Month: November 2020

Securities regulators world-wide are “gravitating” to a view that companies’ global-warming disclosures should differ by industry sector, US Securities and Exchange Commission Chairman Jay Clayton said.

Clayton said he spoke with an International Organization of Securities Commissions task force yesterday about how to create global standards that are “meaningful.”

“This is an area where, for certain sectors and certain companies, we all believe disclosure is required, it’s material,” he told the Senate Banking Committee yesterday. “Different sectors, different ways.”

https://mlexmarketinsight.com/insights-center/editors-picks/area-of-expertise/energy/securities-regulators-world-wide-gravitating-to-sector-specific-approach-to-climate-disclosure

https://www.wsj.com/articles/the-u-k-s-experiment-with-climate-reporting-is-worth-watching-11605610427?st=8y4p3tiqv5w9fdj&reflink=article_email_share

The U.K. is making its big corporate and financial sectors think more rigorously about climate change. There could be write-downs, but also reassurance for investors that problems aren’t building up out of sight.

From next year, many U.K. companies and funds will have to report how their assets and organizations will affect and be affected by global warming. The new rules, announced by the country’s Treasury chief, Rishi Sunak, as part of a post-Brexit financial strategy last week, are in line with 2017 recommendations from the Task Force on Climate-related Financial Disclosures.

https://www.reuters.com/article/us-usa-fed-stability-climate-idUSKBN27P2T9

The U.S. Federal Reserve for the first time called out climate change among risks enumerated in its biannual financial stability report, and warned about the potential for abrupt changes in asset values in response to a warming planet.

“Acute hazards, such as storms, floods, or wildfires, may cause investors to update their perceptions of the value of real or financial assets suddenly,” Fed Governor Lael Brainard said in comments attached to the report, released Monday.

“Chronic hazards, such as slow increases in mean temperatures or sea levels, or a gradual change in investor sentiment about those risks, introduce the possibility of abrupt tipping points or significant swings in sentiment,” Brainard said.

Link to Fed Report:

https://www.federalreserve.gov/publications/financial-stability-report.htm

https://blogs.cfainstitute.org/investor/2020/11/09/systemic-climate-risk-and-west-coast-wildfires/

Is 2020 the watershed year when the world begins to understand the concept of systemic risk in our interactions with the natural environment? What explains the recent drumbeat of headlines in the financial press and the accompanying fund flows?

COVID-19 is one reason. The pandemic has accelerated interest in environmental, social, and governance (ESG) investing and influenced government policy, economic activity, and markets in a dramatic, swift, and entirely global way. This is in marked contrast to climate change–associated systemic risk, the awareness of which has developed over a much longer time frame.