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09/24/2013 08:40 AM     print story email story  

Most Companies Ignore SEC Climate Reporting Requirement

SustainableBusiness.com News

At least 75% of US publicly traded companies flaunt the Securities and Exchange Commission (SEC) requirement that they inform investors about climate change risks associated with their business in their annual reports. 

Only 27% of US companies even mention "climate change" or "global warming" in their most recent financial report, reports Lawrence Taylor, a retired database developer that took it upon himself to conduct the analysis.

Taylor SEC disclosure study

Companies in banking, education, recreation and personal services are the worst offenders in terms of transparency, he finds. Apple and Amazon are among the biggest companies that fail to report - the same companies that are called out year after year for their lack of transparency on climate-related issues.

Implemented in January 2010, SEC's rules - the first national mandate in the world - were hailed as an important step towards putting climate change on the same level as any financial risk to corporations. It requires full disclosure of any business impact from climate change, be it from international treaties,  state or national regulations, or from vulnerability to extreme weather events. Companies must also discuss strategies to address these impacts in annual financial filings as well as opportunities associated with moving to a greener economy. 

To see how companies are doing on this reporting, Taylor analyzed the annual reports of 3,895 companies listed on major stock exchanges. He spent 1,100 hours over five months manually searching documents on SEC's website and organizing the information into a searchable database.

"The role of this [project] is simply one more little piece of information to help people do some good on the issue of climate change," Taylor told InsideClimate News. He hopes  climate activists will use the information to encourage companies to take action.

And what about the minority of companies that do mention climate change? Most (70%) discuss it in the context of how carbon regulations would negatively affect operating costs.  

Not surprisingly, the biggest coal, natural gas and oil companies talk about climate change a lot, Taylor notes. Almost 86%mention it in their reports pointing to the costs of environmental regulations to shareholders. 

Less than a quarter mention the potential physical impacts - such as floods at oil and gas sites like we're are seeing in Colorado - on their assets or bottom line.

While 43% of utilities discuss physical threats they face from climate change, the majority (75%) warn shareholders about the financial cost of regulations.

In fact, just 12% of companies discuss the potential physical impact on their business from extreme weather or rising sea levels.

Taylor sites a variety of reasons for companies to avoid reporting on these risks: other business distractions and concerns; potential lawsuits; the possibility that companies honestly believe climate change isn't a major financial threat; or they believe propaganda put forth by climate deniers.

And where is the enforcement of this requirement by the SEC? Another reason for this widespread lack of compliance could be because the SEC has "not put much focus into implementing the guidance," notes Jim Coburn, senior manager of investor programs at Ceres.

SEC's penalty for failing to include this information is forcing the company to rewrite the report, which is rarely if ever enforced, he says.  If it does anything, the SEC may send a letter asking the company to provide more information next year.

Here is Taylor's research:

Website: https://sites.google.com/site/decisionfacts/



Reader Comments (1)

Author:
Môlsem

Date Posted:
09/24/13 06:11 PM

Well, well ... violate SEC rules and nothing happens? They need to move on these cases pronto.

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