Risk & Compliance

Investors Call for Emissions Disclosures

Environmental issues are becoming an increasingly important corporate governance issue.
Stephen TaubFebruary 3, 2005

A group of 143 institutional investors managing assets of $20 trillion have sent a letter to the 500 largest companies in the world, asking for disclosure of investment-relevant information concerning their greenhouse-gas emissions.

This is the third such request by the London-based Carbon Disclosure Project, a special project of the Philanthropic Collaborative of Rockefeller Philanthropy Advisors in New York. Signers of the letter include Credit Suisse Group, Merrill Lynch Investment Managers, Neuberger Berman, UBS Global Asset Management, the New York State Common Retirement Fund, the California State Teachers’ Retirement System, and the Connecticut Retirement Plans and Trust Funds.

“The numerous indications of accelerating human induced climate change make it clear that there are business risks and opportunities that have implications for the value of investments in corporations worldwide,” said project coordinator Paul Dickinson, in a statement. He cited examples including changes in weather patterns; political and regulatory momentum against companies that emit significant amounts of carbon; development of more-emissions-sensitive technologies, products, and services; and shifts in consumer sentiment toward corporations.

Dickinson noted that the data to assess these issues is sometimes unavailable, lacking comparability, or of poor quality. The Carbon Disclosure Project will encourage the development of a common emissions-measurement methodology and its integration into general investment analysis. The recipient companies have been asked to reply within four months; responses will be analyzed and reported on by Innovest Strategic Value Advisors.

Environmental issues took a giant leap toward the mainstream in November 2003, when a group of state treasurers and pension-fund leaders issued a 10-point “call for action” demanding increased corporate disclosure of environmental risks.

The next month, a United Nations summit in New York examined risks to institutional portfolios of climate change. Following the summit, a number of large institutional investors fired off a letter to the Securities and Exchange Commission, calling on the SEC to clarify the importance of climate-risk disclosure in the “management’s discussion and analysis” section of periodic reports.

Last July, the Government Accountability Office published a controversial report calling on the SEC to improve its tracking of environmental disclosures by public companies. The commission agreed with the recommendations in the GAO report, adding it is “taking steps to increase the tracking and transparency” of environmental data.