Social and Governance Matters

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Global Stock Exchanges Considering Adopting Sustainability Disclosure Listing Requirements

A group of investors representing over $13 trillion in assets and led by Ceres’s Investor Network on Climate Risk recently submitted recommendations to various global stock exchanges for a uniform mandatory stock exchange standard on corporate environmental, social and governance (ESG) reporting. These recommendations follow Ceres’s April 2013 consultation paper on this topic. The investors recommend exchanges consider adopting, and capturing in a global listing rule, the following three company requirements:

  • First:  Listed companies are to disclose in their annual financial filings a “materiality” assessment where management will discuss its approach to determining what ESG issues are material to their companies.

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Ceres Continues Its Campaign to Improve Climate Change Disclosure in SEC Filings

Ceres, a leading sustainability nonprofit representing institutional investors with over $11 trillion in assets under management, is calling again on the SEC and registrants to do more to improve climate change disclosure in SEC filings. Dissatisfied with the SEC’s perceived lack of follow-through on its own February 2010 Climate Change Disclosure Guidance, Ceres released a report earlier this month, Cool Response: The SEC & Corporate Climate Change Reporting  – SEC Climate Guidance & S&P 500 Reporting – 2010 to 2013, directing the SEC to prioritize climate change disclosure by issuing more comment letters to companies with “inadequate” disclosure. Ceres cites the SEC’s three climate change comments from 2012 to 2013 out of the thousands it issued each year as evidence of the SEC’s poor enforcement of its 2010 disclosure guidance, which Ceres spent several years petitioning the SEC to adopt.
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Investor Group with $3 Trillion under Management Launches Latest Carbon Risk Initiative against Oil & Gas, Coal and Utility Companies Focused on the Value of Fossil Fuel Reserves

A coalition of over 70 international investors has sent letters to 45 of the world’s top oil & gas, coal and electric power companies requesting that the companies assess and disclose potential reduced demand for their products or services due to current and probable future greenhouse gas reduction policies and/or the physical impacts of climate change.  This campaign, the Carbon Asset Risk Initiative (or CARI) led by Ceres and the Carbon Tracker Initiative, is yet another institutional investor and not-for-profit campaign seeking to highlight risks inherent in carbon-intensive industries with the ultimate goal of moving toward renewable energy.  CARI’s main target appears to be oil & gas companies, particularly those with holdings in the carbon-intensive Canadian oil sands.
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Sustainability Accounting Standards Board Develops Industry Standards of Sustainability Disclosure for SEC Filings

Following up on our earlier report, yet another group is determined to require public companies to disclose sustainability issues in SEC filings. The Sustainability Accounting Standards Board (SASB) held a conference recently to discuss its standard-setting process. While its name invokes an immediate similarity to FASB, SASB has no official designation, although its advisory council includes an impressive list of industry, sustainability and financial professionals affiliated with Deutsche Bank, ISS, J.P. Morgan, Goldman Sachs, Morgan Stanley, BlackRock, AllianceBernstein, CalPERS, Ernst & Young, PwC and McKinsey, among others.

After being informed by the SEC of its reluctance to consider a separate line item requirement for environmental, social and governance (ESG) disclosure because of differences among industry sectors, SASB has begun drafting, and plans to adopt by the second quarter of 2015, ESG disclosure standards for 88 different industries in 10 sectors: (i) health care; (ii) financials; (iii) technology & communications; (iv) non-renewable resources; (v) transportation; (vi) services; (vii) resource transformation; (viii) consumption; (ix) renewable resources & alternative energy; and (x) infrastructure.
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