Joe Kennedy: The SEC must require companies to disclose their risk from climate change

Joseph P. Kennedy III writes in the Washington Post:

[W]e are faced with a looming threat to market stability that was not foreseen by our forebears: the growing risk of climate change to our economy — and our very existence. That’s why the SEC must update its regulations and clearly require that companies disclose the risk that climate change poses to their businesses, and that they use standardized, transparent methodologies to do so that result in current, reliable data. Fifty-five percent of Americans own some form of stock.

These are not just abstract financial instruments. For most families, they are hard-earned retirement accounts, college savings and other essential resources tirelessly put aside for their families’ futures. This means that lack of information about climate-related business risks poses a direct threat to the economic security of millions of American families. How, exactly? A long list of scientists, economists and government officials have made clear that climate change could disrupt asset valuations, international financial markets and global economic stability.

A 2019 study from the National Bureau of Economic Research said that climate change’s impact on everything from farming to manufacturing could reduce the U.S. gross domestic product by 10.5 percent by the end of this century. The nonprofit Sustainability Accounting Standards Board has identified climate change as being a material risk factor for 68 out of 77 defined industry sectors. Advertisement A 2019 survey of 215 of the world’s 500 largest companies found nearly $1 trillion in reported climate-related financial risk. A report last year from the federal Commodity Futures Trading Commission put the threat in no uncertain terms: “Over time, if significant action is not taken to check rising global average temperatures, climate change impacts could impair the productive capacity of the economy and undermine its ability to generate employment, income, and opportunity.”

…Woodwell Climate Research Center (formerly the Woods Hole Research Center) and Wellington Management, which has more than $1 trillion in assets under management, jointly released updated climate-change-related disclosure guidelines and called on the SEC to mandate such disclosures and ensure their quality. In short: There is broad and deep support for advancing mandatory, rigorous climate disclosure, motivated not by politics but by a shared commitment to protecting the safety and soundness of the U.S. economy. American investors deserve to know the risks they face, and there is no greater systemic risk than climate change.

Opinion | The SEC must require companies to disclose their risk from climate change – The Washington Post

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