Investors turn up heat on governments to mandate climate disclosure

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Institutional investors are pushing world leaders and U.S. regulators to mandate that companies disclose climate risks.

As world leaders gather ahead of Friday’s meeting of leading industrial nations, 457 institutional investors with a combined $41 trillion in assets are urging governments to do more, sooner.

“We stand at the beginning of a pivotal decade in which institutional investors and government leaders worldwide have the power to raise ambition and accelerate action to tackle the climate crisis,” the investors said in a statement Wednesday, coordinated by the Investor Agenda and signed by investors representing 37% of global professionally managed assets.

“Investors are urgently seeking to decrease their exposure to climate risk as a core fiduciary duty and benefit from the opportunities associated with the transition to a net-zero emissions economy,” the statement said.

Combatting climate risk more aggressively includes committing to mandatory climate risk disclosure requirements aligned with the Task Force on Climate-related Financial Disclosures “that are consistent, comparable, and decision-useful,” the investors said in the 2021 Global Investor Statement to Governments on the Climate Crisis

The statement is available for investors to sign until November, at the start of the United Nations Climate Change Conference, known as COP-26, to be held in Glasgow

Another group of investors called on the SEC to mandate climate disclosure. The 173 investors with a combined $2.5 trillion in assets, plus 155 companies, and 58 nonprofits said in a statement that “disclosure of the material and systemic risks of climate change will help companies and investors to understand, price, and manage climate risks and opportunities. These activities are at the core of efficient securities markets, and are essential to ensuring a just and thriving economy that works for all people and communities,” they said.

Mandated disclosure would come with compliance costs, but “it is far less costly to companies and their investors than ignoring the risk,” they said.

“The SEC really does have a role to play here,” said New York State Comptroller Thomas P. DiNapoli, sole trustee of the New York State Common Retirement Fund, Albany, in an interview.

As investors like the $254.8 billion pension fund assess the long-term viability of the companies they hold in terms of climate risk, he said, “we need the data to be more efficient and certainly more reliable.”