On Friday, Senator Elizabeth Warren (D-Mass.) introduced a bill that would direct the Securities and Exchange Commission to issue rules within 1 year requiring public companies to disclose their exposure to climate change risks. Several investment companies and advocacy groups wrote a letter in support of the bill, including nonprofit As You Sow, asset manager Domini Impact Investments and JSA Financial Group.
The Climate Risk Disclosure Act would require public companies to report their direct and indirect greenhouse gas emissions, the amount of fossil fuel-related assets they own or manage, how their valuation would be impacted if climate change continues, and their risk strategies related to the physical and transitional risks posed by climate change.
“While the SEC already advises that climate change risks can be material for publicly traded companies, in which case they must report on climate risks to investors, companies are not required to report on climate issues in any standardized way through their SEC filings,” said Lisa Woll, CEO of The Forum for Sustainable and Responsible Investment. “Furthermore, the SEC has been lax in enforcing climate change disclosures.”
“Climate change is a real and present danger—and it will have an enormous effect on the value of company assets,” Warren said. “Climate change can be an economic opportunity if we act boldly and decisively. But if we don’t, we will see a global catastrophe that will put the 2008 crisis to shame. Our bill will use market forces to speed up the transition from fossil fuels to cleaner energy—reducing the odds of an environmental and financial disaster without spending a dime of taxpayer money.”
In May, Morningstar introduced its Portfolio Carbon Risk Score, which identifies funds that hold companies with low carbon emissions or are lowering carbons emissions in line with the Paris agreement.