CORRECT: SEC Guidance May Lead CO2 Policy Risk Disclosure
29 October 2009 - 6:20AM
Dow Jones News
U.S.-traded companies may be under greater pressure to disclose
their exposure to the potential cost of climate policies under a
new U.S. Securities Exchange Commission staff guidance issued
Tuesday.
In the Staff Legal Guidance, the Division of Corporation Finance
said it's changing how it analyzes companies' "no-action" requests
on shareholder proposals relating to environmental, financial or
health risks.
The guidance reverses the staff's previous position, which has
so far prevented shareholders from asking companies about their
balance sheet exposure to climate change, greenhouse gas emission
policies and other issues. Now, for example, insurance companies
may be requested to disclose the economic costs of climate change
to its customers; coal companies to reveal the potential impact of
a climate bill on their production; and utilities would have to
show how their generation portfolios may have to be restructured to
meet greenhouse gas emission targets.
Mindy Lubber, head of Ceres, a network of investors and
environmental organizations, said the SEC staff guidance "overturns
antiquated, nonsensical rules, keeping with the times and
protecting investors." Ceres directs the Investor Network on
Climate Risk, whose member public pension funds, institutional
investors and fund mangers represent around $8 trillion in
assets.
Lubber said the old position meant the SEC either threw out
valid, important and compelling resolutions that were about
protecting investors, "or it forced investors to do mental
calisthenics to re-write shareholder resolutions."
Companies could previously ask the SEC for a no-action letter is
shareholder requests focused on disclosure of "risk." If the SEC
grants a no-action request, companies don't have to respond to
shareholder resolutions.
As Congress and the Obama administration move toward federal
regulation of greenhouse gas emissions, major segments of the
economy are increasingly likely to see their bottom lines either
positively or negatively impacted by new climate regulations.
As federal lawmakers move forward with drafting a landmark
climate bill, the Environmental Protection Agency has issued
several proposals that would regulate greenhouse gas emissions from
cars and large industrial sources.
The administration has issued a raft of economic assessments of
climate legislation that outlines a band of likely carbon prices.
That should give companies enough information to brief investors on
the risks such policies may pose to their business, some investors
say.
Dan Bakal, Ceres' Director of electric power programs, said that
while approved shareholder requests aren't binding, "they do have
quite an impact, sending a pretty powerful signal to the company
that need to take action on an issue."
Bakal said companies such as Alpha Natural Resources (ANR),
Consol Energy (CNX) and Foundation Coal - now merged with Alpha -
have previously successfully rejected shareholder resolutions
seeking more information on regulatory risks.
The SEC guidance follows a series of investor lawsuits against
emissions-intense companies demanding that they better reveal the
potential impact of climate policies on their operations.
SEC Commissioner Elisse Walters has said the agency is
separately considering giving new guidance requiring greater carbon
disclosure in regular filings with the Commission.
-By Ian Talley, Dow Jones Newswires; (202) 862 9285;
ian.talley@dowjones.com