{"id":3877,"date":"2015-11-24T09:10:35","date_gmt":"2015-11-24T14:10:35","guid":{"rendered":"http:\/\/blogs.law.columbia.edu\/climatechange\/?p=3877"},"modified":"2016-01-09T21:56:37","modified_gmt":"2016-01-10T02:56:37","slug":"nascent-convergence-in-corporate-climate-disclosure-requirements","status":"publish","type":"post","link":"https:\/\/blogs.law.columbia.edu\/climatechange\/2015\/11\/24\/nascent-convergence-in-corporate-climate-disclosure-requirements\/","title":{"rendered":"Nascent Convergence in Corporate Climate Disclosure Requirements?"},"content":{"rendered":"

Justin Gundlach
\nClimate Law Fellow<\/em><\/p>\n

In advance of the recent G-20 meeting in Ankara, Turkey, the G-20\u2019s Finance Ministers and Central Bank Governors asked the international Financial Stability Board<\/a> to hold a meeting \u201con the financial stability implications of climate change related issues.\u201d Following that September meeting, the FSB published a proposal<\/a> in November for \u201can industry-led disclosure task force . . . to develop voluntary, consistent climate related disclosures of the sort that would be useful to lenders, insurers, investors and other stakeholders in understanding material risks.\u201d Details of the proposal are discussed below the jump.<\/p>\n

This development is just the latest in a series. As the investment firm BlackRock put it in an October 2015 report<\/a>, \u201cYou may or may not believe man-made climate change is real or dismiss the science behind it. No matter. Climate change risk has arrived as an investment issue.\u201d Better understanding of climate change\u2014its causes, effects, trajectory, and financial implications\u2014has prompted responses on the part of corporations, NGOs, and regulators. Some corporations have begun imputing internal carbon prices<\/a>; the Carbon Disclosure Project<\/a> and Climate Disclosure Standards Board<\/a> have motivated a growing list of corporations and governments to undertake climate change-related disclosures; and, most notably, regulators now encourage\u2014with varying<\/a> degrees<\/a> of stringency<\/a> and clarity\u2014disclosure of climate change-related risks to investors and the public.<\/p>\n

As reporting requirements take shape, so too do the legal implications of failing to meet those requirements. Also discussed below the jump are investigations by the New York Attorney General since 2007 into the adequacy of climate change-related corporate disclosures. Much as the FSB\u2019s proposed task force could unify and give shape to currently inchoate climate change-related disclosure requirements, the New York AG\u2019s investigation into ExxonMobil<\/a> could highlight the consequences of efforts to dodge or game disclosure requirements in the U.S. and abroad.
\n<\/p>\n

Investigations first. In November 2009, the New York Attorney General resolved four of five investigations<\/a> by agreeing to settlements with large publicly traded energy companies \u201cconcerning [each] Company\u2019s analysis and public disclosure of the potential impacts that GHG legislation and climate change from GHG emissions might have on the Company\u2019s operations and results.\u201d[1]<\/a> The fifth investigation, which involved Peabody Energy Corporation, the nation\u2019s largest coal company, yielded a settlement<\/a> just this month. The other four involved AES Corporation<\/a>, Dominion<\/a>, Dynegy<\/a>, and Xcel Energy<\/a>. All five were conducted under the Martin Act, a New York law that, like the U.S. Securities and Exchange Act, prohibits fraudulent corporate disclosures.<\/p>\n

Notably, the initial round of settlements preceded the Securities and Exchange Commission (SEC)\u2019s February 2010 issuance of interpretive guidance<\/a> on how its requirements for corporate disclosures by publicly traded companies pertained to climate change-related risks. The SEC did not please many people with this move. While proponents of clear and firm climate change-related disclosures found it lacking, the 112th Congress debated S. 1393 and H.R. 2603\u2014a proposal to rescind the action legislatively.<\/p>\n

The 10-Ks filed by the above mentioned companies for fiscal years 2009 to 2011 reflect an evolution of sorts, followed by an equilibrium that has persisted since. For instance, whereas the AES Corporation in its FY 2010 10-K discussed Mexico\u2019s efforts to \u201creduce the alleged effects of climate change,\u201d its FY 2011 filing dropped \u201calleged\u201d from the sentence. By 2012, the companies\u2019 disclosures contained the content that has persisted since\u2014content that is by no means uniform across companies. To illustrate, Dynegy states that the risks of climate change-related regulation are greater than the physical risks of climate change itself, while Xcel Energy observes that it faces risks not only from the physical risks of climate change and related regulatory measures but also from severely adverse regional economic effects that could follow from climate change-related events.<\/p>\n

The most recent addition to this list of corporate actors investigated by the New York AG is ExxonMobil, which\u2014the LA Times<\/a> and InsideClimate News<\/a> recently revealed\u2014has spent tens of millions of dollars in a decades-long campaign to sow doubts about the reality of climate change even though it was among the first entities in the world to grasp that reality. The AG has not published the subpoena issued to ExxonMobil.<\/p>\n

The FSB\u2019s proposal<\/a> for a disclosure task force does not hint at such investigations, penalties, or even a risk of public ignominy on the part of the companies it could affect. Rather, the FSB notes that climate change has given rise several types of risk relevant to the financial sector, that nearly 400 different corporate disclosure schemes exist, but that \u201c[t]he wide range of existing schemes relating to climate or sustainability highlights the lack of consensus at this point about what effective disclosures in this area would consist of.\u201d As a remedy, the FSB proposes a voluntary process for better articulating the particulars of what companies should disclose about their exposure to climate change-related risks. The FSB also emphasizes that \u201c[t]he disclosure task force should not add to the already well-developed body of existing disclosure schemes,\u201d but should instead work toward a set of recommendations that \u201cincorporate the principle of materiality and . . . weigh the balance of costs and benefits.\u201d<\/p>\n

*\u00a0\u00a0 \u00a0*\u00a0\u00a0 \u00a0*<\/p>\n

The task force proposed by the FSB would focus on the substantive particulars of corporate disclosures related to climate change. The New York AG\u2019s recent investigations have focused on companies that have sought\u2014to varying degrees\u2014to avoid telling investors and the public about material climate change-related risks. Both push toward greater uniformity and accuracy in companies\u2019 articulation of the financial implications of climate change.<\/p>\n

 <\/p>\n

[1]<\/a> The AES Corp., Form 10-K for Fiscal Year ending Dec. 31, 2009, SEC File No. 1-12291, at 85.<\/p>\n

<\/div>","protected":false},"excerpt":{"rendered":"

Justin Gundlach Climate Law Fellow In advance of the recent G-20 meeting in Ankara, Turkey, the G-20\u2019s Finance Ministers and Central Bank Governors asked the international Financial Stability Board to hold a meeting \u201con the financial stability implications of climate change related issues.\u201d Following that September meeting, the FSB published a proposal in November for […]<\/p>\n","protected":false},"author":1666,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[5532],"tags":[],"class_list":{"0":"post-3877","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-climate-disclosures","7":"czr-hentry"},"yoast_head":"\nNascent Convergence in Corporate Climate Disclosure Requirements? - Climate Law Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/blogs.law.columbia.edu\/climatechange\/2015\/11\/24\/nascent-convergence-in-corporate-climate-disclosure-requirements\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Nascent Convergence in Corporate Climate Disclosure Requirements? 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