A White House climate official is scheduled to speak Monday about a new plan to disclose the financial risk associated with climate change, following work with a Group of 20 task force.
Ali Zaidi, associate director for natural resources, energy and science at the Office of Management and Budget, is scheduled to speak at the Atlantic Council following a meeting of the G-20 Task Force on Climate-Related Financial Disclosure. The task force is planning to recommend voluntary measures for companies to disclose climate-related financial risk to consumers and investors.
Joining Zaidi will be Mary Schapiro, the former chairwoman of the Securities and Exchange Commission. They are set to discuss the Obama administration’s use of regulations to make disclosure of financial risk more prevalent and how talking about the risks of climate change could affect companies’ financial situations.
The task force was set up by the Group of 20 developed countries to explore how to get the world’s companies to better take into account climate change in pricing and evaluating risk. It last met in London this month.
The issue is receiving more attention as New York Attorney General Eric Schneiderman investigates whether Exxon Mobil defrauded its investors based on what it knew about climate change and when. Reports have indicated, and Exxon Mobil has denied, the company knew as early as the 1970s that climate change would impact its business due to the burning of fossil fuels but did not tell investors about that information.
Schneiderman also is investigating why Exxon Mobil kept the value of its oil and natural gas reserves steady as energy prices plunged and more concerns about climate change were raised.
The SEC is required to collect information from companies about how climate change affects their finances and assets, but rarely enforces that provision, according to the International Institute for Sustainable Development. The commission requires companies to file the information in their regular filings.
However, the agency has rarely gone after companies for providing lax information. According to the New York Times, the commission sent 49 letters to companies chastising them for not including enough information in their filings in 2010 and 2011. However, in the next two years, the commission sent three such letters.
Robert Repetto, a senior fellow at the institute, argued this year that the SEC needs to ramp up its enforcement of that power because vulnerable assets, such as fossil fuel reserves, could end up costing investors. Many company officials don’t believe disclosing those assets is necessary because it’s traditionally considered a voluntary maneuver, he wrote.
“Climate issues were previously regarded, if at all, in the context of firms’ corporate social responsibility reporting,” Repetto wrote. “Firms were called upon to report on their fossil fuel use or carbon emissions, along with other indicators of environmental performance and management.”
The G-20’s task force plays an important role in convincing companies to increase their transparency, he wrote. It’s important for investors to know that fossil fuel companies with large reserves may be less valuable than previously thought because those companies won’t be able to use those reserves if climate change is to be combatted, Repetto argued.
Many scientists blame the burning of fossil fuels for causing climate change and the subsequent warming of the globe.
Repetto said requiring more disclosure of risk caused by climate change should be a no-brainer for Wall Street and Washington.
“This is an issue on which Wall Street and Main Street can unite. Adequate financial disclosure would not only protect investors and help allocate capital efficiently, but would also put pressure corporations to manage their exposure to climate risks more prudently,” he wrote.
