Failing Report Card

Survey finds largest U.S. companies doing “poor job” disclosing climate change risks.

By Michael Connor

Arguing that the nation’s publicly-held companies “should elevate climate change as a corporate priority and communicate openly with investors about their strategies and responses,” the environmental network group Ceres and the socially responsible mutual fund company Calvert released a report harshly critical of climate change disclosure at most top-tier companies.

“Disclosure practices among the nation’s largest 500 companies are severely lacking. Less than half of the S&P 500 companies responded, and the response received fell far short of the standards set” by the Global Framework for Climate Risk Exposure, the report said. “Nearly a third of the responders, in fact, declined to share their answers with all investors, designating their responses as ‘confidential’”.

The report said that while industries like oil and gas—with significant greenhouse gas emissions and energy-intensive operations—face obvious risks from regulation, “lower emitting” industry sectors, such as retailers, banks and telecommunication companies “should also provide shareholders with more analysis and disclosure” on risks and strategies for managing or mitigating those risks.

Citing damage caused by hurricanes in 2005, for example, the report noted that in addition to $45 billion of insured losses from hurricane Katrina alone, retailers, telecom companies, utilities and banks also suffered major “financial hits.” According to the report, “JP Morgan Chase reported a $400 million special provision related to hurricanes in third quarter 2005. BellSouth suffered more than $100 million of losses from hurricane-related damage. Coca-Cola, Target, McDonalds and Carnival were also hit with losses. All told, nearly half of the largest 100 companies in the S&P 500 reported measurable impacts for Katrina and Rita-related losses in 2005.”

The report provides industry-by-industry analysis and commentary on particular corporate disclosure practices. Citigroup, for example, is praised for “taking steps to analyze and manage the implications of climate change, and the company’s response serves as a preliminary benchmark for others in the financial services sector.”

Most insurers were criticized for disclosure shortcomings. Allstate, for example, did not respond to the survey questionnaire despite having reported $3.68 billion in Katrina-related losses in the third quarter of 2005, the report said. “Other insurance companies, such as MetLife, and other retailers, such as CVS, felt the financial impacts from climate change yet did not respond to the questionnaire.”

U.S. companies lag well behind their foreign competitors in climate risk disclosure, according to the report, with only 47 percent of the S&P 500 companies responding to the survey questionnaire, as opposed to 72 percent among the FTSE 500

Mindy Lubber, President of Ceres, and Julie Fox Gorte, Vice President and Chief Social Investment Strategist for Calvert, point to increased pressure on companies for disclosure by the Investor Network on Climate Risk, which is composed of major institutional investors: “While ‘Wall Street time’ is usually measured month-to-month and quarter-to-quarter,” they say, “many of the world’s largest investors are looking at both the short- and long-term financial implications from climate change.”

The report concludes: “Disclosure of emissions, risks and opportunities is only one step toward thoughtful management of climate variables, but it is the essential first step—the ignition switch in the engine of climate mitigation and adaptation.”

Click here for a full copy of the report or visit  www.ceres.org or www.calvert.com .