For decades, U.S. companies have been making a significant omission in their financial statements: They’ve failed to recognize and disclose the full cost of climate change. This matters not only for the planet’s future, but also for investors today. It makes some businesses look more profitable than they really are, and it prevents others from realizing the value of new and greener opportunities.
The Securities and Exchange Commission wants to address this by requiring better disclosure of climate-related costs and risks. With some minor adjustments, its proposal is an excellent idea.
Many of the world’s largest companies trumpet their commitment to the environment, producing glossy annual reports loaded with facts and figures. But these efforts often lack rigor and they can be hard to compare across entities and industries. Hence, investors have been clamoring for more consistency and accountability. To that end, initiatives such as the Task Force on Climate-Related Financial Disclosures (chaired by Michael Bloomberg, founder and majority owner of the parent company of Bloomberg News) have developed global reporting standards, and regulators around the world are working to make them mandatory.
