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."
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."