In Unprecedented Response, Investors Call on SEC to Improve Reporting of Climate Risks and Other Sustainability Challenges

In response to a formal review of the Securities and Exchange Commission’s corporate disclosure requirements, dozens of institutional investors have submitted letters to the federal agency requesting quick action to require stronger reporting of sustainability risks such as climate change, water scarcity and global deforestation.

“Based on our experience with these issues, we believe it is critical for the SEC to improve reporting of material sustainability risks in issuers’ SEC filings, both because such disclosure is mandated by current law and because we need it to make informed investment and proxy voting decisions,” wrote 45 investors representing $1.1 trillion in assets under management, including the nation’s largest public pension fund, CalPERS, in a letter submitted Wednesday that was coordinated by the nonprofit group Ceres.

“We look to the SEC to require the corporate reporting investors need to both assess risk and opportunity brought by climate change,” said Anne Simpson, Investment Director, Global Governance at the California Public Employees’ Retirement System (CalPERS), the nation’s largest public pension fund with about $300 billion in assets under management.  “Voluntary disclosure is swiss cheese – appetizing and full of holes.  Investors need robust, mandatory reporting to capture climate change risks across their portfolios.”

The letter specifically references climate change as posing material risks “which we believe are becoming increasingly significant to companies in multiple sectors.”  It said that the “business plans of many oil and gas, electric power and coal companies appear to pose material financial risks to investors because they are based on forecasts for increasing demand that fail to take into account the accelerating transition to a low carbon global economy.”

The letters were in response to the SEC’s request for public comments on a wide range of disclosure topics, through a process known as the Concept Release.  The SEC occasionally publishes such releases “to solicit the public's views on securities issues so that [they] can better evaluate the need for future rulemaking.”

It is the first time the SEC has asked for investor input on reporting of critical sustainability and climate risk issues facing companies and investors.  The public comment period ends Thursday, July 21.

Among the other investors submitting their own letters to the SEC were BlackRock and the New York State Comptroller.

“SEC Chair Mary Jo White’s recent statements that sustainability disclosure ‘has our attention’ are a real shift in the SEC’s posture,” said Ceres president Mindy Lubber, whose organization has been working with investors for years to improve corporate sustainability reporting.  “The Commissioner and its staff should immediately step up efforts to enforce its existing rules to improve sustainability reporting.”

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