Regulations Pose Potential Risks to the Enterprise

September 12th, 2008

We have provided our customers with important updates to help them stay on top of key regulatory activities that could impact their operations. It’s worth noting that there has been increased activity recently, focused on GHG management, and not all of those proposals are coming from environmental regulators. Here are three examples, courtesy of Jeff Ladner, Director of ESS’ Climate Change Solution Practices:

Binding requirement to disclose climate risk for energy company

• “Under a first-ever binding and enforceable agreement with New York’s Attorney General Andrew M. Cuomo, Xcel Energy will have to disclose the financial risks that climate change poses to its investors in its annual SEC filings.” The deal also commits Xcel to a broad array of climate change disclosures including: projected increase in CO2 emissions from planned coal-fired power plants; strategies for reducing emissions; and corporate governance actions related to climate change.
• Important tip for you: This agreement is expected to set a precedent for climate risk disclosure requirements from the SEC.
• On a related note, 70 institutional investors are following up on earlier petitions to the SEC. The institutional investors are driving the requirement to disclose climate change risk for all public companies.

FASB proposing new standard for disclosing loss contingencies, including environmental liabilities

• The proposed accounting standard seeks to modify the rules currently governing loss contingencies [financial reserves]. The new amendment reflects the growing pressure that large investors are placing on FASB to force companies to come clean about their liabilities in the name of increasing transparency.
• If the rule remains unchanged, it will become effective for annual financial statements issued for fiscal years ending after December 15, 2008.

Climate related shareholder proxies

• You can now track climate/environmental related proxies demanding improved disclosure and transparency. Numerous companies with whom we are actively engaged are involved in addressing shareholder issues THIS YEAR. The file for the proxies is available for download.

Although we’ve been talking about these issues for many years, they seem to be accelerating, and the regulatory environment is changing daily. That’s why we continue to remind decisions makers that integrated information technology is an essential tool for companies that want to successfully navigate through today’s complicated regulatory environment.

Tags: climate change climate risk co2 emissions corporate governance environmental liabilities fasb xcel energy

Entry Filed under: Operational Risk Management, Sustainability, Corporate Responsibility, Corporate Governance, GHG Regulations, Non-Financial Risk Management