Attorney General Tong Calls on SEC to Require U.S. Companies to Disclose Financial Risk from Climate Change
(Hartford, CT) – Attorney General William Tong today joined a California-led coalition of attorneys general in urging the Securities and Exchange Commission (SEC) to require U.S. companies to provide detailed and accurate information about the financial risk they face from climate change. The need to mandate such disclosures is urgent and falls squarely within existing SEC authority.
In the past five years alone, climate change-related weather events have cost U.S. companies more than $600 billion in direct economic damages. Mandatory climate change-related disclosures are essential to help insulate U.S. and global financial systems from systemic risk associated with climate change and to protect investors, including the many ordinary Americans whose retirement savings are largely investment-based.
“We ignore the climate crisis at our own peril. Climate change is already costing us billions of dollars and unchecked will touch every aspect of our lives, including our financial systems,” Attorney General Tong said. “Our coalition is calling on the SEC to enact common sense requirements for U.S. companies to report and disclose how much financial risk they face because of climate change. This is a crucial step to protect Connecticut investors and shield our financial institutions from the devastating consequences of climate change. Full transparency around climate risks will strengthen our economy’s resilience.”
Climate change is no longer an abstract challenge to be dealt with at a later date — it is a concrete and growing threat, inflicting damage on the U.S. economy and its financial system that will worsen over time. According to a study cited in the comment letter, 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. Demand from institutional and retail investors for U.S. companies to respond to the impacts of climate change has grown significantly, as evidenced by the recent election of three new members to Exxon’s board who intend to push the company to address climate change, as well as the overwhelming passage of a shareholder resolution demanding that Chevron reduce its carbon emissions.
Currently, the majority of U.S. companies do not make any climate change-related disclosures, and the disclosures that companies do make are often boilerplate, suggesting that the companies are not thoroughly evaluating or disclosing their exposure to climate change-related risks. In today's comment letter, the attorneys general urge the SEC to mandate that companies, both public and private, assess climate change-related risks affecting their businesses and disclose that information to investors, arguing that the current disclosure requirements the SEC has in place are insufficient. The coalition specifically suggests that the SEC require companies to:
- Make annual disclosures of their greenhouse gas emissions and any plans to address their emissions;
- Analyze and disclose the potential impacts of climate change and climate change regulation; and
- Disclose corporate governance and risk management protocols as they pertain to climate change.
Attorney General Tong joins the attorneys general of California, Delaware, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Oregon, Vermont, and Wisconsin in sending today's letter.
A copy of the comment letter can be found here.
Assistant Attorney General William Dornbos and Chief of the Environment Section Matthew Levine assisted the Attorney General with this matter.