Former SEC Commissioner on Utility Financial Disclosures

It is possible that some ESG [environmental, social, and governance] information may be material to a particular company, and if so, current SEC regulations already require that the company disclose the information. But broadly speaking, such information often is not material. 

Yet companies are continually being pressured to disclose ESG information that is unrelated to their financial performance or business operations… 

Unfortunately, the unintended consequences of this disclosure process have cost investors billions of dollars in consulting and legal fees and have worsened the humanitarian situation. This is not unusual with ESG information, and many public companies have found themselves faced with shareholder proposals, litigation, and intense advocacy efforts aimed at promoting social or political goals. Some companies have even been faced with politically motivated investigations into their ESG disclosures – for example, Exxon Mobil was investigated by attorneys general in New York, California, and Massachusetts for its climate change disclosures…

This year, there was an unprecedented level of shareholder support for shareholder proposals requesting companies to report on the “portfolio risk” of the “Two Degree” climate change scenario. These proposals, which call on companies to “publish an annual assessment of the long-term portfolio impacts of technological advances and global climate change policies . . . consistent with [government policies] to limit global average temperature rise to well below 2 degrees Celsius,” were introduced by the New York State Common Retirement Fund and the California Public Employees Retirement System, and similar proposals have been introduced by other shareholder groups…

The electric industry should continue to focus on building and protecting shareholder value. A key part of this endeavor includes reaching out to shareholders. Even though some shareholders are seeking disclosure that is not material, given the large number of utility companies that voluntarily disclose ESG data already and the amount of information being disclosed, the industry would benefit from a smart, industry-specific approach to disclosure.

Is your organization impacting the debate as a member of the PUF community? Nearly two hundred utilities, commissions, consumer advocates, associations, agencies, professional firms and vendors are members. How about yours?

Steve Mitnick, Editor-in-Chief, Public Utilities Fortnightly

E-mail me: mitnick@fortnightly.com