Investors want more standardized, robust climate change disclosure

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Sarah Wilson, senior director of responsible investing at Nuveen, called for increased transparency from issuers on climate change risks Monday during The Bond Buyer's California Public Finance Conference.

Investors and rating agencies are calling for increased transparency from state and local governments on how climate change will affect them now and in the future.

During The Bond Buyer’s California Public Finance Conference Monday morning, Sarah Wilson, senior director of the responsible investment team at Nuveen, said they have put in their own resources to evaluate risk, but need more disclosure from issuers.

“We would really just call for increased transparency and insight into what the risks are from the issuers’ perspective, which we know will be far more accurate and actionable for us,” Wilson said.

Investors, analysts and rating agencies say a standardized way of getting climate change disclosures would be “the Holy Grail.”

Investors want less boilerplate language from issuers and prefer a more quantitative approach. However, more frequently, issuers aren’t even discussing climate change, Wilson said.

“Boilerplate language may be kind of the first step because obviously going from zero to 100 is going to be tough,” Wilson said.

“But our hope is that boilerplate language is the minimum not the maximum,” she added.

Wilson said she doesn’t expect issuers to have all the answers.

“I think it’s fine to come out with general beliefs in a narrative form, or it’s fine to talk about where you are in a journey of integrating climate risk into capital planning or risk management,” Wilson said.

Jenny Poree, head of the National Municipal and Cooperative Utilities group at S&P Global Ratings,, said her agency has identified that over 30% of rating changes have been driven by ESG (Environmental, Social, Governance) factors, a large percentage being climate-related.

In a California Debt and Investment Advisory Commission report released this month, the commission reviewed almost 200 official statements for enterprise-revenue bonds issued between July 2016 and June 2019 and found that just 37% of issuers mentioned climate change anywhere in their disclosure documents.

“Despite growing market expectations to report climate risk, the majority of issuers in the study did not mention climate change anywhere in their disclosure documents,” the report said.

Some of the panelists believe current COVID-19 disclosure could bring more disclosure to the climate change space.

Robert Berry, CDIAC executive director, called COVID-19 a “microcosm” of the process that issuers are facing regarding disclosure of climate change impacts

Poree said she has seen more robust COVID-19 disclosure, and is hopeful it will encourage issuers to be similarly transparent with climate-related risks.

The Securities and Exchange Commission cannot tell municipal issuers what to put in their financial disclosures, though they are still subject to the SEC’s antifraud laws and are not allowed to omit material information.

In 2010, the SEC released guidance aimed towards corporates to help them know what to disclose in their financials regarding climate change.

In 2018, the number of disclosures in the municipal market began to rise following Exxon Mobil filing litigation against Calfornia issuers for omitting information about climate change in their disclosures.

“This litigation was pretty groundbreaking and caused a bit stir, in both the municipal markets and elsewhere,” said Rudy Salo, partner at Nixon Peabody. “It caused public agencies to review and disclose their climate change risk in their offering documents.”

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