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February 25, 2011
Report Offers Guidance to Companies on Climate Change Disclosure
    by Robert Kropp

Ceres identifies areas that companies should address in their climate change reporting, and provides examples of what constitutes best practice at present.


Regulation of greenhouse gas (GHG) emissions in the United States may be "inching" toward implementation, according to a new report by Ceres, but the slow pace of progress has not stopped sustainable investors from holding companies to increasingly rigorous standards of climate change disclosure.

Ceres notes that its report appears one year after the Securities and Exchange Commission (SEC) issued guidance on disclosure of climate change risks and opportunities at publicly traded companies. In its guidance, the Commission stated, "Existing disclosure rules…may require a company to disclose the impact that business or legal developments related to climate change may have on its business."

"Disclosures now being made voluntarily, such as in corporate sustainability reports or Carbon Disclosure Project (CDP) survey responses, may also need to be made as part of mandatory SEC filings," the report states.

In addition, the report points out, the Environmental Protection Agency (EPA) has adopted "regulations for greenhouse gas emissions from motor vehicles and large sources such as power plants and factories under the Clean Air Act."

Focusing on large capitalization companies, with an emphasis on electric companies, which, it states, "tend to report more information than other companies," the report states that while climate change-related disclosures by public companies have improved in recent years, "disclosures very often fail to satisfy investors' legitimate expectations."

The report indentifies five areas that should be addressed in corporate disclosures, including regulatory risks and opportunities, physical impacts, business trends, emissions, and strategic analysis of emissions management.

The report names several companies whose reporting on the above areas it rates as good. For instance, National Grid identified the board committee and senior executives responsible for addressing climate change, as well as actions the board took on the issue.

On the other hand, while DuPont provided "investors specific information about a seemingly wide range of initiatives related to climate change, the lack of quantitative information does not allow investors to assess the company's efforts against DuPont's own benchmarks or other firms' efforts," the report found.

The report provides an 11-point checklist to help companies improve the quality of climate change-related disclosures.

"Five years ago, it was unusual for any company to mention climate change in a financial filing, and few provided much more than a boilerplate acknowledgment that regulation of greenhouse gas emissions might at some point have a material impact on the company," stated Julie Gorte, senior vice president for sustainable investing at Pax World Management. "Now, with expanded investor awareness of the financial impacts of climate change, investors are looking for more, and this report gives companies critical information on what 'more' should look like."

 

 
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