparency, accountability and an honest assessment of risk and liabilities on social and environmental issues will reveal the off-balance sheet liabilities that could threaten to undermine shareholder value--just as surely as accounting manipulation and the absence of disclosure undermined Enron shareholders, the workers, the community, as well as the integrity of our financial markets."

After Treasurer Nappier's statement, Peter Lehner, assistant attorney general-in-charge of the environmental protection bureau of the office of New York State Attorney General Eliot Spitzer, spoke. He invoked the oft-cited 1998 Environmental Protection Agency (EPA) report that found 74 percent of companies underdisclosed their material environmental liabilities.

"In other words, even with relatively well-known risks, such as the cost of cleaning up a Superfund site or the cost of complying with existing clean air or clean water rules, most companies did not disclose in a manner that EPA believed compliant with the Securities and Exchange Commission and accounting requirements," said Mr. Lehner.

The symposium ended with proposals for better social and environmental disclosure. Speakers included Thomas Palley of George Soros' Open Society Institute, Jill Ratner, president of the Rose Foundation for Communities and the Environment, and William Patterson, director of the AFL-CIO's office of investment. The Corporate Sunshine Working Group posted its own proposals on its website.

In her statement earlier in the event, Treasurer Nappier called for the SEC to create a Blue Ribbon Task Force to formally review and recommend changes to its existing disclosure rules and enforcement policies related to social and environmental issues. She specifically suggested that the task force consider how to revise existing rules to address climate change, and how to convert the standardized social and environmental protocols of the Global Reporting Initiative (GRI) into financial reporting mechanisms.

Commissioner Goldschmid expressed "keen interest" in reading the transcript, which the Corporate Sunshine Working Group will post on its website next week, and so "with his leadership, the SEC may take some action," according to Ms. Chan-Fishel.

"One thing Commissioner Goldschmid said was that the Supreme Court's definition of materiality--what a reasonable investor would need to know about a company to making financial or voting decisions--won't change," Ms. Chan-Fishel reported. "But what reasonable investors and the public at large finds important over time does change-so issues like global warming, genetic engineering, human rights, etc...can be included in the purview of what's 'material.'"


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