Think the Earth

On January 27th, the United States Securities and Exchange Commission (SEC) publicly announced that public companies should include any serious risks that global warming might pose to their businesses in their disclosure list for investors. The SEC has always required companies to reveal possible financial or legal impacts relevant to a variety of environmental problems, but it has never specifically stated climate change as a potential risk on business practices.

The SEC chairwoman, Mary L. Schapiro commented, "We are not opining on whether the world's climate is changing; at what pace it might be changing; or due to what causes." Additionally, she said, "Similarly, a company must disclose the significant risks that it faces, whether those risks are due to increased competition or severe weather. These principles of materiality form the bedrock of our disclosure framework," as she emphasized that revealing climate risks is based on a logical step that is not different from any other business risks.

The SEC, on a party-line 3-2 vote, issued "interpretive guidance" to assist companies to decide when and how to determine whether to disclose matters related to climate change. It was the petitions from environmental and investor groups that pressured the agency to take the action, which repeatedly urged the importance of climate change risks to be added to a disclosure list. Although the commission does not intend to create new legal requirements for companies, the SEC asks to include climate related legal risks among other disclosures. From now on, the significance of climate related information seems to be amplifying undoubtedly for investors.