. Mandatory climate risk disclosure is a way to ensure that investors and the public can understand how climate change affects the financial health of these companies and react accordingly.
Mandating climate risk disclosure means moving away from our current, voluntary approach. As SEC Commissioner Allison Herren Lee recently, “The voluntary disclosure that companies have increasingly provided in recent years is still largely regarded as insufficient. It’s not standardized, it’s not consistent, it’s not comparable, and it’s not reliable. Voluntary disclosure is not getting the job done.
Mandating that a company disclose how climate change affects its financial outlook means treating it like any other risk in the financial sector. That means asset managers will consider climate change alongside other forms of risk when they determine the soundness of an investment. This, in turn, will help align prudent financial decision-making with sustainability and protective climate action.No new legislation is necessary to move climate risk disclosure forward.