Casten, Senator Warren Lead Colleagues Introducing a Bill to Require Every Public Company to Disclose Climate-Related Risks
Washington, DC – U.S. Representative Sean Casten (IL-06) and U.S. Senator Elizabeth Warren (D-Mass.) today reintroduced the Climate Risk Disclosure Act of 2019 to require public companies to disclose critical information about their exposure to climate-related risks. Originally introduced in 2018, the legislation will help investors appropriately assess climate-related risks, accelerate the transition from fossil fuels to cleaner and more efficient energy sources, and reduce the risks of both environmental and financial catastrophe. It builds on the work of former Vice President Al Gore, who has warned that ignoring the risks of climate change is producing a "carbon bubble" that will have severe economic consequences. The Climate Risk Disclosure Act is cosponsored by Senators Brian Schatz (D-Hawaii), Sheldon Whitehouse (D-R.I.), Chris Van Hollen (D-Md.), Amy Klobuchar (D-Minn.), Kirsten Gillibrand (D-N.Y.), Michael Bennet (D-Colo.), Richard Blumenthal (D-Conn.), Cory Booker (D-N.J.), Edward J. Markey (D-Mass.), Jeff Merkley (D-Ore.), Kamala Harris (D-Calif.), Tina Smith (D-Minn.), Dianne Feinstein (D-Calif.), and Chuck Schumer (D-N.Y.). U.S. Representative Sean Casten (D-Ill.) introduced the House companion legislation, along with U.S. Representative Matthew Cartwright (D-Penn.).
“The climate crisis presents an existential threat to all life on Earth. We need bold, comprehensive climate action. Public corporations must take responsibility for the large financial risks posed by the impacts of climate change, while embracing the economic opportunity of being global leaders in developing a clean energy economy. Our bill utilizes market mechanisms to incentivize climate action by ensuring that corporations disclose the risks posed by climate action to the benefit of their shareholders and the public. I’m proud to introduce this bold climate action bill in the House and am thankful for Senator Warren’s partnership on this issue in the Senate,” said Representative Casten.
“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 reintroducing the Climate Risk Disclosure Act again to give investors, and the American public, the power to hold corporations accountable for their role in the climate crisis.”
"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, Chair of the Special Committee on the Climate Crisis.
“We can minimize the American economy’s exposure to the worsening effects of climate change by making sure companies disclose the real risks they face,” said Senator Whitehouse. “Warnings abound right now. A lot of financial downside across the economy will be prevented if investors start demanding a faster transition to clean energy and preparation for climate change.
“The United States can either lead or follow when it comes to the clean energy transition. I believe we should lead. This legislation would help investors know the serious risks associated with our changing climate, and then help us get to work on combatting these risks for the good of our public health and America’s economic competitiveness,” said Senator Smith.
“The effects of climate change are already visible as we continue to see more and more dangerous wildfires, floods, droughts and hurricanes. This threat, and its effects on the private sector, must be made explicit so the public and shareholders can make informed decisions. We have to stop pretending that the harmful consequences of climate change aren’t already before us and begin factoring those into our decision-making,” said Senator Feinstein.
“This bill will help Americans understand the risks climate change poses to the companies they invest in and to our economy as a whole,” said Congressman Cartwright. “I’ve been proud to work on this issue for years with the U.S. Government Accountability Office, who at my request have produced multiple reports on the SEC’s implementation of the 2010 climate change disclosure guidance. I’ve also been proud of my working relationship with Senator Warren to elevate this issue, and I thank Congressman Casten for his leadership in moving this bill forward.”
“No smart business or investor would make decisions about their day-to-day or long-term actions without systematically researching, documenting and mitigating the risks they face,” said Kathy Mulvey, Fossil Fuel Accountability Campaign Director at the Union of Concerned Scientists. “Mainstream investors are now demanding improved disclosures related to climate change, one of the biggest risks affecting the global economy and individual corporations—particularly fossil fuel giants like ExxonMobil. As our work shows, climate change presents real physical risks, as well as reputational and litigation risks, to companies and will disrupt the ways the private sector operates, whether or not companies have admitted this fact. Ensuring that climate risk disclosure is standardized will allow companies and investors to plan for the future with their eyes wide open.”
Recent data show that a major climate related disaster could trigger severe economic impacts. A report released last month by Moody’s Analytics says the climate change could create tens of trillions of dollars in damages to the world economy by the year 2100, and will “universally hurt worker health and productivity.”
Rising sea levels, extreme storms, water shortages also directly threaten valuable company assets. Freddie Mac stated that it appears climate change will likely destroy billions of dollars in property and produce "economic losses and social disruption . . . likely to be greater in total than those experienced in the housing crisis and Great Recession."
Global efforts to reduce greenhouse gas emissions or mitigate the effects of climate change could dramatically affect the value of company assets as well. To reach the goals of the Paris Agreement, energy experts estimate that the global community must dramatically reduce fossil fuel consumption over the next 30 years, with nearly 0% of electricity generated from coal and about 8% of electricity generated from gas by 2050, while also using carbon dioxide removal activities.
In recognition of the findings in a report released by the Intergovernmental Panel on Climate Change (IPCC) since the bill was originally introduced, the Climate Risk Disclosure Act of 2019 will link disclosures to a scenario where global temperatures are prevented from rising more than 1.5 degrees above preindustrial levels. The IPCC report found that “[w]ith clear benefits to people and natural ecosystems, limiting global warming to 1.5°C compared to 2°C could go hand in hand with ensuring a more sustainable and equitable society.”
The Climate Risk Disclosure Act directs the SEC, in consultation with climate experts at other federal agencies, to issue rules within one year 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 Climate Risk Disclosure Act also 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. The legislation will help the market appropriately assess the risk of climate change which will help push private actors and government actors to act more decisively to address the climate crisis and promote financial stability without costing a penny of taxpayer money.
The legislation is endorsed by over 20 organizations: 350.org, American Family Values, Anthropocene Alliance, As You Sow, Center for International Environmental Law, Climate Hawks Vote, Dwight Hall Socially Responsible Investment Fund, Friends of the Earth, Gasp, Global Witness, Greenpeace USA, Institute for Agriculture and Trade Policy, League of Conservation Voters, Natural Investments LLC, Sierra Club, Sisters of St. Francis of Philadelphia, the Sustainability Group of Loring, Wolcott & Coolidge, Trinity Health, Union of Concerned Scientists, Vert Asset Management, and Mercy Investment Services.