New York State Comptroller Thomas P. DiNapoli and New York City Comptroller Scott M. Stringer today called on the Securities and Exchange Commission to compel fossil fuel industry companies — by enforcement or other action — to enhance disclosure of the material risks climate change poses to their business and what steps they are taking to meet those challenges. DiNapoli, Trustee of the New York State Common Retirement Fund, and Stringer, Chief Investment Advisor of the New York City Retirement Systems, manage more than $330 billion in assets for more than 1.7 million current and retired state, city, and municipal government employees and their beneficiaries.
“As investors, we’re concerned that many fossil fuel companies are responding to global warming’s unprecedented challenge with a business-as-usual approach,” DiNapoli said. “It’s time for the SEC to step in and, through regulatory or enforcement action, require these companies to provide complete and accurate information to protect investors and the broader marketplace. Fossil fuel companies can’t acknowledge climate change and their role in it, but then act as if it won’t affect them and their investors. They can’t have it both ways.”
“The silence of fossil fuel companies on the risks they face from climate change is a red flag for investors,” Stringer said. “The SEC has both the authority and the responsibility to require fossil fuel companies to disclose material risks related to climate change, including potential physical impacts and regulatory responses. We need better enforcement of existing disclosure regulations to ensure that our portfolio companies are protecting our investment for the long-term.”
In response to investors’ repeated calls for more information, many fossil fuel companies have admitted that climate change is real and that their products produce emissions that contribute to it. But when asked how laws and regulations to prevent climate change may affect their business models, many companies such as ExxonMobil have said that there will be no impact.
In their letter to Commissioner Mary Jo White, the Comptrollers note that volatility in the fossil fuel industry will likely continue and that SEC action now “will ensure that investors have the benefit of company analysis of the potential impact of large and growing risks on future company performance.”
Climate change has spurred calls for significant reductions in carbon emissions and to embrace alternative energies but fossil fuel companies have shown little evidence they’re adjusting their business models to meet these changes. Few companies have explained how they will address the risks that rising sea levels and extreme weather pose to coastal refineries, port facilities, off-shore oil rigs or other critical infrastructure. Regulatory actions such as carbon pricing that have gone into effect in the northeastern U.S., California and Europe have the potential to limit development of fossil fuel reserves, yet companies have largely not disclosed realistic plans to address these risks.
The New York State Common Retirement Fund is currently participating in a study, conducted by Mercer with other global institutional investors, to study the impact that various climate change scenarios could have on investments. The study will help the Fund manage its asset allocation to meet risks.
The full text of the Comptrollers’ letter is available here: www.osc.state.ny.us/sites/default/files/other/documents/pdf/2019-03/sec-corporate-disclosure-letter.pdf
Ceres, a non-profit advocate for sustainability leadership, submitted its own similar letter to the SEC. Comptroller DiNapoli is a member of Ceres’ board.
About the New York State Common Retirement Fund
The New York State Common Retirement Fund is the third largest public pension fund in the United States with assets of $176.8 billion as of March 31, 2014. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. The Fund has a diversified portfolio of public and private equities, fixed income, real estate and alternative instruments.