First report by Bloomberg, a recent CERES report indicates that the Securities and Exchange Commission has failed to make climate risk reporting a priority to S&P 500 companies.
“Investors want greater transparency on the business risks of climate change as a means to protect and increase shareholder value,” Ceres President Mindy Lubber said in a statement. “Yet the SEC is not adequately enforcing its own requirements.”
The report indicates that while overall quantity of climate disclosure reporting has increased since 2010, the overall quality has actually fallen from 4.94 to 4.65 (out of 100). It also points to the SEC’s failure to address climate disclosure assessments, with a sharp decrease in comment letter sent out in 2012 and 2013.
For those less familiar CERES is an advocate for sustainability leadership. Ceres mobilizes a powerful network of investors, companies and public interest groups to accelerate and expand the adoption of sustainable business practices and solutions to build a healthy global economy (direct from their website).
I reviewed their insurer climate disclosure survey in 2012 for consulting purposes. In my opinion it did address real climate risk issues that could be impacted and affect investor performance. For example disclosing risk assessment practices, establishment of risk strategy and response plans, informing/encouraging insured, etc.
However, the survey also included questions regarding limiting emissions during operations, while an admirable and environmentally sound practice, seems to overstep the purpose of the questionnaire (and doesn’t match the other questions).
The overall goal and purpose of the survey was to place climate change in a brighter light of focus for insurers. But many still struggle to know what areas will truly be affected (maybe they focus on #7 and #8 as a start?)
Operators in Connecticut and Minnesota will now be required to complete the disclosure survey going forward, joining California, Washington, and New York, and the premium threshold has dropped from $300M to $100M, easily doubling the number of required responders in these five states.
It also creates/enhances the necessity for insurance companies to have a go-to resource for climate strategy and planning going forward, operating as part of their risk management committee while also reaching investments, customer support, underwriting, and sales.