S&P; 500 Fare Poorly on Climate Risk Disclosure


In October, we took note of the Global Framework for Climate Risk Disclosure, a voluntary standard corporations can use to disclose their climate-related risks to their investors. On Wednesday, Ceres and Calvert released their report Climate Risk Disclosure by the S&P; 500, which took a look at how companies in this index are doing in applying these standards. The short version of the verdict: not very well. Among the problems the report identified:

  • A Poor Response to the Request for Information: Only 47% of the companies sent surveys by Climate Disclosure Project last February responded to them. In contrast, 72% of FT 500 companies responded.
  • Keeping Information Secret: Of those companies that did respond, seventy (nearly 1/3 of the total respondents) wouldn't allow their responses to be made public. We wonder which part of "disclosure" they don't understand.
  • Words Don't Match Actions: Eighty percent of the responding companies "...addressed the need to reduce greenhouse gas emissions"; about 25% of the respondents disclosed "...measurable emissions reductions targets and specific time
    frames for reduction."
Interestingly enough, the companies doing the best in disclosing climate risks are utilities and oil companies. Those doing the worst are "low emitters," such as banks, telecommunications companies, and health care corporations. At one level, this makes sense: traditional energy companies have large climate footprints that have drawn attention. What the report makes clear, though, is that the risks for loss from climate-related phenomena aren't limited to those companies that emit high levels of greenhouse gases: any business can suffer from a higher frequency of severe weather events, for instance. Furthermore, the authors wonder if these companies not disclosing risks are also taking full advantage of the opportunities presented by climate change, including investing in clean technology, and anticipating regulatory changes.

A dry read? Certainly. As investors continue to become more aware of the economic risks presented by the climate crisis, though, more corporate executives will probably want to think harder about this topic. As with most issues in the financial world, the perception of being unprepared can be just as damaging as the reality. ::Carbon Disclosure Project via Insurance Journal

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