MIL-OSI USA: Warren, Casten, Colleagues Reintroduce Bill Requiring Public Companies to Disclose Climate-Related Risks

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US Senate News:

Source: United States Senator for Massachusetts – Elizabeth Warren

April 15, 2021

The Climate Risk Disclosure Act Would Accelerate the Transition from Fossil Fuels

Bill Text | One-Pager (PDF) 

Washington, DC – United States Senator Elizabeth Warren (D-Mass.) and Representative Sean Casten (D-Ill.) today introduced the Climate Risk Disclosure Act of 2021 which would reduce the chances of environmental and financial catastrophe by requiring public companies to disclose more information about their exposure to climate-related risks. By increasing market transparency, this bill will empower investors to appropriately assess climate-related risks and accelerate the market transition from fossil fuels to cleaner and more sustainable energy sources that mitigate climate change. The introduction of this bill follows a new poll from Data for Progress showing that a majority of voters in the United States “want the government to enact and enforce mandatory disclosure rules so Wall Street does not hide behind their investments that are driving climate change.”

The Climate Risk Disclosure Act is cosponsored by Senators Brian Schatz (D-Hawaii), Sheldon Whitehouse (D-R.I.), Richard Blumenthal (D-Conn.), Dianne Feinstein (D-Calif.), Chris Van Hollen (D-Md.), Edward J. Markey (D-Mass.), Amy Klobuchar (D-Minn.), Tina Smith (D-Minn.), Kirsten Gillibrand (D-N.Y.), Jeff Merkley (D-Ore.), Michael Bennet (D-Colo.), Tom Carper (D-Del.), Majority Leader Chuck Schumer (D-N.Y.), and Cory Booker (D-N.J.). U.S. Representative Sean Casten introduced the House companion legislation, along with Representatives Matt Cartwright (D-Pa.), Bill Foster (D-Ill.), Alan Lowenthal (D-Calif.), Nanette Diaz Barragán (D-Calif.), Joe Neguse (D- Colo.), and Mike Levin (D-Calif.).

Climate change is an existential threat to our planet and poses severe risks for our economy. As Federal Reserve Governor Lael Brainard recently stated, “Climate change is already imposing substantial economic costs and is projected to have a profound effect on the economy at home and abroad…Financial market participants that do not put in place frameworks to assess and address climate-related risks could face significant losses on climate-sensitive assets caused by environmental shifts, by a disorderly transition, or both.”

The Securities and Exchange Commission (SEC) has issued guidelines suggesting that companies consider the effects of the climate crisis on company assets, but it has not mandated that public companies disclose their exposure to climate-related risks. As a result, investors lack access to basic information about the potential impact of the climate crisis on American companies, creating enormous environmental and financial risks.

The Climate Risk Disclosure Act directs the SEC, in consultation with climate experts at other federal agencies, to issue rules within two years that require every public company to disclose:

  •  Its direct and indirect greenhouse gas emissions;
  • The total amount of fossil-fuel related assets that it owns or manages;
  • How its valuation would be affected if climate change continues at its current pace or if policymakers successfully restrict greenhouse gas emissions to meet the 1.5 degrees Celsius goal; and
  • Its risk management strategies related to the physical risks and transition risks posed by the climate crisis.

The bill directs the SEC to tailor these disclosure requirements to different industries and to impose additional disclosure requirements on companies engaged in the commercial development of fossil fuels. It will help the market appropriately assess the risk of climate change and push private and government actors to address the climate crisis with the seriousness that it deserves. Without costing the taxpayer a penny, this bill will help promote financial stability at home and abroad.

“It’s time to wake up and fight back against giant corporations that want to pollute our environment and ask taxpayers to clean up the mess,” said Senator Warren. “I’m glad to reintroduce the Climate Risk Disclosure Act to give investors, and the American public, the power to hold corporations accountable for their role in the climate crisis.”

Rep. Casten said “Climate change poses a grave and imminent threat to the stability of our financial system and its ability to sustain our economy. Senator Warren and I introduced the Climate Risk Disclosure Act requiring publicly traded companies to disclose their climate related risks to provide investors with unambiguous disclosures to accurately convey their exposure to this massive and rapidly growing  risk. The right time to safeguard our financial system against climate change was a decade ago, but our last chance is now.”

“Coloradans and Americans see the threats climate change poses to every sector of our economy,” said Senator Michael Bennet. “Shareholders and the public deserve to know the full picture of a company’s exposure to climate-related risks, as well as the steps it is taking to reduce emissions and protect their financial stability.”

“This bill will ensure corporate giants play their part in fighting climate change. The climate crisis is here, and publicly traded companies should analyze its risks to their companies and the economy, and make that information public. The Climate Risk Disclosure Act would require them to do just that, helping spur investments in clean energy and avoid a financial crisis,” said Senator Blumenthal. 

“Climate change is one of the greatest threats we face. Rising seas, more intense weather, and warming temperatures will continue to have increasing and significant impacts on our country’s infrastructure and economy. Equipping investors with a better understanding of the climate-related risks facing America’s public companies will enable smarter and safer investment decisions, provide greater long-term stability to the American economy, and help our nation fight climate change,” said Senator Booker

“We continue to experience the harmful effects of climate change, including more frequent and dangerous wildfires, droughts, floods and hurricanes. That is why the risks that climate change poses to companies must be made clear to the public and shareholders. They need to be able to factor the potential consequences of climate change into their financial decision-making,” said Senator Feinstein

“Climate change poses severe threats not just to our environmental health, but also to the long term strength of our economy. For decades, big companies have polluted our environment with little transparency with the public and it’s time they disclose the climate-related risks that burden consumers and hurt workers,” said Senator Gillibrand. “I’m proud to join Senator Warren in this fight to address the climate crisis and hold corporations accountable for their climate risks.”

“From farms underwater in the heartland to raging wildfires out west to shipping delays on our waterway infrastructure, we’re seeing the consequences of climate change in communities across the country,” said Senator Klobuchar. “This legislation will ensure that public companies are adequately assessing climate-related risks to our economy and sharing that information with the public. We cannot close our eyes to the climate change that is already happening around us. We must act.”

“We can protect our economic stability and protect the planet at the same time. The climate crisis is an immediate and ongoing threat to our economy, businesses, and communities-and everyone needs to know the risks it poses. Our goal is 100 percent clean, renewable, zero-emissions energy sources, and disclosures in our financial system need to reflect the future of that energy system,” said Senator Markey. 

“We’re already feeling the impacts of climate chaos all around us-from lives lost, displaced communities, and billions of dollars in damages from wildfires, devastating and more powerful hurricanes, and droughts,” said Senator Merkley. “Investments in fossil fuels continue to fan the flames of this crisis, while also putting investors’ money at grave risk-sometimes without them even knowing. It’s time for transparency and open communication about those risks, so Americans can make a truly informed choice about where their money is going.”

“Publicly traded companies have an obligation to their shareholders to disclose all material risk, and climate change is no longer a theoretical problem to be contended with some time in the future. It is here, and it is costing companies money. That cost must be analyzed and disclosed,” said Senator Schatz.

“Climate change represents an existential threat to our country, our economy and our planet,” said Senate Majority Leader Chuck Schumer. “That’s why we must use every tool at our disposal to protect the environment and ourselves from the risks posed by climate change. I’m proud to co-sponsor the Climate Risk Disclosure Act, which will help to hold corporations accountable and combat the climate crisis by accelerating the transition from fossil fuels to clean energy, making our world a safer and healthier place for generations to come.” 

“Climate change is a serious threat but there’s great economic opportunity if we all rise to the challenge of responding to it,” said Senator Smith. “This bill holds public companies accountable for their direct and indirect greenhouse gas emissions, as well as for their investments in the oil and gas industries. It also aims to encourage public companies to act on climate, by requiring them to assess the risk of climate change on their valuation. This will promote financial stability and improve our climate, without spending taxpayer money.”

“The climate crisis poses an imminent threat to our environment and our economy. Investors have a right to know what steps companies are taking to address these threats and what losses they may suffer as a result of inaction. This legislation will not only provide the transparency investors deserve, but will also ultimately help incentivize corporations to step up in the fight against climate change,” said Senator Van Hollen.

“We are on the precipice of a climate catastrophe.  Experts by the dozen warn that its leading edge will be a massive hit to our economy,” said Senator Whitehouse. “Companies that ignore their exposure to climate-related risks disserve both their shareholders and the public.  Accurate disclosure of those risks will help us avert wide-reaching environmental and financial disasters.”

“For the sake of our economy and our communities, we can’t afford to let corporations continue to hide the massive risks of climate change. As a baseline expectation, companies should be required to tell investors how exposed they are to the risks that climate change poses. The ‘Climate Risk Disclosure Act’ sends a powerful signal to the Biden administration to take this problem seriously and pursue common sense action immediately. We applaud Senator Warren and Representative Casten for leading the charge on this vision that can help protect Americans’ homes, jobs, and retirements.” – Jamal Raad, Executive Director, Evergreen Action

“Harms to people, communities and companies across the country are rising due to climate impacts such as flooding, heat and other extreme weather events. Investors and the public deserve comprehensive, consistent and comparable disclosures about climate change risks–one of the biggest threats to the global economy and individual corporations. The Climate Risk Disclosure Act will increase transparency and help ensure science and data are available to help companies better plan for a low-carbon future and provide investors with the information needed to make smart decisions. Mandatory, standardized climate risk disclosure allows companies and investors to plan for the future with their eyes wide open and incentivizes ambitious climate action.” – Kathy Mulvey, Accountability Campaign Director, Climate & Energy Program, Union of Concerned Scientists

“Investors, companies, municipalities and communities lack the information they need to act decisively on climate change risk. Without this information they are flying blind. Today’s voluntary corporate disclosure approach is  not meeting the urgency of the climate crisis. There’s broad consensus that current disclosures are spotty and unreliable, and that the existing system is extremely inefficient for investors and companies, and the broader capital markets. We simply don’t have enough information to price climate risk. That’s why we support the Climate Risk Disclosure Act. This would solidify in legislation important protections for investors, companies and all stakeholders.” – Steven Rothstein, Managing Director for the Ceres Accelerator for Sustainable Capital Markets, Ceres.

“We applaud Sen. Warren, Rep. Casten, and their co-sponsors for recognizing the critical importance of climate risk disclosures to both investors and the public as we grapple with the systemic risks associated with climate change. These disclosures are particularly important for public companies with fossil fuels assets.” – Daniel Mulé, Policy Lead for Extractive Industries Tax and Transparency at Oxfam America.”

“The PRI welcomes the reintroduction of the Climate Risk Disclosure Act, which directs the US Securities and Exchange Commission to issue rules requiring companies to disclose information about their exposure to risks caused by climate change. The Act would enable investors to better assess and manage climate-related risks and opportunities in their portfolios. The PRI supports mandatory climate and ESG disclosure from issuers, and The Climate Risk Disclosure Act is an important step towards this goal.” – Fiona Reynolds, CEO, PRI

“Due to inaction, the United States is behind the rest of the world in safeguarding our markets and limiting exposure to climate risks, especially risks arising from fossil fuel extraction. We appreciate the initiative of Senator Warren, Representative Casten, as well as their cosponsors in establishing US leadership on this issue and strongly support this critical piece of legislation.” – Kathleen Brophy, Director, Publish What You Pay – United States

The legislation is endorsed by 350.org, Americans for Financial Reform, Center for American Progress, Ceres, Data for Progress, Earthjustice, EarthRights International, Evergreen Action, National Whistleblower Center, Oxfam America, Principles for Responsible Investment (PRI), Public Citizen, Publish What You Pay – United States, Sierra Club, Sunrise Movement, Union of Concerned Scientists, and US SIF: The Forum for Sustainable and Responsible Investment.

Combatting the climate crisis is one of Senator Warren’s highest priorities.

  • Last month, Senator Warren unveiled the BUILD GREEN Infrastructure and Jobs Act which would invest $500 billion over ten years in state, local, and tribal projects to jumpstart the transition to all electric public vehicles and rail and help modernize the nation’s crumbling infrastructure.  
  • Senator Warren and Congressman Andy Levin (D-Mich.) announced legislation to use U.S. federal procurement to help fight the climate crisis, spur innovation, and boost demand for American-made clean energy products at home and in the rapidly-growing markets for green products abroad.
  • In May 2019, Senator Warren and Representative Veronica Escobar (D-Tex.) announced the Department of Defense Climate Resiliency and Readiness Act, requiring the Department of Defense (DoD) to adapt its infrastructure and operations to address climate change and improve energy efficiency to strengthen military readiness.

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