New database reveals which companies disclose carbon risks
Last month's international agreement at COP21 in Paris has lifted the hopes of sustainable investors that a meaningful transition to a low-carbon economy may, after many years of disappointment, get underway. The sheer numbers may be no less staggering — according to Ceres, more than $1 trillion per year for the next 36 years.
Of course, government commitments are one thing, and the translation of those commitments into the action needed to effectively combat climate change something else entirely. And massive investment in renewable energy and other clean technologies is unlikely to meet demand until regulatory regimes encourage it.
But even with an economy that favors fossil fuel companies, sustainable investors never just have sat and waited. It may well be in fact that the COP21 agreement has emboldened an already activist tradition of shareowner engagement on environmental, social and corporate governance (ESG) factors.
A new shareowner coalition coordinated by Walden Asset Management has filed resolutions with 11 oil and gas companies, seeking to shine a light on the practice of energy companies to fund, through direct lobbying or trade association membership, efforts to derail regulatory efforts to mitigate the worst effects of climate change.
A second group of investors, representing nearly $300 billion in assets under management and more than $1 billion in ExxonMobil shares, has requested that the company “disclose the resilience of its business model in the wake of the Paris Agreement on climate change.”
The efforts of shareowners surely will be aided by a new online search tool, developed by Ceres and CookESG Research, that "allows users to find whether disclosures in annual SEC filings discuss carbon asset risks, including competition from renewable sources of energy, capital expenditures on high cost, carbon intensive exploration projects, government efforts to limit carbon emissions, and the possibility of reduced global demand for fossil fuels."
It's unlikely to come as much of a surprise that 10-K disclosures by fossil fuel companies are, at present, inadequate.
"A survey of the most recent disclosures by the 23 oil and gas production and extraction companies in the S&P 500 index, disclosing a collective 77 billion barrels of oil equivalent (BOE) in reserves as of the end of 2014, reveals that not one discussed the potential impact on the value of these reserves of an international agreement to limit global warming," Jackie Cook of CookESG Research wrote recently.
Ceres president Mindy Lubber added, "Robust carbon asset risk data from fossil fuel companies is a critical need, but it’s still lacking, especially given the growing worldwide focus on reducing pollution that is causing climate warming."
In 2010, the Securities and Exchange Commission issued interpretive guidance (PDF) governing corporate disclosures relating to climate change; however, the search tool reveals the lack of improvement in reporting, and the SEC has shown little resolve in pursuing companies that fail to incorporate climate risk in their disclosures.
On the other hand, state-level investigations into climate reporting by Exxon are underway, and members of Congress asked the SEC for an update on the effect of its interpretive guidance.
"This tool, in combination with climate disclosure requirements enacted by the SEC, is an important step in helping investors understand how companies are responding — or are not responding — to growing climate-related risks," Lubber stated.