Virtually all the leading candidates for next year’s Democratic presidential nomination are calling for mandatory disclosure of the climate risk fossil companies face. And fossils are beginning to feel the heat.
“Environmental groups and investors alike say the U.S. Securities and Exchange Commission (SEC) has let oil and gas companies obscure how stricter greenhouse gas regulations and the changing climate could jeopardize their operations,” Politico reports. “Now, fossil fuel producers worry that a Democratic president would require them to make damaging revelations that would spook investors.”
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That’s after potential nominees Joe Biden, Elizabeth Warren, Jay Inslee, and Beto O’Rourke all put forward measures to strengthen the SEC’s requirements for climate-related disclosures.
“They don’t need to be climate warriors, but they should be warriors for shareholders understanding the risk associated with their investments,” said Sen. Brian Schatz (D, HI). “If they’re not requiring one of the fastest-growing risks to be accurately accounted for, then they’re not doing their job.”
Politico has summaries of the climate disclosure positions espoused to date by Biden, Inslee, Warren, and candidates Cory Booker, Kamala Harris, and Kirsten Gillibrand.
“The growing push heightens the stakes of the 2020 election for oil and gas companies, whose fossil fuel assets are worth hundreds of billions of dollars,” the publication notes. And “the calls for more disclosure around climate risks aren’t limited to companies’ SEC filings. Last week, Commodity Futures Trading Commission member Rostin Behnam called for the agency to form a subcommittee focused on climate-related financial market risks, and he warned that global warming could spark a 2008-style financial meltdown.”
The SEC declined to comment on its climate disclosure policies, but fossils were already pushing back hard.
“The potential for an extremist ideologue Democrat in the White House weaponizing the SEC and overall corporate governance policies in the context of the environmental, social, and governance suite of issues is quite a serious concern among publicly-held companies in the energy sector,” said Stephen Brown, principal at RBJ Strategies LLC, described by Politico as an energy lobbying firm. “It impacts the cost of capital and risks micro-management of corporate activities.”
“The SEC should avoid promoting political, social, and public policy objectives, or attempting to drive related corporate behaviour advocated by special interest groups,” added Exxon Vice President and Controller David Rosenthal.
As You Sow President Danielle Fugere acknowledged that mandatory disclosure on a par with SEC rules for reporting companies’ oil and gas reserves could harm fossils’ balance sheets—by accurately reflecting the risks they face. “If these issues were clearly disclosed according to an SEC format like that which is required for reserves, credit [ratings] could be downgraded sooner rather than later for certain companies,” she told Politico. “I have no idea what level this would rise to but, from a broader economic standpoint, this would appropriately facilitate re-ordering toward a low-carbon transition.”
Politico cites fossil lobbyists who “are warning clients to reach out to Democrats to press them on the harms publicly-traded energy companies would face if the SEC were to force them to produce regular reports of how climate change is affecting their business. Lobbyists are also advising clients what legal actions they could take to slow down any changes at the SEC.”
The story notes that Donald Trump’s SEC “has blocked shareholder resolutions aimed at requiring climate risk disclosures, arguing in one case that a climate measure directed at Exxon was an attempt by a subset of shareholders to ‘micromanage’ the fossil fuel giant. It made a similar ruling for oil and gas producer Devon Energy against a climate resolution in March.”