Companies: Come Clean on Climate Change

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ExxonMobil's (XOM) disclosure was abysmal, as was that of Massey Coal, owned by Massey Energy (MEE). If all companies reported as they do, investing would be akin to throwing darts.

Investors are also pushing for better corporate disclosure on other environmental, social, and governance (ESG) issues. Water scarcity, child labor in contract factories, and executive compensation are examples of ESG issues that can have an impact on a company's bottom line. "What we seek is not radical but rooted in the SEC's duty to follow the most fundamental investor-protection principle there is: the right to know," says California State Treasurer Bill Lockyer, one of 14 leading investors who petitioned the SEC last October to include climate change and other material ESG issues in disclosure requirements for companies.

Investors have concluded, and research backs them up, that attention to ESG issues correlates with financial performance.

Financial service firms are also taking notice. Bloomberg is launching a ground-breaking ESG data service for its customers that could revolutionize financial markets with transparency. Starting late this year, clients using Bloomberg's 250,000 data terminals will have access to all publicly available ESG data from 2,000 to 3,000 companies.

Cluing Investors In

And just last month, the world's largest stock exchange group, NYSE Euronext, announced a partnership with ASSET4, a database of ESG information on 2,800 global companies, marking the first time a stock exchange will provide investors with key ESG performance indicators.

Still, integration of ESG factors is not mainstream. As Bloomberg's Emil Efthimides said of his company's new initiative: "Eleven percent of assets under management are socially responsible [investors who already use ESG data]. Now the other 89% will get a chance to see this data. Maybe they'll dabble in it or even request the information from companies. It will become a virtuous cycle."

But without a mandate or clear guidelines from the SEC, disclosure will remain spotty and inconsistent, making it difficult for investors to benchmark companies relative to their peers. The SEC must reaffirm its role as the central authority for all business reporting and provide clear disclosure standards on climate change and broader ESG issues.

Today's economic crisis would not have occurred if transparency and accountability were the norm. Reclaiming these fundamentals through better disclosure of climate and other ESG factors will help secure the lasting prosperity of our nation.

Lubber is president of Ceres, a leading coalition of investors, environmental groups, and other public interest organizations working with companies to address sustainability challenges such as climate change. For more information, visit http://www.ceres.org.

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