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New Tool Provides Easy Access to Russell 3000's Climate Change Disclosures

Ceres and CookESG Research have launched a free, easy-to-use web tool for accessing climate change-related disclosures in company filings with the U.S. Securities Exchange Commission, which issued formal climate disclosure guidance in 2010.

The tool allows users to filter and customize company 10-K filing excerpts relating to clean energy, renewables, weather risk and climate-related regulatory risks and opportunities. The tool scans filings, automatically identifies climate-related text, and sorts information into renewable energy, physical impacts and other categories. Users can search by industry, and can search for topics such as “climate and fossil fuel extraction,” “energy/fuel efficiency” and “GHG emissions reduction goals.”

The tool covers all Russell 3000 companies from 2009 to the present. In the future, the tool will extend its reach to include US and non-US companies and coverage on a broader range of sustainability issues, including hydraulic fracturing and water availability, which also pose material risks and opportunities to a range of companies.

Building on the SEC's groundbreaking Interpretive Guidance on climate disclosure, a new Ceres analysis derived from the tool shows that only half of Russell 3000 filers had something to say about climate change in their 2014 10-K filings — up from just over a third of companies in 2009. The larger S&P 500 companies were more apt to provide climate disclosure — 62 percent provided such disclosure in their 2014 filings (in February, Ceres issued a separate analysis, Cool Response: SEC and Climate Change Reporting, analyzing climate risk disclosure by S&P 500 companies in 2013.).

“Robust climate-related data from companies is a critical need, but it’s still lacking,” said Mindy Lubber, president of Ceres. “This tool is an important step in making it easier for investors to analyze corporate data that’s available and what’s still missing.”

Investors, who along with Ceres petitioned the SEC for the climate disclosure guidance in 2010, welcomed the new search tool.

“Disclosure of material climate risks is crucial for protecting our pension fund assets in the long run, which is why we strongly support the SEC interpretive guidance on climate disclosure,” said Maryland State Treasurer Nancy Kopp. “This tool will help investors make better decisions based on the climate-related risk reporting companies provide.”

“CalPERS has been engaging with companies to improve their responses to climate risks and opportunities for more than a decade,” added Anne Stausboll, CEO of the California Public Employees Retirement System, the nation’s largest public pension system. “This tool is helpful for discussions with companies, and for comparing their reporting and performance to peers in their industry."

Useful to investors, accountants, corporations, academics and analysts, the search tool offers a unique picture of what climate issues companies consider material, as well as the quality of reporting they provide. It shows that the quality of disclosure is highly variable from company to company within industry sectors, and it helps users to identify best practice by which to judge industry peers.

The tool identifies disclosure practices across a wide range of industries, among those:

  • Waste Management’s 2014 10-K report describes not only the risks it faces and may face from physical and regulatory climate impacts, but also discusses strategic business opportunities to provide their public and private sector customers with sustainable solutions to reduce their greenhouse gas (GHG) emissions.
  • Hess Corporation’s 2014 10-K states that the company “recognizes that climate change is a global environmental concern. The Corporation assesses, monitors and takes measures to reduce our carbon footprint at existing and planned operations.”
  • While short of providing quantitative data, Hess’ reporting contrasts with the ambiguous disclosure offered by some companies. For example, Kinder Morgan’s 2014 10-K states, “Studies have suggested that emissions of certain gases, commonly referred to as greenhouse gases, may be contributing to warming of the Earth's atmosphere. ... Some climatic models indicate that global warming is likely to result in rising sea levels, increased intensity of hurricanes and tropical storms, and increased frequency of extreme precipitation and flooding.”
  • Not surprisingly, electrical power companies provided more information generally than companies in other industries. For example, Exelon’s 2015 10-K focused on the regulatory risks presented by climate change, but also briefly described physical climate impacts and energy efficiency and renewable energy.
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