Ceres' Kelly discusses move to block SEC climate disclosure guidance

Earlier this summer, the House passed legislation that would block the Securities and Exchange Commission from implementing its climate disclosure guidance that was enacted in 2010. As Congress works to finalize a spending package, how will this climate risk reporting be treated? During today's OnPoint, Anne Kelly, senior program director for policy and the BICEP program at Ceres, explains why Ceres' network of investors relies on the information provided through these disclosures. She also weighs in on questions surrounding the SEC's enforcement of the guidance.


Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Anne Kelly, senior program director for policy and the BICEP program at Ceres. Anne, thank you for joining me.

Anne Kelly: Thank you, Monica.

Monica Trauzzi: Anne, earlier this summer the House passed legislation that would block the SEC from implementing its climate disclosure guidance that was enacted in 2010, its Climate Risk Reporting Guidance for Publicly Traded Companies. It's not the first time that the House has tried to move to block the reporting guidance, but Ceres is particularly concerned this time around that this will ultimately slip through the cracks as the Senate and president move to the broader spending bill.

Anne Kelly: Exactly.

Monica Trauzzi: What's going on right now, and why are you so concerned?

Anne Kelly: Well, as you know the lifeblood of our financial markets are accurate information, and the SEC's job is to make certain that publicly traded companies in fact provide investors with clear, comparable, robust financial information on risk. And climate risk has now risen to the level of being material; it is a material risk for all the obvious reasons: water shortages, resource depletion, climatic changes, changes in demand. And we feel strongly that more than investors need to be informed by companies. What the Posey amendment would do is to put a bar on the SEC's ability to enforce that 2010 guidance at a time when it's more important than ever. And we want to make certain that the SEC's allowed to do its job. You know, we're not asking for a new law or a new regulation. We're essentially saying, you know, let the Securities and Exchange Commission provide investors with the necessary information. And there's robust agreement among investors that this is information that they need.

Monica Trauzzi: And as you said, this was an amendment sponsored by Florida Congressman Bill Posey.

Anne Kelly: Yes.

Monica Trauzzi: He says these guidelines are essentially a tool for special interests. You think that it's critical, though, to have these disclosures in place. You have the backing of many investors. What specifically do they find so significant and important in the information that they receive?

Anne Kelly: Well, we do respectfully disagree with Representative Posey, and I should note that there were 11 Republicans who also did not vote for that amendment, and so we're hoping for a bipartisan solution here. But I guess the best example for your question is Peabody Coal in April, which really did not provide accurate information to investors about the demand for their product, and as a result their shares dove and investors were caught flat-footed and they ended up filing for bankruptcy in April because of the shift in the demand for coal. And as we move to a low-carbon economy, particularly in light of the Paris Agreement and its goal of a 2-degree rise in temperature with a stretch goal of 1.5, you know, we feel it's important that energy companies in particular provide the necessary information and really stress-test their business plans against low-carbon economic scenarios so that investors can play, so that they can make the right decisions.

Monica Trauzzi: There have been questions, though, about the SEC's enforcement of the guidance. In fact the GAO found earlier this year that it's not a priority for the commission. Why do your investors continue to rely on the information when there have been some questions raised about it?

Anne Kelly: Our investors are confident that if the SEC takes this seriously, as they actually took it more seriously in 2010, 2011 — there were 40 letters from the SEC to companies asking for more robust disclosure and to incorporate the guidance. That has diminished, but we're encouraged that SEC Chair Mary Jo White has said quite recently that climate change is going to be a bigger focus for her. I mean, it's very clear that the investors are calling for the information, and not just investors from the U.S. but from Europe, Australia, New Zealand. It's very clear that this is information they need to make decisions.

Monica Trauzzi: So from a policy standpoint, what comes next? What are you looking towards?

Anne Kelly: We are looking to make certain — yes, we're working with members of the Senate Banking Committee as well as the House Financial Services Committee chairs, the leads, to make certain that this amendment does not become part of any final spending bill. And we're pleased that we have consistently had the support of the White House on this front, and we're going to continue to push in this direction, and we're quite hopeful.

Monica Trauzzi: OK, we will end it right there. Thank you so much for coming on the show.

Anne Kelly: Thank you, Monica.

Monica Trauzzi: Nice to see you.

Anne Kelly: Thank you.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]



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