League Supports Climate Risk Disclosure Act of 2021

LWVUS endorsed the reintroduction of the Climate Risk Disclosure Act of 2021. The bill, introduced by Senator Warren (D-MA) and Representative Sean Casten (D-IL6), will help accelerate the transition to a low-carbon economy and reduce the risk for financial instability by ensuring that shareholders have the information they need to mitigate financial, physical, and legal climate related risks to their investments.

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Senator Elizabeth Warren

317 Hart Senate Office Building

Washington, DC 20510

 

Representative Sean Casten

429 Cannon House Office Building

Washington, DC 20515

 

Dear Senator Warren and Representative Casten:

 

The 82 undersigned organizations write to you in support of the Climate Risk Disclosure Act of 2021. The bill is a necessary step to ensure that shareholders have the information they need to adequately mitigate financial, physical and legal climate-related risks to their investments. By ensuring that private capital can appropriately assess climate-related risks, the bill will help accelerate the transition to a low-carbon economy and reduce the risk of financial instability.

Climate change poses significant risks and challenges to businesses, whether or not companies have acknowledged this in their public communications. For example, fossil fuel companies already face worsening flooding at refineries that threaten their infrastructure, increasing potential for stranded assets as society demands a transition away from fossil fuels, and mounting lawsuits by municipalities seeking to recover costs of adapting to climate impacts and responding to climate-related damages. These challenges, and many others, will only intensify in the coming years and decades. Despite these risks, many companies fail to share this critical information with their shareholders – and those that do provide patchwork data that is unstandardized across the industry and therefore difficult for regulators and Main Street investors to parse.

The international financial community is already taking steps to meet global commitments to rapidly transition to a low-carbon economy, striving to limit global warming to 1.5 degrees Celsius above pre-industrial levels to avoid the worst effects of climate change. The Climate Risk Disclosure Act tasks the Securities and Exchange Commission with developing the standards that would allow systematic evaluation of climate-related risks. The bill responds to mainstream investor expectations, as reflected by the participation of 545 global investors who are responsible for more than $52 trillion in assets under management in the Climate Action 100+ initiative calling for enhanced corporate climate disclosure, and in SEC Acting Chair Allison Herren Lee’s recent direction to the agency to update its disclosure guidance in order to meet investor demand.

A recent report from the U.S. Commodity Futures Trading Commission finds that “climate change poses a major risk to the stability of the U.S. financial system” and recommends that the U.S. “move urgently and decisively to measure, understand, and address these risks,” including ensuring that regulators have the data they need to analyze climate risks. Just as regulators must be able to accurately assess climate-related risk to the financial system, investors must be able to do the same for their assets.

Ensuring that climate risk disclosure is standardized will allow companies and investors— especially those managing state employee pension funds and other long-term portfolios—to plan for a low-carbon future and guarantee that science and data guide the process.

We are grateful for your leadership in addressing the necessity of climate risk disclosure and holding public companies accountable to their shareholders.

 

Sincerely,

See Attached Letter for Full List of Signatories