Can an SEC ruling reverse climate change?
Mary: Hello and welcome to Grist Talks, our regular series of conversations with really smart people about really interesting topics. I’m Mary Bruno your really smart and interesting host. And I’m joined today by really smart and really interesting panelists. But before I bring them into the conversation, let me first introduce today’s topic.
On January 27th, commissioners at the U.S. Securities and Exchange Commission decided in a close 3-2 vote that publicly traded companies really ought to disclose any climate change-related risks and opportunities that might affect their bottom line. So for example, do ski resorts have a plan for dealing with warmer, dryer winters? Have insurance companies calculated the budget impacts of more severe weather or a rise in sea level? Has the healthcare industry prepared for an expansion of certain viruses and bacteria? Inquiring, responsible investors needed to know, hence the SEC’s vote, and I quote “to prove public companies with interpretive guidance on existing SEC disclosure requirements as the apply to business or legal developments relating to the issue of climate change.”
So what does it all mean? That’s why we’re here today.
We’re going to be talking about impact of this “interpretive guidance” on day-to-day corporate practices and on the U.S. economy in general. But we’ll also be looking at the impact of the SEC decision on climate change itself. Could it, for instance, mark a turning point in the struggle to arrest climate change? Could these new SEC guidelines give corporate America, and maybe the rest of us too, a little nudge, maybe a shove, to start thinking and planning for the long term? If so, it would be an immense, an important cultural shift. Because let’s face it, the ability to think ahead — way, way, way, ahead — is an obvious first step in tackling a problem as complex and multi-generational as climate change.
So with that, I am very pleased to welcome our three panelists:
Investor, Julie Gorte, Senior Vice President for Sustainable Investing at New Hampshire based Pax World Management Corporation, which, if you don’t know, was the first socially responsible investment firm in the U.S.;
Economist, Kristen Sheeran, Executive Director of the Economics for Equity and the Environmental, or E3 Network, in Portland, Ore., and co-author of the book, Saving Kyoto;
And futurist, Sara Robinson, a fellow at both the Campaign for America’s Future and The Commonwill Institute, which are located in Washington D.C. and San Francisco, respectively.
It’s a great pleasure to have you all with us today. Julie Gorte, let’s start with you.
Investors have been pushing the SEC for some kind of leadership or direction on corporate disclosure of climate-related risks, for 10 years, right? So why is this issue so important to investors? Why, if it is so important to investors, has it taken so long to get some action? And while you’re answering those questions, can you also describe for us who and how the investment community has been lobbying all this time?
Julie: The most proximate answer to that who and how question is that there were 22 of us that petitioned the SEC in September of 2007 to issue this guidance. And those petitioners included the treasurers, controllers, or financial officials representing California, Florida, Kentucky, Maine, Maryland, New Jersey, New York, North Carolina, Oregon, Rhode Island, and Vermont. There were also two asset managers, including my firm Pax, and three nonprofits that joined in this petition.
This was not the first time that the SEC had heard that we wanted some more interpretive guidance or action on climate change. We’d been saying so for quite some time. The Investor Network on Climate Risk, which includes all of the above mentioned entities as well as many more asset managers and asset owners, was formed in 2001. Part of our platform right from the start was that we needed some public sector action, including guidance or action on the reporting of climate change risks and opportunities. If I go back a decade, there were very few in the investment community that paid attention to it accept in the socially responsible investment world. In the years since 2001, the investment community has become much more interested in and aware of climate change.
There was a report in the early 2000s from the Association of British Insurers noting that the damages, or losses — insured losses — from severe weather had doubled and tripled over the previous two-to-three year period, and that they were expected to continue to rise on a rather dramatic scale as a result of climate change. So when the insurers get concerned, because that absolutely is their bottom line, a lot of other investors started paying attention.
Now we’re seeing reports from all the mainstream analysts that provide research to everybody else in the financial community — you know, Citigroup, Goldman Sachs, HSBC, Societe General — covering climate change, originally just with respect to the big emitters like utilities and energy companies, but then sort of branching out and saying “well, here’s how it could effect this sector or that sector.” And pretty soon it got to the point where we recognized that there are no sectors, really, that don’t have to think about climate change.
You mentioned health care companies and the expanding landscape of morbidity and mortality. You’ve got Bell South with I don’t know how many thousands of wires strung all over the hurricane alley down in the South. So, what we’re really seeing in investment is that the consciousness of climate change as a financial issue has increased, and is still increasing, and I think that was part of the critical mass that led to the SEC issuing this guideline.