Today the Securities and Exchange Commission voted to issue a release directing all public companies to disclose whether global climate change, and the legislation and regulations designed to respond to climate change, will affect the results and operations of those companies. Seems like a fairly straight-forward investor protection measure - isn't the SEC supposed to require public companies to disclose all material risks? The punchline is that before the SEC could issue the release, Republicans on the House Energy and Commerce Committee sent the SEC an angry letter opposing the release, because they fear it will lend support to efforts to pass cap-and-trade legislation. So the two Republican members of the SEC (supposedly an independent agency), voted against the release.
Here is a link to the SEC's press release announcing its climate change interpretative release.
http://www.sec.gov/...
And here is the statement of SEC Chairman Mary Schapiro explaining what the SEC was doing and why.
http://www.sec.gov/...
The basic legal principal here should be completely non-controversial - ever since 1934, publicly traded companies have had to disclose their results, and disclose "known trends and uncertainties" that could affect those results in the future. The SEC simply announced today that global climate change, and the world-wide legislation and regulation designed to combat climate change, may be a material known trend and uncertainty, and public companies should disclose whether and how it will affect their operations.
This SEC release was the result of a petition filed by Ceres and the Environmental Defense Fund, supported by a broad range of large institutional investors, including socially responsible mutual fund companies and large state and local government pension plans. These investors said information about climate change was important to their long-term investing decisions, and that many public companies had not provided enough accurate, reliable, comparable information on this issue to allow them to make informed investment decisions.
You might have thought this would be uncontroversial - but you'd be wrong. The SEC, by law (the Government in the Sunshine Act), had to announce last week it was going to issue this release. The SEC announcement led Texas Rep. Joe Barton, and his sidekick Oregon Rep. Greg Walden, to write a hysterical (in both senses) letter attacking the proposed SEC release (which they hadn't seen, and did not know what it would say). Link is attached:
http://republicans.energycommerce.ho...
Barton, the ranking Republican on the House Energy and Commerce Committee and a bought-and-paid-for captive of the oil and gas industry, is terrified that the SEC's action would give momentum to the CO2 cap-and-trade legislation currently pending in Congress. Barton's argument (as best as I can make it out) is that since the SEC didn't protect investors in the Bernie Madoff case, it shouldn't protect any other investors in any other situation. Big CO2 emitters (such as - steady now - the oil and gas industry, but also utilities and chemical companies) have not been telling their investors how climate change legislation and regulation will affect them. Neither have insurance companies and others that face increased risks from climate change. Investors in those companies face losses because the companies have not come clean about what their real risks are.
OK, hyper-ventilating Congress-critters are nothing new. That's why we have independent agencies like the SEC, to resist political pressure, right? Not so much. By law, two of the five SEC Commissioners must be from a political party different from the President. SEC Commissioner Kathy Casey is a former staffer for Alabama Republican Senator Richard Shelby. So it's no real surprise that she marched in lockstep with the Congressional Republicans, and voted against the release. The bigger surprise is SEC Commissioner Troy Parades, formerly a relatively respected law school prof at Washington University in St. Louis. Parades reasoned that public companies should not have to disclose issues that could hurt their public reputation. He also argued that giving investors too much information would hurt them - it would bury them with trivia. Boy, those are real strong investor-protection rationales there, Troy. I'm not making this up - here's a link to his statement:
http://www.sec.gov/...
Last, he argued that the SEC has more important things to do, and it shouldn't be wasting its time on climate change disclosure.
Three months ago, the SEC updated its guidance on disclosure about oil and gas reserves. The update (which modernized some admittedly outdated standards from the 1970s) had the effect of making the assets of oil and gas companies look more valuable. If you want to read the exceptionally boring guidance, it's here:
http://www.sec.gov/...
I don't remember Joe Barton complaining that the SEC doesn't know anything about oil and gas, or Troy Parades complaining that the SEC had more important things to do then. In the words of the wise church lady, "Isn't that convenient?"