There is currently no standardized framework or law requiring corporate climate risk disclosure in the United States
Article in Nation of Change – Aug 1, 2020By Dana Drugmand
Warning of an impending financial implosion driven largely by fossil fuel industry deception, a recent report calls on fossil fuel insiders and other potential whistleblowers to help expose and prosecute this fraud.
According to this new report from the National Whistleblower Center (NWC) published July 23, fossil fuel executives’ deception on the financial risks of climate change—to their business and the economy at large—is widespread and is likely actionable fraud, meaning that further securities fraud lawsuits against companies like ExxonMobil should be expected particularly if whistleblowers come forward to work with financial regulators and prosecutors.
“In light of the deceptions we found, the handful of pending fraud cases challenging climate risk disclosures by fossil fuel companies are probably just the tip of the iceberg,” said John Kostyack, NWC Executive Director and lead author of the report, titled Exposing a Ticking Time Bomb: How Fossil Fuel Industry Fraud is Setting Us Up for a Financial Implosion – and What Whistleblowers Can Do About It. “We anticipate that the number of cases and defendants will increase dramatically in the near future once potential whistleblowers learn about the benefits of modern whistleblower laws and begin providing information to regulators and prosecutors about climate risk deceptions along the lines of those outlined in our report.”
Climate risks include physical risks from climate-related damage to property and infrastructure, as well as transition risks as the world moves away from fossil fuels. Both types of risk “uniquely threaten the finances of fossil fuel companies,” according to the report, and these companies “are therefore highly motivated to conceal their exposure to these risks.” Investors and the larger economy that are deeply intertwined with the fossil fuel sector face serious harm when these climate risks are not disclosed, the report argues.
There is currently no standardized framework or law requiring corporate climate risk disclosure in the United States.
However, Senator Elizabeth Warren (D-MA) has introduced a bill that addresses this gap, and has urged federal financial regulators to mandate climate risk disclosure from public companies. Large investors managing almost $1 trillion in assets (such as pension funds) recently sent a letter to the Federal Reserve, the Securities and Exchange Commission, and other financial regulators warning that the climate crisis is a systemic threat to the economy and calling for mandatory climate risk disclosures.
In March the Senate Democrats’ Special Committee on the Climate Crisis held a hearing where economic experts warned of a potential financial crisis similar to the 2008 economic crash, but this time brought on by the climate crisis. And in June over 60 central banks around the world warned that global GDP could drop by 25 percent by the end of the century without urgent action to reduce greenhouse gas emissions that cause climate change.
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