Investors Call for Companies to Disclose Climate Risk

| Mon Nov. 23, 2009 1:34 PM EST

What will climate change cost the US economy? To date, the political debate has been fixated almost exclusively on fears that carbon regulations will impose heavy burdens on American companies. But what about the costs that companies will incur if climate change continues unabated? Or the new opportunities that a carbon cap may create for some businesses, such as firms that make windmills or solar panels? Faced with a lack of reliable analysis of the full costs and benefits of both climate change and climate policies, a group of major investors wants the Securities and Exchange Commission to step in. On Monday, the investors wrote to the SEC asking the agency to come up with guidelines to help businesses properly account for climate-related factors that will affect their bottom lines.

The letter was signed by 20 institutional investors from the US and Canada who represent $1 trillion in assets. Signatories include the state treasurers from Oregon, North Carolina, Connecticut, Maryland and Vermont, Florida’s Chief Financial Officer, the Environmental Defense Fund, Ceres, a sustainable business coalition, and the California Public Employees’ Retirement System (CalPERS), the biggest public pension fund in the US. "CalPERS protects workers’ retirement benefits, and climate change poses both great risks and opportunities to these investments,” said CalPERS CEO Anne Stausboll in a statement. "The SEC should strengthen and enforce its current requirements so investors' decisions fully account for climate change’s financial effects."

Last month, the SEC issued new rules at the behest of Ceres and investor groups that require companies to disclose how climate regulation could affect their earnings, if investors request such information. But most companies haven't even started to assess these potential financial risks, in part because the tools for doing are still in their infancy. This latest investor request is an attempt to hurry up the process of ensuring that clmate change is factored into every company's balance sheet—and a sure sign that business leaders and investors believe some kind of climate regulation is coming, and coming soon.

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