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Investors Want SEC's Help on Climate Risks

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Investors Want SEC's Help on Climate Risks

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Investors Want SEC's Help on Climate Risks

Investors Want SEC's Help on Climate Risks

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  • <iframe src="https://www.npr.org/player/embed/14495722/14495473" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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A group of state treasurers and asset management companies that controls billions in stocks and other securities wants to protect against exposure to climate change.

The group petitioned the U.S. Securities and Exchange Commission to have companies disclose the risk their industries as a result of climate change that might deal a blow to profits.

Public companies must now report any risks that could have a substantial impact on their financial well being. But so far, most businesses don't have much to say about climate change.

Alex Sink wants that to change. She's Florida's chief financial officer and she oversees a pension fund worth $140 billion.

"We're interested in ensuring that we maximize our investment returns for our recipients," Sink said.

Sink highlights a Florida power company that recently was blocked from building a new coal-fired power plant because of climate change concerns. That decision has implications for that company's financial future and investors deserved to know about it, she said.

"It's become very difficult to analyze and evaluate a company — how the impact of global warming might impact their particular businesses, both from a negative and from a positive or an opportunity standpoint," she added.

Other top financial or legal officials from 10 other states signed the petition along with major investment companies and environmental.

"We represent well over $1 trillion of investment assets," said Sink. "So we aren't a small group of fringe investors asking the SEC to take this action."

American Electric Power, one of the nation's biggest power providers, already mentions climate change in its financial reports.

"We basically describe that if greenhouse gas rules or legislation does come into being sometime in the country, it's likely to have material effect on the financial condition of the company," said Tom Berkinmeyer, a lawyer for the American Electric Power.

But the power company doesn't say much more than that. Berkinmeyer said that's because the U.S. Congress hasn't decided how to regulate greenhouse gas emissions.

Industry analyst Peter Wallison said the SEC is sure to turn down the petitioners' request.

"The rules already require companies to do exactly what they're asking if it represents any kind of real threat or additional cost they will have to bear in the future," said Wallison, who works for the American Enterprise Institute, a Washington think tank that favors limited government.

He said the reason companies don't say more about climate change is that the risks pale in comparison to others.

"This one would fall way, way down the list of potential costs to companies," said Wallison. "For example, there is a lot of political risk about health insurance costs, there's political risk about tax changes, and interest rate changes."

But Donald Langevoort, a law professor at Georgetown University, agrees that it is time for the SEC to require companies to focus more on global warming.

"On the assumption that climate change really is going to change the cost of doing business, it's important that companies focus attention on this and disclosure can be healthy in that regard," Langevoort said.

And if the SEC requires more disclosure, companies may be prodded to do more to cut back their greenhouse gas emissions.

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