SEC Mandates Disclosure for Climate Risks

(January 28, 2010) – Under a new Securities and Exchange Commission decision, companies will be required to disclose the effects of global warming and efforts to mitigate climate change in their financial reports to investors.

The requirement will enhance the consistency of companies’ financial reporting, said SEC chairwoman Mary L. Schapiro, according to Pensions & Investments. “I do not believe that public companies today are doing the best job they possibly can do with respect to their current mandated disclosures,” said Schapiro, who was appointed by President Obama.

Utilities that have high emissions of carbon dioxide may face increased costs from efforts to slow down the effects of climate change. Alternatively, investors looking to benefit from increased data from companies on environmental risks include The California State Teachers’ Retirement System (CalSTRS).

Other investors that may view the new climate-change disclosure standard as an opportunity are sovereign wealth funds. With two-thirds of their wealth coming from oil and gas interests, SWFs may have an intrinsic role toward achieving a clean-tech future and closing the world’s annual funding gap of around $150 billion on projects to cut carbon dioxide emissions, Reuters reported.

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The SEC requirement was approved by a 3-2 commissioner vote along party lines — all three Democrats voted for it and two Republicans, Kathleen Casey and Troy Paredes, rejected the proposal, asserting that scientific claims that man-made emissions lead to climate change are “unsettled,” according to Bloomberg. They said the legislation could bury investors with unnecessary information.

The SEC guidelines are provided partly in response to investors who said companies aren’t providing sufficient data on the potential business risks from environmental protection laws.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

(January 28, 2010) – The $134-billion California State Teachers Retirement System (CalSTRS) will need to ask taxpayers for more cash.

This comes after the country’s biggest government pension fund, the California Public Employees’ Retirement System (CalPERS), deals with charges of bribery and corruption, as middlemen reportedly received $125 million in commissions from investment managers for arranging deals with the $200-billion fund. Its portfolio is down about 20% from its peak in 2007.

CalSTRS’ investment losses have left the system underfunded by $42.6 billion. Its unfunded liabilities almost doubled from $22.5 billion in June 2008, according to a report on CalSTRS’ Web site by CEO Jack Ehnes. Next year, the fund, with $202 billion in assets, will ask lawmakers for an increase of as much as 14% to what the state and school districts currently pay toward employee retirement benefits, reported Bloomberg.

Ehnes said that to replace the gap without higher taxpayer subsidy, the fund would need to earn more than 20%, or more than twice as much as it says is feasible, in each of the next five years, according to Pensions & Investments.

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CalSTRS lost about a quarter of its portfolio in the fiscal year that ended June 30, fueled by a 43% drop in its real estate portfolio and a 27.6% decline in private equity.

Without an increase in contributions by school systems, the state of California, or teachers, the nation’s second-largest public pension fund is expected to run out of money for its defined benefit program by 2045, Ehnes indicated in the report.

Ehnes also said CalSTRS plans to forge ahead with a campaign to educate and persuade legislators to take action in 2011 by approving additional contributions.

Ehnes will deliver the report at CalSTRS’ board meeting on February 5 in West Sacramento. In the meantime, he will travel to Davos, Switzerland to attend the invitation-only World Economic Forum, which started Wednesday and runs through Sunday.

“It is a beneficial trip for us,” said CalSTRS fund spokesman Ricardo Duran to the Los Angles Times. “It keeps us in the forefront of some of the issues the board has identified as being important,” describing the trip’s value of forming contacts with business and governmental leaders.

During the European trip, Ehnes is scheduled to make a speech on “financing low-carbon growth.” He also plans to present a paper about “green investing in 2010,” according to the Los Angles Times.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742