In 2012, Consolidated Edison incurred "response and restoration" costs for Hurricane Sandy totaling $461 million. The company's 10-K talks about climate-related risks, but only in the context of its own greenhouse gas emissions, noting that these constitute less than 0.1 percent of all U.S. GHG emissions, never making the link between climate change and the superstorm that cost the company nearly half a billion dollars. The insurance giant American International Group reported losses of $2.7 billion due to Hurricane Sandy, as well as another $3.3 billion mostly from Hurricane Irene. Its mention of climate change in its 2012 10-K is limited to one brief sentence, noting that the company's exposure to catastrophic events can be evaluated rapidly "if climate change or other events increase the frequency or severity of catastrophes."
Sadly, this level of so-called disclosure is typical. It is well established that climate change brings with it increased incidence of extreme weather, and it is also clear that extreme weather can blow sizable holes in corporate balance sheets. It seems logical for companies to perhaps link the effects of climate change to the increased likelihood of catastrophic weather, and make plans to deal with that, but if this is happening, they apparently do not consider it worthy of investor attention.
Ceres just released its new Cool Response report calling attention to the fact that, despite the SEC's guidance on climate-risk reporting in 2010, such reporting is still inadequate and the SEC has not followed up with enforcement. The SEC's guidance outlined "expectations from companies in reporting on 'material' regulatory, physical, and indirect risks and opportunities related to climate change," reported Ceres, but the agency is not making that disclosure an important issue. The agency has issued 49 comment letters to companies regarding their climate risk disclosure since its guidance was published, but 46 of those came in 2010 and 2011, and only three since then.
Ceres' new report has some excellent correctional steps for the SEC to take (below). Let's hope they're listening.
Ceres Recommendations for the SEC on climate risk disclosure:
• Issue more comment letters to companies with inadequate disclosure of material climate risks.
• Focus on companies in sectors facing significant climate risks and opportunities when reviewing corporate filings.
• Focus on the adequacy of disclosures concerning recent, major regulatory developments when reviewing corporate filings.
• Where reporting appears inadequate, compare SEC filings with a company's voluntary disclosures.
• Create a federal interagency working group focused on climate risks and opportunities to businesses, and an SEC task force focused on reviewing climate change disclosures.