California and nearly a dozen other states want companies to reveal the financial risks of the climate crisis

California and nearly a dozen other states want companies to reveal the financial risks of the climate crisis

The states note that many US companies do not make climate-related disclosures and have no plans to do so in the future. Others issue “boilerplate” disclosures that “suggest that they are not thoroughly evaluating or disclosure their exposure,” the letter said. “Given the demand from investors for such disclosures, the significance of climate change risk to companies, and the importance of efficient capital allocation to climate-resilient companies, such disclosures are squarely in the public interest,” the letter reads. States say they have a vested interest here because climate change is causing extreme weather events that damage local communities and sap public resources. California in particular has been rocked by deadly wildfires that could worsen as the climate crisis deepens. Rising sea levels threaten coastal communities and risk severe flooding.

The costs of the climate crisis The pressure from states comes ahead of Tuesday’s deadline set by the SEC for the public to weigh in on the agency’s climate change disclosure rules. The SEC has already received more than 5,000 comments in response to its mid-March request for public input. The agency has also held more than two dozen meetings with companies and business groups, including with the representatives of Apple (AAPL), JPMorgan Chase (JPM), Uber (UBER), Walmart (WMT), Royal Dutch Shell (RDSA), ConocoPhillips (COP), the US Chamber of Commerce and News Roundtable.

In its 22-page comment letter, the California-led coalition argues that mandatory climate disclosures are “essential” not only to the SEC’s mandate to protect investors but also to “ensure efficient capital formation and allocation.” Specifically, the states urged the SEC to require companies to make annual disclosures of their emissions and any plans to address them; analyze and disclose the potential impacts of both climate change and climate regulation; and disclose policies on corporate governance and risk management related to climate change.

Debating the role of the SEC However, some business groups and Republicans are urging the SEC not to overstep its authority by imposing burdensome climate regulation. “As the state prepares for the twin crises of drought and wildfires, Californians have a right to know what exposure their investments — including college savings, pensions and retirement accounts — have to climate change,” California Attorney General Rob Bonta said in a statement.

The comment letter points out that climate-related weather events have imposed more than $600 billion in direct economic damages on US companies since 2016, according to estimates by the National Oceanic and Atmospheric Administration. At the same time, climate change and the transition to clean energy poses legal, business and physical risks to companies — including ones that states and their residents invest in directly or through retirement accounts and pension programs.

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  • California and nearly a dozen other states want companies to reveal the financial risks of the climate crisis
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