Institutional Investors Demand Climate Risk Disclosure

NEW YORK, New York, November 21, 2003 (ENS) - Institutional investors representing over $1 trillion in assets gathered with senior representatives of Wall Street fund management firms at the United Nations New York headquarters today for an unprecedented closed door summit to examine the risks of climate change to their portfolios.

A 10 point "call for action" demanding tough new steps by the U.S. Securities and Exchange Commission (SEC), corporate boards and Wall Street firms to increase corporate disclosure of the risks posed by climate change to pension fund investors emerged from the meeting, called the Institutional Investors Summit on Climate Risk.

Eight state and city treasurers and comptrollers and two major labor pension fund leaders in attendance at the summit have formed an Investor Network on Climate Risk and said they will immediately petition the SEC for enforcement of environmental risk disclosure requirements.

They will seek climate risk disclosure at companies in the oil and gas, electric power, automobile and other sectors.

Summit co-chair and Network member Connecticut Treasurer Denise Nappier said, "Companies that fail to adequately disclose potential liabilities related to climate risk and financial analysts who ignore the potential financial risks of investments in these companies run the risk of fueling the next governance crisis.

Connecticut Treasurer Denise Nappier served as co-chair of the Institutional Investors Summit on Climate Risk. (Photo courtesy Government of Connecticut)

The Network's call for action seeks more power for ordinary shareholders to influence the climate policies of the companies whose shares they hold. It asks that the SEC "re-interpret or change its proxy rules" relating to "ordinary business" to recognize that shareholders should have the right to vote on resolutions asking their companies to report on financial risks that may be faced due to climate change.

The investors called on the U.S. Congress and the Executive Branch, when developing policies to address greenhouse gas emissions, to assess the financial impact of climate change on the value of long-term investments.

State governments and regional organizations must assess the potential financial impact of climate change on their states, and businesses that operate in them, the call to action states.

Speakers at the gathering pointed out that serious global consequences are looming for businesses and their budgets if an appropriate response to climate change is not made.

New York State Comptroller Alan Hevesi said, "Today, we are taking aim at the SEC for not enforcing key rules on disclosure of environmental issues. We are focusing on corporate boards that come up short on corporate governance by failing to analyze and disclose environmental risks. And we urge Wall Street fund management firms to develop an analysis of climate change risk for portfolio companies and industries."

As New York State Comptroller Alan Hevesi is the state's chief financial officer. (Photo courtesy Government of New York)

In attendance were senior executives of Bank of America, Bank of New York, Goldman Sachs, Lazard Asset Management, Lehman Brothers, Marsh and McLennan, Morgan Stanley, Moody's and Standard and Poor's.

Also in attendance at the summit were trustees of Los Angeles and New York City pension funds, the heads of the California Public Employees Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS), as well as representatives of the New York State Teachers' Retirement System and the Michigan Municipal Employee Retirement System.

Former U.S. Vice President Al Gore attended the summit in his new capacity as vice chairman of Metropolitan West Financial of Los Angeles, a financial services holding company with more than $50 billion in assets under management, a position he assumed on Wednesday.

Global warming could have serious consequences for businesses and investor budgets, and not just for the environment itself, unless the world "mounts a sufficient response," UN Secretary-General Kofi Annan told summit participants.

Institutional investors can have "a decisive impact" on future greenhouse gas emissions and the environmental performance of major companies, Annan said, and their decisions "can greatly affect how people work and live over the coming decades."

California State Treasurer Phil Angelides told the gathering, "In global warming, we are facing an enormous risk to the U.S. economy and to retirement funds that Wall Street has so far chosen to ignore. The corporate scandals over the last couple of years have made it clear that investors need to pay more attention to corporate practices that affect long term value."

California State Treasurer Phil Angelides (Photo courtesy Government of California)

In addition to Angelides, Hevesi, and Nappier, initial members of the Investor Network on Climate Risk and signers of the 10 point call for action include Maine Treasurer Dale McCormick, New Mexico Treasurer Robert Virgil, New York City Comptroller William Thompson, Oregon Treasurer Randall Edwards, Vermont Treasurer Jeb Spaulding,

On the pension fund side, signers include Steve Abrecht, director of the National Industry Pension Fund for the 1.6 million member Service Employees International Union, and William Boarman, chairman of the CWA/ITU Negotiated Pension Plan which covers the Communications Workers of America and the International Telecommunication Union.

Co-chaired by Nappier and United Nations Foundation president Timothy Wirth, the Institutional Investors Summit on Climate Risk was supported by the UN Fund for International Partnerships, and supported by the UN Environment Programme and other UN agencies.

The summit was organized by CERES, a U.S. based coalition of investment funds and public interest groups. CERES will serve as the new secretariat to the Investor Network on Climate Risk (INCR).

Climate risk is not only a concern for institutional investors. On its new website: http://www.incr.com, the INCR says, "Climate risk has become embedded, to a greater or lesser extent, in every business and investment portfolio in the United States."