Securities and Exchange Commission urged to consult CDP data for climate disclosure

SEC’s 2010 guidance has had little effect, says US SIF

The US SIF, the Forum for Sustainable and Responsible Investment, concerned that Securities and Exchange Commission (SEC) guidance on corporate climate change disclosure that was introduced in 2010 is not being followed, has urged the SEC to look at CDP [the former Carbon Disclosure Project] data.

“Four years after the SEC issued guidance on climate change disclosure… we are concerned that the guidance has had little effect,” US SIF Chief Executive Lisa Woll writes in a submission to the SEC Chair Mary Jo White. Woll points to reports that roughly half of the 3,000 largest listed companies in the US did not report change disclosure in their annual filings.

“Additionally,” the submission notes, “there appears to be a stark difference between what companies are reporting to CDP and what they are reporting in SEC filings.”

It explains how the CDP, the UK-based environmental data body, is now backed by more than 769 institutional investors with an asset base of $92trn – up from 534 supporters and $64trn in 2010.

“This stunning growth suggests that investors need more than basic MD&A [Management Discussion and Analysis] climate risk disclosure.” Noting how the CDP survey also includes actual emissions reporting, policies, procedures, management systems and lobbying, the US SIF says: “We would urge the Commission to review the CDP surveys, which now cover water, forests and supply chains, in addition to climate, to identify additional line item disclosure requirements in this area.”

Woll’s letter notes how firms such as Morgan Stanley, State Street, Goldman Sachs, Bank of New York Mellon and Alliance Bernstein have declared the importance of ESG issues in making investment decisions.But investor efforts to incorporate ESG information have been “hindered by a lack of comprehensive, comparable and reliable data”.

“The primarily voluntary nature of corporate sustainability reporting means that the information available to investors remains inconsistent and incomplete,” writes Woll, whose organisation represents more than 300 investment groups.

The comments come as part of a debate on the SEC’s corporate disclosure regime mandated by the Jumpstart Our Business Startups (JOBS) Act.

The SEC launched the review into companies’ disclosure in late December last year as part of its “ongoing efforts to modernize and simplify disclosure requirements” and cut compliance costs.

The review will initially focus on periodic disclosures such as the 10-K, 10-Q, and 8-K filings. Subsequent phases of the project will include compensation and governance information included in proxy statements. SEC Chair White said at the time that the ultimate objective was to improve the disclosure regime for both companies and investors.

Meanwhile, the CDP says in its latest water report, released today (November 5), that 68% of the world’s largest companies are reporting exposure to water risks. The analysis is based on the water management data of 174 companies listed on the FTSE Global 500 Equity Index provided to CDP at the request of 573 institutional investors with $60trn in assets. The number of investors pressing for corporate accountability on water and related information through CDP has increased by more than 300% since 2010, it said.