In July 2020, the National Whistleblower Center (NWC) released a report detailing widespread deception by fossil fuel executives regarding the financial risks of climate change. The report describes why deception about companies’ preparedness for climate change risks represents a ticking time bomb that, if not addressed, could contribute to worldwide economic devastation.
The report, written by a team of NWC experts, provides the first-ever analysis of legal strategies for exposing climate risk fraud by the fossil fuel sector. It also represents the first study to use the methods of professional fraud investigators to identify fossil fuel industry financial disclosure practices that are likely to be fraudulent.
The key findings of the report include:
The full report is available here.
In July 2020, the Global Financial Markets Center’s The FinReg Blog launched a month-long special issue that reflects the complex, international, and interdisciplinary interaction between climate change, financial markets, and financial stability. The Climate Change and Financial Markets special issue includes scholarship and analysis from practitioners and researchers spanning multiple disciplines and institutional contexts. The pieces address distinct aspects of climate change and financial markets, including issues relating to Risk Measurement and Management, Regulation and Supervision, Corporate Governance, Monetary Policy, Environmental Justice, Macroeconomics of Climate and Health Crises, and Market Adaptation and Financial Innovation.
Together, the posts in this special issue highlight promising approaches to climate-related financial risk, regulation, and innovation and the need for collaboration among interdisciplinary researchers, financial industry practitioners, and policymakers in addressing this topic of critical importance to economic and environmental resilience. Published pieces are available here.
In a January 2020 statement, SEC Commissioner Allison Herren Lee called on the SEC to stop ignoring the “challenge of disclosure around climate change risk,” and to “begin the difficult process of confronting it.” In her statement, Commissioner Lee highlights that investors are overwhelmingly expressing to the SEC their need for “consistent, reliable, and comparable disclosures of the risks and opportunities related to sustainability measures, particularly climate risk.”
She also points to three problems that have arisen due to the lack of a mandatory standardized framework. First, not all issuers disclose climate-related risks, and disclosure continues to vary greatly by issuer, making it “difficult if not impossible for investors to compare companies.” Second, due to the proliferation of voluntary standards and principles, as well as specific requests from numerous investors, companies are faced with significant, and sometimes competing, disclosure demands. Finally, absent a mandatory standardized framework, significant questions continue to exist regarding the reliability of the information that companies do choose to disclose.
A large group of institutional investors, representing nearly $1 trillion in assets, called on U.S. regulators to consider climate change as a systemic threat to financial markets and the real economy. The letter, sent to the heads of every federal financial regulatory agency, states that climate change could have a “significant disruptive consequences on asset valuations and our nation’s economic stability” and urges regulators to “explicitly integrate climate change across [their] mandates.” The letter also calls on the S.E.C. to establish mandatory and consistent disclosure of climate threats facing companies. The letter, organized by Ceres, is available here.
New York State Comptroller Thomas DiNapoli announced in mid-July that the New York State Common Retirement Fund has divested from 22 thermal coal mining companies, stating that the companies are “not prepared to thrive, or even survive, in the low-carbon economy.” The Fund, whose assets total over $200 billion, pulled nearly $90 million from coal investments. DiNapoli also signaled that the Fund is in the process of evaluating the “low-carbon transition readiness” of companies in industries that are at high risk from climate change, including companies in the energy, utility, oil-sand extraction, and transportation sectors. Comptroller DiNapoli’s statement is available here.
Morgan Stanley recently committed to publicly disclosing the environmental impact of its loans and investments. The bank is also the first major U.S. bank to join the Partnership for Carbon Accounting Financials, a group of 66 formal members representing more than $5.3 trillion in assets who work to help facilitate the transition to net zero emissions, in line with the Paris Climate Agreement.
Click here to read the statement.