Companies facing more pressure to disclose their climate change risks

Details: Under the Act, companies would have to disclose information about the financial risks they bear because of asset exposure to climate change and the costs of climate-change mitigation and adaptation, including efforts to reduce greenhouse gas emissions and strengthen climate resilience.

The bill contends that “companies have a duty to disclose financial risks that climate change presents,” and that the SEC “has a duty to promote a risk-informed securities market.” Companies would be required to put a dollar value on their carbon emissions, which an investor could use as a measure of their contribution to climate change and incorporate into an investment analysis.

The SEC was also urged to develop rules for ESG disclosures in an Oct. 1 petition from two academics and investors representing more than $5 trillion in assets. Their letter reflects a growing concern about the impacts and risks of climate change on companies for which public information may be lacking.

Reality check: Warren’s climate-risk disclosure bill is unlikely to pass in the near future, and under the Trump administration, the SEC has not heeded calls like the petition's for rule-making on ESG matters. In fact, the last time the SEC issued a public comment letter related to climate change was in 2016. In August, the agency ended a two-year investigation into how Exxon accounted for the value of its fossil fuel reserves in the face of legal and regulatory efforts to combat climate change.

Yes, but: The SEC may have to address such issues if public and investor calls for disclosure continue to grow louder and Democrats regain control of the federal government.

Hillary Holmes is a partner with Gibson Dunn’s Capital Markets and Securities Regulation practice groups in Houston.