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BOSTONDespite the financial risks associated with climate change, more than half of the nation's 500 largest publicly held companies are doing a poor job of disclosing those risks to investors, according to a new report.
Not only are companies at risk of future greenhouse gas emission restrictions and more intense weather events, they also could be at risk of shareholder lawsuits for nondisclosure, one expert warns.
According to the report released last week by Boston-based investor coalition Ceres Inc. and Bethesda, Md.-based asset management firm Calvert Group, only 47% of Standard & Poor's 500 companies responded to a global survey last year by the Carbon Disclosure Project requesting information about their climate risks and strategies. Those that did respond to the London-based investor collaboration's annual questionnaire failed to provide much of the information investors are seeking, the report said.
"Many U.S. companies are still downplaying climate change and its far-reaching business impacts," said Mindy S. Lubber, president of Ceres, in a statement. "More extreme weather events, regulatory changes and growing global demand for climate-friendly technologies are just a few of the ways that climate change will ripple across all sectors of the economy," she said. "Yet, many U.S. companies are not addressing these trends and are leaving investors in the dark about their strategies for mitigating those risks."
That could lead to shareholder lawsuits, said Andrew Logan, insurance program director at Ceres.
If the lack of disclosure reflects lack of action by the company in mitigating its climate change risks and a climate change event occurs that leads to a stock drop, "then the lack of disclosure will be powerful evidence for shareholders in terms of pushing for accountability," Mr. Logan said.
According to the report, investors are looking for analysis that identifies a company's present and future challenges and opportunities associated with climate change. This strategic analysis should include a climate change statement; an explanation of all significant actions the company is taking to minimize its climate risk and to identify opportunities; and a description of the company's corporate governance actions, including the names of the executives in charge of addressing climate risk.
A copy of the full report, "Climate Risk Disclosure by the S&P 500," is available at www.calvert.com/pdf/Ceres_ Calvert_SandP_500.pdf.