In a press release dated August 27, 2008, New York Attorney General Andrew Cuomo announced what is claimed to be the first-ever agreement requiring a company, Xcel Energy (NYSE: XEL) (“Xcel”), to detail financial liabilities related to climate change. The Office of the Attorney General reports that the agreement comes at a time when many power companies are investing in new coal-burning power generation that will contribute to global warming emissions.
Attorney General Cuomo is quoted as stating “[t]his landmark agreement sets a new industry-wide precedent that will force companies to disclose the true financial risks that climate change poses to their investors [ . . . ] Coal-fired power plants can significantly contribute to global warming and investors have the right to know all the associated risks.”
The agreement includes binding and enforceable provisions that require Xcel to provide detailed disclosure of climate change and associated risks in its “Form 10-K” filings, the annual summary report on a company’s performance required by the Securities and Exchange Commission to inform investors. These required disclosures include an analysis of financial risks from climate change related to:
- present and probable future climate change regulation and legislation;
- climate-change related litigation; and
- physical impacts of climate change.
Additionally, the agreement commits Xcel to a broad array of climate change disclosures, including:
- current carbon emissions;
- projected increases in carbon emissions from planned coal-fired power plants;
- company strategies for reducing, offsetting, limiting, or otherwise managing its global warming pollution emissions and expected global warming emissions reductions from these actions; and
- corporate governance actions related to climate change, including whether environmental performance is incorporated into officer compensation.
The press release states that knowledge of financial risks created by regulatory efforts, such as New York’s newly adopted regional carbon regulations for power plants, future state and federal regulatory efforts, and climate-change related litigation, assist investors to make informed financial decisions.
Dale Bryk, director of the Natural Resources Defense Council’s State Climate Change Program, is quoted as saying, “As New York and other Northeastern states move forward with the nation’s first cap and trade program for global warming, investors need full disclosure of the financial risks faced by power companies and others with large carbon footprints.”