Law and the Environment : Environmental Lawyer & Attorney : Foley Hoag Law Firm : Boston, Washington D.C.

The US Securities and Exchange Commission released a staff bulletin yesterday that reverses a Bush administration policy that excluded shareholder resolutions which asked companies to disclose their climate-related financial exposure. While not the rule-making we discussed last week, this could be a significant change for the boards of large companies who may now be forced to respond to shareholder concerns about the risks that greenhouse gases and climate change can create.

The Bulletin states that going forward, the Corporation Finance Division will no longer automatically allow the exclusion of proposals that deal with the evaluation of risk, but will look at the subject matter giving rise to the risk.  The Division will generally not permit a company to exclude a shareholder proposal that deals with significant policy issues relating to the evaluation of risk.  The Division noted in its decision that risk management and risk oversight can have major impacts not only on the shareholders, but on the company itself, and that application of the Bush administration framework in SLB No. 14C led to unwarranted exclusions.

CERES, which had long lobbied for such a change in the SEC's policies, applauded yesterday’s announcement, concluding that “the guidance strikes the right balance of ensuring that resolutions about critical matters reach company share owners, without opening the floodgates to proposals of more questionable significance.”

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An update to a development we noted a few weeks ago --  as reported by Climate Wire today, at the national meeting of the National Association of Insurance Commissioners (NAIC) yesterday, regulatory officials from all 50 states, the District of Columbia and five U.S. territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands) unanimously voted in favor of rules requiring insurers to disclose the impacts of climate change on their business decisions. 

The mandatory survey's adoption comes shortly after Maplecroft, a British risk management firm, reported that, although third world countries are more likely to experience climate-related fatalities, the US ranks #1 in the study's list of nations facing financial climate risk, and averaged $18 billion annually in economic losses from natural disasters between 1980 and 2008. 

As insurance is regulated by each state independently, the climate risk rules must still be adopted by individual states in order to be enforced.  Nonetheless, given that all members voted in favor of the rules, adoption seems likely.   To ensure that the rules are applied evenly, the NAIC Climate Change Task Force plans to monitor states' actions and collect sample answers from insurers to see how the surveys are completed. 

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Sometimes it seems as though the days for coal are short. With a new administration that seems truly committed to addressing climate change, it can be difficult to envision a long-run future. 

Other days, coal, like Citigroup, seems too big to fail. Today, I’m in the latter camp. Yesterday, Zurich Financial Group announced that it would provide insurance to cover risks associated with carbon capture and sequestration (CCS) projects. It’s one thing for Congress, where climate change advocates may need votes from coal-state legislators, to support CCS projects, but when the market starts suggesting that CCS projects are viable, it’s time to sit up and take notice.

Time will tell whether CCS really has a future as part of a climate change strategy, but certainly Zurich’s announcement is a positive one for coal.

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