Letter to the Hon. Gary Gensler, Chairman of the Securities and Exchange Commission - Casten, Warren Submit Comments to SEC To Require Public Companies to Disclose Climate Related Risk

Letter

Dear Chairman Gensler:
We write in response to the Securities and Exchange Commission's (SEC) request for public
input on climate disclosures. Climate change is one of, if not the single-largest systemic risk to
our global financial system and consistent and mandatory climate change disclosures are
imperative. Investors are demanding this information to better understand their risk to this
exposure. We appreciate the SEC's initiative, which is a necessary first step towards correcting
this shortfall in our U.S. capital markets.

It is well established that climate change is a risk to the stability of the global financial system.
The United Nations Intergovernmental Panel on Climate Change (IPCC) has found that without
rapid, ambitious changes to all sectors of society, we will not limit global warming to 1.5˚C and
prevent the ensuing sea level rise, polar ice cap melting, and habitat destruction. The report
found that reaching this goal would "require rapid and far-reaching transitions in energy, land,
urban and infrastructure [systems] (including transport and buildings), and industrial systems."

Earth has already warmed by about 1 degree Celsius, or 1.8 degrees Fahrenheit, since the 19th
century, and the pace of warming is only increasing. It is estimated that global greenhouse gas
emissions must peak by 2020 and decline rapidly thereafter to limit the increase in the global
average temperature to no more than 1.5°C above pre-industrial levels. But, based on current
policies and commitments, "global emissions are not even estimated to peak by 2030--let alone
by 2020." Trends show we are not slowing down. It is long past the time for waffling -- the
climate crisis is a real threat. More heat in the atmosphere is the direct cause of more extreme weather events, rising sea levels, droughts, longer and more destructive wildfire seasons, crop
failures, refugee crises, and the migration of tropical diseases into historically temperate regions.

These effects in turn are causing real, measurable declines in our economic output. A recent
study by SwissRe found that if we meet the Paris Agreements targets and stay below 2°C
temperature increase by 2050, global GDP will decrease by 4%. Remain on our current trajectory and we can expect an 18% reduction in GDP. The Commodity Futures and Trading Commission (CFTC) recently came to a broadly similar conclusion for the U.S. economy, noting that "the latest research suggests that, by the end of this century, the negative impacts on the United States from climate change will amount to about 1.2 percent of annual gross domestic product (GDP) for every 1 degree Celsius increase." It goes on to say that the existing disclosure regime has not resulted in disclosures of a scope, breadth, and quality to be sufficiently useful to market participants and regulators. They specifically note that the information companies are currently disclosing has significant variations making it difficult for investors and others to understand exposure and manage climate risks.

The U.S. is far behind our global partners in addressing climate-related financial risk. It has been
over a decade since the SEC has taken action on this issue, and only recently have our other
regulators started to address this issue with the seriousness it demands. We welcome the recent
actions of the SEC by Commissioner Allison Herren Lee to direct the Division of Corporation
Finance to enhance its focus on climate-related disclosure in public company filings, and issuing
this request for public input on climate risk disclosure is beginning that process.

The current voluntary parameters under the SEC's 2010 Guidance Related to Climate Change
are untenable. Only a mandatory framework can ensure that the market is able to appropriately
assess the severe costs and risks of climate change. We have introduced the Climate Risk
Disclosure Act, S. 1217/H.R. 2570, to present a market-based solution to understand the impact
of a changing climate on companies and provide investors, lenders, and insurers better
information.

The Climate Risk Disclosure Act of 2021 would require public companies to disclose more
information about their exposure to climate-related risks, which will help investors appropriately
assess those risks, ease the transition from fossil fuels to cleaner and more sustainable energy
sources, and reduce the chances of both environmental and financial catastrophe.

Specifically, it states that disclosures must include:
* Evaluation of financial impacts and risk management strategies (including physical and
transitional risk),
* Governance structures and processes to identify and manage climate risks,
* Actions being taken to address climate risk,
* Resilience strategies for climate scenarios, and
* How climate risk is integrated into overall risk strategy.

Additionally, it directs your agency in consultation with climate experts at other federal agencies,
to issue rules within two years of the bill's enactment to establish climate risk disclosure rules
that:

* Are tailored to specific industries,
* Include direct and indirect emissions, disaggregated by greenhouse gas,
* Include reporting standards on all fossil fuel related assets and the percentage of fossil
fuel related assets relative to total assets owned or managed,
* Specify the requirements for scenario analyses,
* Include quantitative analysis to support qualitative statements, industry specific metrics, a
discussion of short- medium- and long-term resilience and risk strategies, and the total
cost attributable to direct and indirect greenhouse gases (using at least the social cost of
carbon),
* Consider a baseline, 1.5 degree, and other scenario that includes the physical impacts of
climate change, and
* Include additional and specific disclosures if the issuer is in the business of commercial
development of fossils.
In your examination, we would implore the SEC to develop requirements like these which
facilitate consistent, reliable, and comparable disclosures, protect shareholders, and provide
needed transparency.
Thank you for your consideration of these issues. We're encouraged by the SEC's engagement
on climate-related financial risk and climate risk disclosure and look forward to working with
you in the future.

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