November 05, 2008
Institutional Investors Call on SEC to Require Climate Change Disclosure
by Robert Kropp
Fourteen large institutional investors join in request for improved ESG reporting as goal of SEC's
21st Century Disclosure Initiative.
In response to the Security and Exchange Commission's request for public comment on its 21st Century
Disclosure Initiative , which proposes to modernize the disclosure system so that the
information is more useful and transparent to investors, the Investor Network on Climate Risk (INCR) called on the SEC to
consider environmental, social and governance (ESG) reporting as a key element of the project.
INCR, a project of Ceres, a network
of investors, environmental organizations and other public interest groups working to address
climate change and other sustainability challenges, stated in its letter to the SEC, "reporting on climate risks
is no longer a mere virtue, but a legal obligation and a necessity for investors."
letter, INCR acknowledged the "need for a deeper engagement with the SEC in order to improve the
SECís disclosure system to meet the needs of investors for improved climate risk disclosure by
registrants," and found that the " 21st Century Disclosure Initiative provides an ideal venue for
such an engagement."
The lack of SEC guidance on a standardized format for climate risk
disclosure has resulted in voluntary corporate reports that often fail to address the needs of
reasonable investors for information on climate change and other ESG risks, the letter asserted.
Noting that many countries now require standardized reporting of corporate environmental,
social, governance (ESG) data, INCR advocated a disclosure system that will keep US investors as
well informed as investors in other markets, and called on the SEC to "integrate reporting of
material ESG risks into its new disclosure system."
In addition to asking the SEC to
require improved disclosure of climate risk information, the letter recommended that the SEC
appoint an investment professional as a member of the Federal Advisory Committee to ensure that
investor views on climate risks are represented.
Signatories of the INCR letter included
fourteen of the nation's largest institutional investors.