ISS Corporate Services, a wholly owned subsidiary of Institutional Shareholder Services Inc., released Tuesday a comprehensive report detailing how the 100 largest large-cap U.S. companies are responding to the Securities and Exchange Commission’s (SEC) climate risk guidelines, which the securities regulator passed in February.
The report, “Disclosing Climate Risks: How 100 Companies Are Responding to New SEC Guidelines,” is based on what ISS says is a “careful analysis of 100 large-cap U.S. companies’ climate risk disclosures,” and provides insight into best practices in climate risk disclosure and identifies opportunities where companies can further improve their communication with investors and other stakeholders.
Mallika Paulraj, the report’s author, stated in the release that “Only 51 out of 100 of the largest U.S. companies surveyed in this report mentioned risks from climate change in their 2009 annual reports.” He adds that here is “vast room for improvement in both the quality and quantity of companies’ disclosure of these risks to investors.”
The new SEC guidelines along with disclosure suggestions outlined in ISS’s report can help companies that are committed to sustainability to “institute a multi-year, staged process to improve existing disclosures or begin to disclose climate-related risk,” Paulraj said.
Some key findings of the report include:
- Only 20% of companies cover all issues defined in the February 2010 SEC climate risk guidelines in their most recent Form 10-K disclosure;
- Climate risk disclosure varies considerably, both between companies in the same sector and across different sectors;
- The energy and utilities sectors lead in climate risk disclosure, due to the carbon-intensive nature of their businesses; and
- Quantification of climate risks and articulation of mitigation strategies are in many cases weak or missing in the 2009 statements.