Section of Environment, Energy, and Resources
Environmental Disclosure Committee
2009 Highlights
Insurance Regulators Adopt Climate Change Risk Disclosure Rules for 2010
On March 17, 2009, The National Association of Insurance Commissioners (NAIC) announced adoption of a mandatory requirement that insurance companies disclose to regulators the financial risks they face from climate change, as well as actions the companies are taking to respond to those risks. All insurance companies with annual premiums of $500 million or more will be required to complete an Insurer Climate Risk Disclosure Survey every year, with an initial reporting deadline of May 1, 2010. Insurers will need to report on how they are altering their risk-management and catastrophe-risk modeling in light of the challenges posed by climate change, the steps they are taking to engage and educate policymakers and policyholders on the risks of climate change, and whether and how they are changing their investment strategies. For more information, visit the Web page for the NAIC Climate Change and Global Warming Task Force.
McGuireWoods LLP Surveys Climate Change Disclosures in 2008 Annual Reports
McGuireWoods LLP conducted a broad-based review of climate change disclosures in approximately 350 companies' 2008 annual reports and released its findings on January 15, 2009 in an article: Climate Change Disclosure: Out with the Old; In with the New? A summary of the article indicates that through 2008, very few companies outside the energy and utility industries made any type of climate change or GHG emissions-related disclosures in their SEC reports. This is likely to change in 2009 in light of increasing pressure for voluntary and mandatory disclosures. The survey is intended to provide a baseline for measuring trends in 2009 disclosures.
2008 Highlights
Environmental Disclosure Committee holds "Quick Teleconference" on Draft ASTM Standard for Climate Change Disclosure
On December 4, 2008, the Environmental Disclosure Committee held a Quick Teleconference cosponsored by the Climate Change, Sustainable Development, and Ecosystems; In-House Counsel; Renewable Energy Resources; and State and Regional Environmental Cooperation committees.
The program discussed the need for a consistent approach to climate change disclosure, introduced the new draft consensus standard balloted by ASTM International, and elicited comments and feedback to improve the draft standard. The moderator was the Committee chair, Greg Rogers, Guida Slavich & Flores, Dallas, TX. The panelists were Gayle Koch, The Brattle Group, Cambridge, MA (see presentation: Koch12-4-08QT.pps ), and Trisha Smith, Thacher Proffitt & Wood LLP, New York, NY (see presentation: Smith12-4-08QT.pps).
New York Attorney General Cuomo, Joined by Vice President Gore, Announces Climate Change Risk Disclosure Agreement with Dynegy Inc.
On October 23, 2008, New York Attorney General Andrew M. Cuomo announced the second major agreement in his initiative to require energy companies to disclose financial liabilities related to climate change. The agreement with Dynegy Inc. follows a similar settlement with Xcel Energy. Cuomo said that these agreements are intended to protect investors by ensuring disclosure of potential financial risks that climate change may pose. "Investors have the right to know all the material financial risks faced by coal-fired power plants associated with global warming and I hope and expect that other companies will follow the lead of Dynegy and Xcel." Vice President Al Gore applauded Cuomo for his leadership in engineering a new model to combat global warming.
Commentators Assess Requirements for a Universal Standard for Climate Change Disclosure
Former Environmental Disclosure Committee chairman Jeffrey A. Smith has co-authored an article for Capital Markets Law Journal, Climate change disclosure: Moving towards a brave new world, published August 19, 2008. The article explains why climate change disclosure is still in a primitive stage of development, and suggests a framework for developing disclosure standards that will be useful for investment decisions.
New York Attorney General Cuomo Reaches Agreement with Xcel to Disclose Financial Risks of Climate Change
New York Attorney General Andrew M. Cuomo announced on August 27, 2008 the first-ever binding and enforceable agreement requiring a major energy company to disclose the financial risks that climate change poses to its investors. Xcel Energy has agreed to detailed disclosures including a discussion of financial risks associated with climate change regulation, legislation, and litigation. The New York Times notes that Cuomo hopes that the agreement will encourage other energy companies to follow Xcel's precedent.
FASB Proposes Expansion of Loss Contingency Disclosure
On June 5, 2008, FASB released for public comment Proposed Statement of Financial Accounting Standards, Disclosure of Certain Loss Contingencies. The proposed standard would significantly expand the quantitative and qualitative disclosure requirements for loss contingencies under SFAS 5 and 141(R). In issuing the draft, FASB is responding to investors and other users of financial statements who are seeking additional information to assess the likelihood, timing, and amount of future cash flows associated with loss contingencies. The proposed standard would be effective for fiscal years ending after December 15, 2008, and interim and annual periods in subsequent fiscal years.
Responses from interested parties wishing to comment on the proposed standard must be received in writing by August 8, 2008. Interested parties should submit their comments by email to director@fasb.org, File Reference No. 1025-300.
Investor Group Asks Congress for Climate Change Legislation, Saying Lack of Clear Policy Undermines Long-Term Economic Competitiveness
On May 30, 2008, a group of more than 50 leading investors, organized by Ceres and the Investor Network on Climate Risk (INCR), issued a letter to Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell calling for a national climate policy to reduce U.S. greenhouse gas emissions by at least 60 to 90 percent below 1990 levels by 2050. The request is similar to reductions that would have been achieved under the Lieberman-Warner bill. The letter's message is that climate policy uncertainty due to the lack of federal regulations may be undermining companies’ long-term competitiveness because it is preventing them from making large-scale capital investments in clean energy and other low-carbon technologies and practices. The letter also notes that the Securities and Exchange Commission and other financial regulatory bodies should clarify what companies should disclose with respect to climate change in their regular financial reporting.
Ceres Publishes First-Ever Ranking of 40 Leading Banks on Climate Change Strategies
On January 10, 2008, the Ceres investor coalition issued the first-ever report that analyzes climate change governance practices of 40 of the world’s largest banks. The report employs a “Climate Change Governance Checklist” to evaluate how 16 U.S. and 24 non-U.S. banks are addressing climate change through board of director oversight, management performance, public disclosure, GHG emissions accounting and strategic planning. 34 of the 40 banks responded to the latest climate-disclosure annual survey conducted by the Carbon Disclosure Project, a nonprofit group that seeks information on climate risks and opportunities from companies on behalf of investors, and 28 of the banks have calculated and disclosed their GHG emissions from operations. The report concludes that more action is needed across European, North American and Asian banks alike. One recommendation is that banks provide better disclosure about the financial and material risks posed by climate change, their own emission reduction strategies, and emissions resulting their financing and investment.
The report is located here with profiles of U.S. banks located here.
