Power company in the U.S. to disclose climate risks to investors

Published|27.10.08

Dynegy, a U.S. power company, agreed to disclose its financial risks from climate change under a binding and enforceable agreement with the New York’s General Attorney Andrew M. Cuomo.

The reporting requirement is to include not only risks from present and probable future climate change legislation, regulation and litigation, but also risks from the physical impacts of climate change. This new regulatory landmark reinforces the materiality of climate change impacts as financial risks upon companies. Former U.S. Vice President Al Gore supported the agreement and claimed that it served investors’ right to the truth so as to avoid unnecessary risks.

This is the second deal to come out of Cuomo’s filings to the Securities Exchange Commission (SEC) in September 2007 against five power companies with plans to build new coal-fired power plants: AES Corporation, Dominion, Dynegy, Peabody Energy and Xcel Energy. In August 2008, Xcel Energy agreed to disclose the financial risks that climate change poses to its investors in its annual reporting to the SEC.

UK incorporated companies should also take note of the forward risk disclosure provisions in the Companies Act and of the increasing interest by institutional investors in potential climatic change risks to their portfolios.

Acclimatise has been advising its clients on the potential legal liability issues and business impacts that could arise from failing to assess and disclose the risks of inevitable climate change to their business models (see our previous News Item ‘Directors in the dock’).

If you would like to learn more about our climate change risk management services and how we can help your company manage the impacts of inevitable climate change, then please contact David Beer, d.beer@acclimatise.uk.com.