Rep. Cartwright, Sen. Reed Introduce Effort to Modernize the SEC’s Industry Guides for Oil, Gas, and Mining Companies to Improve Climate Risk Transparency
Washington, DC – Today, U.S. Representative Matt Cartwright (PA-17) and U.S. Senator Jack Reed (RI) introduced legislation, in both the House and Senate, in an effort to modernize the Securities and Exchange Commission’s industry guides for oil, gas, and mining companies to improve climate risk transparency.
In 2010, the SEC provided interpretive guidance, which was intended to provide greater transparency to investors on the material risks posed by climate change. However, there are some concerns about how seriously companies are taking their responsibility to disclose climate related risks and how effectively the SEC has been monitoring compliance with this interpretive guidance.
In 2015, after a two-year investigation, New York Attorney General Eric Schneiderman secured an unprecedented agreement with Peabody Energy to end the company’s misleading statements and disclose risks arising from climate change. Peabody Energy, a publicly-traded coal company, made public statements about the potential economic impact of climate change that were not consistent with the firm's internal financial projections.
In the resulting settlement of charges that the company misled investors and the public, Peabody Energy agreed to make comprehensive SEC disclosures about the risks climate change poses to its business. It appears the SEC had no role in this settlement in which Peabody Energy agreed to amend its SEC disclosures admitting that "concerns about the environmental impacts of coal combustion ... could significantly affect demand for our products or our securities.”
“The SEC needs to do more when it comes to critically reviewing the disclosures being filed by publicly traded companies,” Rep. Cartwright said. “To help do this, the SEC should update its industry guides for mining companies and for oil, and gas companies to reflect the growing risk climate change presents to these companies.”
Senator Reed echoed these comments, stating, “It is clear that the SEC needs to do more when it comes to critically reviewing the disclosures being filed by publicly traded companies, but it is also clear that the SEC’s industry guides for oil, gas, and mining companies should be updated to reflect the growing risk of climate change to these companies. This legislation would ensure the investing public can access the material information necessary to make informed decisions when investing in these companies.”
These disclosures are important to institutional investors, such as Allianz Global Investors, which is a global diversified active investment manager with nearly $500 billion in assets under management, who has specifically called for “achieving better disclosure of the effects of carbon costs on the Oil & Gas companies.”
Section 911 of the Wall Street Reform and Consumer Protection Act established the Investor Advisory Committee to advise the SEC on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the market place.
This legislation would direct the SEC to work with the SEC’s Investor Advisory Committee to update the industry guides for mining, oil, and gas companies.