In an open letter to Securities and Exchange Commission (SEC) Chairman Jay Clayton, Senate Banking Committee member Senator Elizabeth Warren urged the SEC to implement climate risk disclosures for companies, in order to enable investors and other stakeholders to assess climate-related environmental and financial risks.
In the letter, Senator Warren stated:
“Investors and the public currently lack sufficient information about the threats of the climate crisis on their investments, though the risks to our economy posed by the climate crisis continue to grow.”
Warren’s letter cited a campaign sent to the SEC and other regulators in July by a group of 40 investment managers and several sustainability-themed organizations. In that letter, the investors, representing almost $1 trillion in assets, urged the regulators to become more active on addressing climate threats, and help lead a path to net zero emissions.
Both letters maintain that climate risks should be viewed in the context of the systemic threats that they pose to the financial markets and the economy, which would place them within the mandates of regulators such as the SEC, with duties to protect investors and ensure market stability.
“It is distressing that by ignoring these climate risks, the SEC is not fulfilling its mission to ‘protect investors’ and ‘maintain fair, orderly, and efficient markets.’ I urge you to take immediate measures, including those found in my Climate Risk Disclosure Act, to implement standard climate risk disclosures so that investors and the public can accurately assess and address climate-related environmental and financial threats.”
Rather than waiting for regulators to mandate requirements for climate and other environmental risk disclosures, investors are beginning to take matters into their own hands. Several major investors, such as BlackRock, have started requesting that their portfolio companies align their disclosures with the TCFD framework and SASB standards, in order to enable greater transparency on sustainability issues.
Senator Warren’s letter outlines some of the specific disclosures the proposed act would require, including:
- Companies’ direct and indirect greenhouse gas emissions;
- The total amount of assets related to fossil fuel that companies own or manage;
- How companies’ valuations would be affected if climate change continues at its current pace or if policymakers successfully restrict greenhouse emissions to meet the 1.5 degrees Celsius above pre-industrial levels goal in the Paris Agreement; and
- Companies’ risk management strategies related to the physical and transition risks posed by the climate crisis.
Warren requested the SEC respond to her letter by August 26.