Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Thursday, October 25, 2007

Climate change to get higher on the IR agenda?

Pressure is growing on issuers to enhance company communications on climate change and the impact of their businesses on the environment. Several events in the last few days have ratcheted up how investors feel about this.

First is an initiative from a group of leading US and European institutional investors who speak for $1.5 trillion. They have filed a petition asking that the Securities Exchange Commission (SEC) require publicly-traded companies to assess and fully disclose their financial risks from climate change. They include funds such as CalPERS, and CERES (a European coalition of investors and environmentalists).

The petition points out that corporations should, under existing rules, disclose the risks faced in connection with climate change as they are material to shareholder investment decisions. And that the SEC should be commenting more on any absence of disclosure.

Next, a UN report released this week claims that asset managers who take environmental and social factors into account when building an investment portfolio don't suffer a performance penalty. Indeed, the U.N., who examined more than 20 academic studies, found that half said the effect was positive, while the rest were ‘neutral’.

The findings are significant as funds have frequently ignored so-called responsible investments in the belief that they don't generate as high returns as mainstream channels, but investor appetite is growing as issues such as climate change and human rights dominate headlines.

And its not just institutional investors. A story emerges about the Sisters of Saint Dominic who own 300 of the 5 billion Exxon Mobile shares outstanding. They use those few shares to keep the company talking about an issue that it would probably prefer to ignore.

So investor appetite for environmental information to be communicated is developing fast.

Channels for this communication range from the ‘passive’, such as an annual report, to the ‘active’. These include company participation in investor conferences, dedicated to environmental issues, to be run in coming weeks by investment banks such as UBS, Credit Suisse and Lehmann.

And there even news wires (yes I know – see my attribution) that focus on this. CSR Wire transmits news to those proactively signed up as interested.

So the tools are there, the investor interest is growing, and some companies are already there. Others will surely follow.


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