$600 Billion. That is the amount of money directly attributed to weather events brought on or exacerbated by climate change over the past five years. Now a coalition of states, including Connecticut, Delaware, Illinois, Maryland, Michigan, Minnesota, New York, Oregon, Vermont, and Wisconsin, and led by California (the Coalition), are pushing for the U.S. Securities and Exchange Commission (SEC) to require U.S. companies to disclose their financial risks posed by climate change.
As stated in a press release by California Attorney General Rob Bonta, “Rising temperatures are expected to decrease the United States’ annual gross domestic product between 1.9% and 10.5%, and the economy is more likely to experience systemic shocks from climate-related events when financial markets lack sufficient, accurate information to price in climate risk.”
At present, consensus among environmental groups is that the voluntary, environment-related disclosures by most U.S. companies are pat, boilerplate statements that merely pay lip service to the issue, provide no useful information, and certainly not any information that would lead to accountability or meaningful change. The Coalition is making the argument that investors need—and are entitled to—a change.
Among its comments and recommendations, the Coalition suggests the SEC require that companies:
- Make annual disclosures of emissions of greenhouse gas(es) and detail their plans to address these emissions;
- Evaluate and state anticipated impacts of climate change and climate change regulation; and
- Disclose corporate command structure and risk management as they pertain to climate change.
There are those who argue, however, that in taking these actions to promulgate SEC enforcement of Environment, Social, and Governance (ESG) criteria the Coalition simply seeks to weaponize this information to redefine the purpose of business and politicize more aspects of business. They further argue that SEC involvement at the macro level will cause the cost of goods and services to increase, negatively affecting low-income and historically disadvantaged groups, in addition to decreasing the competitive edge of some companies in the marketplace.