Having failed in their attempt to paint energy companies with the same brush as tobacco companies, environmental activists have switched tactics and are now accusing publicly traded oil and gas corporations of hiding the true costs of climate change to their businesses. The effort threatens to change the current focus of financial reporting—which is to provide salient information to investors—and instead serve the policy agenda of liberal activists.
They have enlisted New York attorney general Eric Schneiderman to lead the cause. Earlier this year, he announced that he is looking at whether Exxon Mobil ignores the true risk of global warming in evaluating its energy reserves. If global warming accelerates, Schneiderman’s logic goes, then Exxon would be stuck with fossil fuel reserves rendered worthless by future regulations or a concomitant reduced demand for oil.
“There may be massive securities fraud here,” Schneiderman averred to the New York Times last month. “If, collectively, the fossil fuel companies are overstating their assets by trillions of dollars, that’s a big deal.”
Around the same time, Obama Administration officials applied pressure to the Securities and Exchange Commission (SEC) to issue “detailed and standardized industry specific requirements for disclosure, and, once in place, aggressively hold public companies to account.”
It’s no surprise that global-warming activists are turning to financial disclosure as a political tool. Labor unions and environmentalists have become adept at using shareholder leverage to embarrass corporate managements, forcing them to spend time and money on compliance and defense, and steering them toward the activists’ social and political goals. However, attempting to subvert reporting requirements goes well beyond what these entities have attempted.
The departing SEC chair, Mary Jo White, a Democratic appointee, clearly understands the objective and has shown little interest in changing the rules, despite intense pressure from Elizabeth Warren and others in Congress. White said in a 2013 speech that political disclosure requirements are aimed more “at exerting societal pressure on companies to change behavior, rather than to disclose financial information that primarily informs investment decisions.”
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