CLIMATE:

SEC to require companies to disclose warming risks

This story was updated at 5:20 p.m. EST.

Publicly traded companies must consider the physical impacts of climate change -- as well as the economic impacts of domestic and international greenhouse gas emissions-reduction rules -- when disclosing risks to investors, the Securities and Exchange Commission decided today.

The interpretive guidance, approved by a 3-2 vote at SEC's Washington headquarters, does not create new legal requirements for companies. Rather, it will ensure consistent disclosure of bottom-line risks to shareholders, SEC Chairwoman Mary Schapiro said.

"It is neither surprising nor especially remarkable for us to conclude that of course a company must consider whether potential legislation -- whether that legislation concerns climate change or new licensing requirements -- is likely to occur," Schapiro said. "If so, then under our traditional framework, the company must then evaluate the impact it would have on ... liquidity, capital resources or results of operations and disclose to shareholders when that potential impact will be material."

Similarly, a company must disclose the opportunities and risks that it faces from severe weather, rising sea levels and changing demand for products based on their carbon footprint. SEC will publish the interpretive guidance on its Web site and in the Federal Register, and the agency's Division of Corporation Finance will use it when reviewing company filings.

The progressive investor coalition Ceres, which has petitioned SEC to issue climate disclosure guidance several times in recent years, applauded today's vote.

"With this guidance, investors can make more sound decisions based on better information -- and businesses will have a level playing field with clear standards and expectations for disclosure," said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, a group of 80 institutional investors with $8 trillion in collective assets.

Not everyone is pleased. Commissioner Kathleen Casey, one of two Republicans on the panel who voted against issuing the climate guidance, called it a misuse of agency resources.

"I can only conclude that the purpose of this release is to place the imprimatur of the commission on the agenda of the social and environmental policy lobby, an agenda that falls outside of our expertise," Casey said.

House Energy and Commerce Committee ranking member Joe Barton (R-Texas) and fellow committee Republican Greg Walden of Oregon wrote Schapiro a letter in advance of today's meeting, questioning whether SEC has statutory authority to issue such guidance. The lawmakers asked how many environmental scientists SEC employs and whether the agency was shifting its oversight from investment matters to corporate participation in global warming abatement.

"We would be troubled by an undertaking which seems so transparently political and such a breathtaking waste of the commission's resources," the lawmakers added.

Schapiro appeared mindful of such criticisms during today's meeting. She underscored that the guidance should not be interpreted as an agency statement regarding the facts of climate change.

"We are not opining on whether the world's climate is changing, at what pace it might be changing, or due to what causes," Schapiro added.

Click here to read the letter.