Informing Investors of Climate Risk: The Impact of Securities Laws in the Environmental Context

• Date: 01 June 2016

6-2016 NEWS & ANALYSIS 46 ELR 10455

D I A L O G U E

Informing Investors of Climate

Risk: The Impact of Securities Laws

in the Environmental Context

Summary

Investors, regulators, and shareholders have shown

increasing interest in the information that corporations

do and do not disclose about potential climate risks.

Legal requirements in this area are complex, governed

by an amalgam of securities laws dating back to the

1920s, state anti-fraud statutes, and more recent guid-

ance and voluntary practices specic to climate risk.

On March 17, 2016, the Energy Bar Association’s Envi-

ronmental Regulation Committee convened a panel of

expert practitioners to discuss these issues. is Dia-

logue presents a transcript of the discussion, which has

been edited for style, clarity, and space considerations.

Tom Mounteer (moderator) is a Partner at Paul Hastings

LLP.

Leah A. Dundon is Of Counsel at Beveridge & Diamond

PC.

Kevin A. Ewing is a Partner at Bracewell LLP.

Elizabeth Lewis is Head of Sustainable Investing at the

World Resources Institute.

e panelists thank Bennet t Resnik for organizing the panel.

Tom Mounteer: Our topic today is informing investors

of climate risk . I’ ll begin by introducing the panelists in

alphabetical order. Leah Dundon, Of Counsel at Bev-

eridge & Diamond, is currently working on her Ph.D. in

environmental engineering, management, and policy at

Vanderbilt University. Kevin Ewing, a Partner at Brace-

well, has represented clients responding to the New York

Attorney General’s climate disclosure subpoena, which

we will discuss today. Elizabeth Lewis leads the World

Resource Institute (WRI) sustainable investment initia-

tive; her remarks will explain more fully her function of

leading an eort to encourage institutional investors to

embrace sustainable investment models.

We’ll devote considerable attention to public company

disclosure in the U.S. Securities and Exchange Commis-

sion (SEC) context but, as most of us know, climate risk

disclosure occurs outside the SEC context, and the panelists

will discuss t hat. We’ll view the actions taken by the New

York Attorney General (AG) for special impact. e panel-

ists will highlight the important interconnections between

mandated and voluntary disclosure of climate risk.

Let’s start the discussion by looking outside the SEC con-

text. In late 2015, KPMG released a survey1 that found that

four-fths of the world’s 250 largest businesses reported on

their carbon footprints, and one-half had set public carbon

reduction targets. Elizabeth will set the stage by describing

the state of climate risk disclosure more generally.

Elizabet h Le wis: e KPMG study points to the fact

that, at least in the United States, a lot is happening on

the voluntary disclosure front because of investor interest

and investor pressure on companies, in addition to what is

legally required. In general, we are in many ways follow-

ing trends that started in Europe. Investors who have been

thinking about these issues are looking to what’s going on

in Europe, in pa rticular in the United Kingdom (U.K.),

some of the Sca ndinavian countries, and Paris, which has

probably the most aggressive laws in terms of mandating

carbon disclosures.

I’ll d iscuss U.S. investor interest in terms of the major

institutional U.S. investor markets. First, pension funds

have been very strong leaders in several ways because of

shareholders  ling resolutions. ey’re pretty focused on

oil and gas companies and support better climate-related

disclosures. In many ways, they are probably the rst group

moving on this front. Note that some of th is activity may

be politically related because of the states where these pen-

sion funds are based.

Next, a dramatic shift has occurred in family oces.

In the United States, family oces account for a signi-

cant chunk of institutionally invested money compared to

other countries. is investor group has been very inter-

ested in general in sustainable investing because there’s

so much wea lth now being made by younger people who

1. KPMG, C  C: T KPMG S  C R-

 R 2015 (Nov. 2015), https://assets.kpmg.com/

content/dam/kpmg/pdf/2016/02/kpmg-international-survey-of-corporate-

responsibility-reporting-2015.pdf.

Copyright © 2016 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.