The SEC’s Guidelines on Climate Change disclosure that took effect in February, 2010 were an important first step in prompting public companies to assess the potential impacts – positive as well as negative – of climate change on their business and future prospects. Transparency and honest disclosure of material information to investors are, after all, bedrock requirements of a functioning investment market and, ultimately, our market economy.
Getting mainstream investment professionals – let alone investors and the public – to take advantage of this rare opportunity to extract a new source of insights into corporate prospects has not been easy. But a recent article that exposes contradictions between what some companies are saying to Congress and what they are saying to investors may help change that.
Larry Margasek of the Associated Press reported in an article published on November 25th that several companies, and industry associations that represent them, are telling Congress that proposed air and water pollution reduction regulations will cause great economic hardship and harm. Yet in their SEC disclosure filings to investors, these same companies “consistently said the impact of environmental proposals is unknown or would not cause serious financial harm to a firm’s finances”.
This is a profoundly disturbing finding that should cause investment professionals – as well as Congress, regulators and the public – to demand an honest and straightforward explanation from these companies.
Investment professionals, at least, should also ask probing questions of other companies in the industries involved. They have much to gain, because whatever they learn will be new and can be compared across companies – two of the most important criteria for information that provides a competitive advantage.
- Companies give GOP, regulators, different messages – as published by the Associated Press
- Also published in the Boston Globe, November 26th (may require subscription)