Copyright 2015. No quotation or citation without attribution.

Brown-Watson Case 15-04

Royal Dutch Shell

By: Sophie Purdom

WATSON INSTITUTE, BROWN UNIVERSITY
Prepared for Professor Peter Gourevitch
Course on Corporate Accountability
Fall 2015

Copyright 2015. No quotation or citation without attribution.
Table of Contents:
0. Overview
I.

Introduction

II.

Corporate practice of concern
a. Description
i. Climate change
ii. Carbon bubble
iii. Carbon asset riskb. Justification for action
i. Current need for action
ii. Current actioniii. Effects of current action

III.

Corporate case study proposal

IV.

Proposed action
a. Description
i. Justificationb. Actors
i. Justification
ii. Political environmentc. Implementation

V.

Projected challenges
a. Obstacle 1: Company participationb. Obstacle 2: Intentional and unintentional greenwashingc. Obstacle 3: SEC politicization slippery slope
d. Obstacle 4: Lack of enforcement

VI.

Alternative actions
a. Alternative 1: Department of Laborb. Alternative 2: Attorney Generalc. Alternative 3: Voluntary disclosured. Alternative 4: Exchanges

VII.

Footnotes

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0. Overview:
Firm: Royal Dutch Shell
Field of CSR concern: Environment
Standard or social practice of concern: Carbon risk disclosure
Stakeholders at risk: Investors
Monitor: U.S. Securities and Exchange Commission (SEC)
Point of view: Reduce materiality risk to investors through transparent and complete
reporting practices of carbon asset risk.
Tools: Legislation
Response of the firm: Increases reporting to investors on carbon risk, therefore provoking
pressure from investors to limit carbon risk by including climate change projections and carbon
pricing into internal management decisions.
System at work (interaction between the two): SEC identifies risk to investors, passes
legislation to affect actions of corporation investors have material grounding to provoke action
from corporation.
I. Introduction:
Global climate change poses a great risk to carbon-intensive industries. i To protect
shareholder value and the public commons of the atmosphere, understanding oil majors’
perspective on climate legislation and physical carbon asset risk is paramount.
This proposal seeks to lay the groundwork for researching the question: Whatorganizational body and what actions can best hold carbon-intensive corporations accountable
for minimizing the carbon asset risk they pass on to investors?
II. Corporate practice of concern:a. Description:
i. Climate change:
Science shows with 95% certaintyii that the 20th century’s unprecedented warming is due
to “dangerous anthropogenic interference with the climate system”.2 If average global
temperature continues on its current trajectory and rises 2°C above 1990 levels,iii the atmosphere
will reach a tipping point beyond which the world’s best scientists predict catastrophic outcomesCopyright 2015. No quotation or citation without attribution.
for ecosystems, the market, and humans alike.3 In order to “hold the increase in global
temperature below two degrees Celsius”iv as agreed upon by the 167 ratifying countries of the
Copenhagen Accord, carbon dioxide, the primary greenhouse gas emitted through humanactivityv, must be limited.
Recent research from the Climate Accountability Institute reveals that 63% of historicalglobal carbon emissions since 1854 can be traced back to the 90 biggest oil, gas and coalproducers and cement manufacturers. vi Of that, the top five ‘oil majors,’ ChevronTexaco,
ExxonMobil, BP, Shell, and ConocoPhillips account for a total of 12.5% of total carbon emitted
to the atmosphere with half of the emissions occurring since 1986.6 This research is factual in its
reporting of oil majors’ significant contribution to the current atmospheric carbon problem.
ii. Carbon bubble:
Complementary research from the International Energy Association (IEA) projects thatcurrent fossil fuel reserves if produced and emitted in the future will far exceed the 2 degree
Copenhagen limit. In fact, the IEA posits that in order to avoid catastrophic climate impacts, nomore than one-third of current fossil fuel reserves can be burned.vii This future projection of apotential necessary limitation on fossil fuel reserve production has dire implication for the oil
industry.
In 2011, the Carbon Tracker Initiative (CTI) picked up on this impending challenge with
its report, “Unburnable Carbon: Are the world’s financial markets carrying a carbon bubble?”.viii
CTI pioneered the idea of a ‘carbon bubble’ based on the Intergovernmental Panel on Climate
Change’s projection of a ‘carbon budget,’ the amount of carbon dioxide emissions permissible toemit into the atmosphere while still having a reasonable chance of meeting the 2 degree
Copenhagen limit.3 CTI argues that if the world must abide by the 2 degree limit, whichscientists agree equates to a carbon budget of 886GtCO2 (without widespread carbon capture andstorage abatement technologies), then already by 2011 the world had burned through over a thirdof its available atmospheric carbon emissions allocation. This left a potential for 565GtCO2 offurther emissions. Complicating the picture more is the fact that all of the proven reserves offossil fuels total an equivalent of 2,795 GtCO2, vastly overshooting the global carbon budget.
The top 100 listed coal and oil and gas companies alone represent total emissions of 745GtCO2.
The simple math which Bill McKibben calculated in his widely popular Rolling Stone article,“Global Warming’s Terrifying New Math: Three simple numbers that add up to a globalCopyright 2015. No quotation or citation without attribution.
catastrophe – and that make clear who the real enemy is,” concludes that only 20% of valued
reserves can be burned unabated, leaving up to 80% of assets technically unburnable.ix
It is this final word – unburnable – that has since driven much of the international
conversation around the supposed carbon bubble. Coined ‘unburnable carbon,’x these reserves offossil fuels that cannot be burned in a 2 degree world pose serious economic risks.xi Companies
in the coal, oil and gas sectors continue to seek to develop further unburnable resources eachyear; in 2012, such companies spent $674B to find and develop new fossil fuel resources.10
However, there is growing concern in the financial sector that these assets might never make it tomarket.xii Impending climate legislation, decreasing coal and oil demand, increasing production
costs, and renewable energy sources reaching price parity all pose serious risks to business as
usual carbon-intensive companies.xiii
iii. Carbon asset risk:
The Carbon Tracker Initiative in conjunction with Ceres coined this potential economic
catastrophe of unburnable carbon reserves precipitously losing their value ‘carbon asset risk’(CAR).xiv
b. Justification for action:
i. Current need for action:
Under the International Energy Agency’s 2 degree scenario, over 1,541GtCO2 would
have to be left underground, undeveloped.xv Economists have translated the value of thosecurrent assets that would never be brought to market at $6 trillion.xvi Complicating the situation
further is the fact that those reserves have already been incorporated into the valuation ofcompanies.16 That means that unburnable carbon is currently being traded in stock markets
around the world and has a direct, and potentially devastating effect, on shareholders.xvii
Markets fail when the full social costs of negative externalities are not accounted for in
pricing mechanisms; carbon emissions are negative externalities that are currently not priced into
the market.xviii This means that carbon-intensive products such as fossil fuels are incorrectly
priced far below their actual cost to society.xix As carbon emissions increase globally with farreaching devastating effects, it is paramount that a price is placed on carbon.xx
ii. Current action:
Investors lack adequate information to price carbon asset risk.xxi Current U.S. Securities
and Exchange Commission (SEC), the primary agency responsible for enforcing and regulating

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the nation's stock and options exchanges, lacks sufficient guidance on climate disclosure because
the SEC neither requires quantitative reporting of emissions nor management of physical andlegislative climate risks.xxii Similarly, the SEC insufficiently enforces responsible reporting; outof the 45,000 comment letters that the SEC sent to registrants since February 2010, only 23
addressed climate disclosure.14 Without the realistic threat of SEC audits, the fossil fuel industry
has no incentive to accurately report CAR estimates.xxiii
As a result, the market systematically overvalues the carbon-intensive assets of the fossil
fuel industry.xxiv This information asymmetry generates two problems. First, the market faces thepossibility of a carbon bubble by clearing at an inaccurately inflated price. Second, theenvironment suffers from an overconsumption of fossil fuels.
iii. Effects of current action:
Yet oil companies continue to invest billions of dollars each year in developing highcarbon, high-cost reserves that will not come on to the market for at least ten years. These
projects’ positive return on investment is premised on a high oil barrel price.xxv If a national orinternational price on carbon increases the cost of their production severely enough, theinternalization of the carbon negative externality is likely to make numerous current and future
low-return projects unprofitable, effectively ‘stranding’ these oil assets.xxvi
Such translation of carbon asset risk into stranded assets has only recently begun to bementioned in traditional financial circles. Of the academic studies published on this subject, mosthave tried to evaluate oil companies’ levels to stranded assets by focusing on company strategy
related to extraction, production and refining site location; market-share; profitability; company
nationality; and threats of entering parties.
III. Corporate case study proposal:
Royal Dutch Shell makes an excellent case study because it is among the larger fossil
fuel companies and has created a department explicitly dedicated to managing the risk of climate
and carbon. Royal Dutch Shell produces rigorous energy outlook reports, invests heavily inrenewables, and recently opened one of the world’s first economically-feasible carbon captureand storage (CCS) plants. But there remains much opportunity to improve Shell’s carbon
disclosure practices especially as they relate to financial reporting.

Copyright 2015. No quotation or citation without attribution.
IV. Proposed action:
a. Description:
As of the February 2010 Commission Guidance Regarding Disclosure Related to Climate
Change, the Securities and Exchange Commission requires that publicly traded companies
disclose climate-related risks in their 10-K filings. Such risks include the physical impact ofclimate change and related legislative and regulatory developments. The Guidance does not
require any new reporting of information but rather specifies that climate risks are indeed
material and therefore must be incorporated in filings.
This proposal recommends that additional specification over disclosure requirements be
included in a more stringent and enforceable SEC ruling on climate disclosure. Explicitly,
carbon-intensive industries, including the energy industry to which Royal Dutch Shell would be
included, should be mandated to disclose on capital expenditures and related risks so thatinvestors can integrate climate risks into their investment strategies. Furthermore, the SEC
should clarify what counts as material by specifying that carbon costs and understanding ofsystemic risks to industry from climate change are included in companies’ assessments.
i. Justification
Regulation is the most effective mechanism for reducing investors’ systemic climate risk
through disclosure. Disclosure is the least obtrusive and most organic method for pricing climate
risk into the market by information revelation. Since laggards will be incentivized to hide theirunderperformance, regulation enforced by the government will maintain an equal playing fieldthat allows investors to allocate funding appropriately.
b. Actors:
The Securities and Exchange Commission Chair, Mary Jo White, should lead the charge.
i. Justification:
The SEC should champion climate risk reporting because their charter is to be
responsible for enforcing, proposing, and regulating securities rules. The SEC has a three-part
mission: to protect investors, manage markets, and facilitate capital growth. As the Chair of theSEC, Mary Jo White’s job is to protect investors. Climate risk, proven as an unregulated material
risk to investors, falls explicitly within the realm of her job description.

Copyright 2015. No quotation or citation without attribution.
However, before hearing or acting on climate risk reporting, Mary Jo White would needsupport to counteract the pushback from players who would be acutely disadvantaged from any
change from the status quo. Essentially White, as is the reality for any politically appointed
official, requires a positive outcome from the cost-benefit analysis of expending political capitalon this issue. Her job could be made easier and she would be more likely to act given themobilization of support in favor of increased climate risk disclosure. This political environmentis described below.
ii. Political environment:
Mary Jo White and the SEC are likely to act on increasing climate risk disclosure given afavorable political environment that minimizes legal or public relations pushback. Such anenvironment can be fostered by broadcast support from parties that would be affected by theregulation. This support has already begun to be mobilized through sign-on letters such as the“Inadequate Carbon Asset Risk Disclosure by Oil and Gas Companies” letter from Ceres
Investor Network on Climate Risk to Mary Jo White. Institutional investors managing over $1.9
trillion signed on to the letter in agreement in April 2015. Clearly, the support from investors forincreased disclosure has already been amassed. As for support from those players who would be
most detrimentally affected by a change from the status quo towards increased disclosure, they
too have demonstrated support, albeit for different reasoning. Carbon intensive industries likeenergy and utilities have begun to call for stable standards for reporting and carbon pricing. Theirperspective is that carbon pricing is inevitable and climate change poses physical risk to assets,
two challenges which leading energy and utilities companies already account for internally.
These leaders hope to gain a competitive advantage by differentiating themselves from theirlesser-prepared competitors through first mover advantage. Mary Jo White would be inclined toincrease climate risk reporting requirements if she knew that the strongest historical opponents
were actually in favor of the regulation. For that reason, standardized reporting on climate risk issought by the strange pairing of investors who benefit from increased data on materiality andcarbon intensive corporates who benefit from predictability. Such a political environment infavor of increased regulation from both affected parties lowers the barriers for the SEC to takeaction.
c. Implementation:

Copyright 2015. No quotation or citation without attribution.
The SEC should amend the “Commission Guidance Regarding Disclosure Related to
Climate Change” to require disclosure of quantified greenhouse gas emissions and reduction
targets, discussion of climate governance and strategy, and companies’ internal carbon price. The
Commission has the authority to do so already; Securities Act Rule 408 requires that publiccompanies disclose to the SEC ‘‘such further material information, if any, as may benecessary.’’ xxvii Moreover, the SEC has explicit authority to strengthen existing disclosure
requirements as they apply to climate change matters6 without requiring a Congressional vote.
Further, the SEC should hire 2 full-time equivalent staffxxviii trained in climate financexxix
to generate approximately 3,000 comment letters per year enforcing adequate climate disclosure.
d. Immediate challenges
1. Hiring 2 FTEs trained in climate finance will increase the SEC’s budget by$200,000/year.xxx
2. Increasing disclosure requirements will require all public companies to allocate moreresources towards reporting.
3. Vulnerable companies with special interestsxxxi will lobby against increased reporting
requirements, likely citing proprietary information constraints. Conversely, investors
representing over $34 trillion in assets under management support improved corporate
climate disclosure.xxxii
V. Projected challenges:
a. Obstacle 1: Company participation
Disclosure is only effective if companies participate. Three years after the SEC requiredthat companies inform investors of the risks that climate change poses to their business, almost
75 percent of the nation's publicly traded companies are ignoring the ruling. According toresearch by Lawrence Taylor and the Sustainability Accounting Standards Board, an analysis ofannual reports of 3,895 U.S. public companies listed on major stock exchanges determined that
only 27 percent mentioned "climate change" or "global warming" in their 2013 filing.
This simple keyword search surfaces a major challenge to the SEC’s call for disclosure.
Namely, companies are not taking seriously the requirement to include climate in material risk
disclosure. Therefore companies are not participating. Without participation by companies,

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investors are no better off than before the ruling and cannot incorporate climate risks into theirinvestment decision-making process or engagements with company management.
b. Obstacle 2: Intentional and unintentional greenwashing
Even companies that adhere to the SEC requirements to incorporate material climate riskin reporting do not necessarily leave investors better informed. This is due to two reasons:intentional misreporting or lack of capacity.
First, the SEC climate risk disclosure requirements incentivize intentional misreporting or“greenwashing,” deceptive marketing used to promote an unfounded perception of anorganization's environmental friendliness. Company disclosure is used much like a report card at
school to signal performance to investors. Stronger reported performance leads to higher
valuation which favors managers who profit from increases in share price. Naturally managers
are incentivized to paint an overly optimistic and green picture of companies’ environmental risk
management. Usually, reporting is kept in check by outside analysts and the SEC itself thatmaintains accuracy. Fines are levied against companies that misreport and shareholder
confidence in the legitimacy of the rest of the firms’ reporting plummets leading to sell offs anddeclining share price. Clearly inaccurate reporting and regulation violations have strong negative
consequences which is why most companies understand that it is better not to cheat (note therecent Volkswagen scandal and near 50 percent decline in stock price.) However, whenregulators do not enforce reporting and when external analysts cannot prove inaccuracy, theincentive for companies to not conflate performance is reduced. This is the current situation with
SEC climate disclosure requirements. The SEC itself has not enforced reporting and external
analysts have not succeeded in muckraking a proven example of misreporting. This is partly due
to the fact that reporting is based off of new metrics that the industry has yet to fully develop ashared language around and also because the metrics are not completely quantitative orcomparable.
Second, overly positive and non-material disclosure is apt to occur from the SEC
mandate because companies, even with the right intentions, do not have the capacity or
knowledge to include pertinent information in their filings. Many companies do not have theresources to hire or train an employee with environmental risk reporting expertise, a system forgathering data and internal reporting, or a sense of what is material to share with investors. In
short, climate risk reporting is new and unknown. As a result, many companies tell stories orCopyright 2015. No quotation or citation without attribution.
share mission statements about their environmental practices which are hard to verify and evenharder to disprove. The information that is disclosed to investors ends up being insignificant andfluffy, not pertinent to actual decision making and often seen as a waste of time.
c. Obstacle 3: SEC politicization slippery slope
As the slippery slope logical argument goes, one small step in a certain direction can leadto a much more significant chain of related events. The slippery slope argument could be used by
opponents as a fear-mongering tactic to dissuade action by the SEC. Opponents would argue that
if the SEC increased reporting requirements for climate risk, it would not have standing to denyincreased regulation over other risks raised by concerned parties in the future.
This obstacle could be avoided by the important distinguishing fact that climate risk has
been repeatedly proven to be a material risk. The SEC is duty-bound to protect investors throughdisclosure of material risks. By using research on materiality, the SEC can distinguish between
legitimate and illegitimate requests for increased regulation.
At the same time, the SEC should be cautious about setting precedent for being batteredby competing political groups. Motivated interests could turn on the SEC as the new battlefield
for lobbyists seeking beneficial regulation or lack thereof. To avoid this risk, the SEC shouldmake it clear that it does not create legislation but rather enforces as an independent regulatory
agency with its head serving independently from Presidential appointments.
e. Obstacle 4: Lack of enforcement
A final obstacle to the success of SEC climate risk reporting standards is lack ofenforceability or prosecution. The real strength of disclosure becomes evident when all parties
must participate. Currently, voluntary disclosure is utilized by outperforming companies whoseek to differentiate themselves through their superior performance. However, voluntarymeasures by definition do not mandate participation and thus underperforming companies are
incentivized to not disclose their risks. When all parties participate, those seeking information
can draw conclusions about leaders and laggards given performance in aggregate. Just as George
Akerlof’s paper "The Market for Lemons: Quality Uncertainty and the Market Mechanism"
examined how information asymmetry between buyers and sellers led to adverse selection andeventually market collapse, information asymmetry (or perceived information asymmetry)
between investors and public companies leads to misevaluation. Such systemic incorrectCopyright 2015. No quotation or citation without attribution.
valuation cannot be prevented by individual companies alone, hence why the SEC must mandatethat all affected parties participate in accurate disclosure.
The first enforcement obstacle refers to the SEC’s ability to administer compliance fromall affected parties. The SEC can mandate that materially affected companies report on climate
risk but this requirement will be ignored by disaffected parties unless there is an enforcement
mechanism that tilts the cost-benefit analysis of compliance towards reporting. An example ofsuch an enforcement tool is financial penalties or legal citations for reporting avoidance. Suchenforcement mechanisms require staff time but could actually generate revenue through fines.
The second enforcement obstacle is a result of the first challenge. Some participatingcompanies will be incentivized to inaccurately or incompletely report their actual climate risk.
Given no penalty for inaccuracy, companies will become complacent and the information
available to investors will be useless or worse, detrimental. This obstacle can be overcome by the
SEC’s verification of the accuracy of companies’ reports. SEC staff trained in the subject matter
could either spot check or respond to investors’ requests for verification of company reporting
accuracy. The SEC has authority to do so given its charter and responsibilities to protect
investors and maintain the functionality of stock exchanges. As it does with enforcing
participation, the SEC will need teeth to enforce accuracy of reporting. In this case, mere
exposure of inaccuracy by the SEC should pose a financial incentive to companies sinceinvestors will pay a lower price for stocks with a damaged reputation that have been exposed as
apt to misreport.
VI. Alternative actions:a. Alternative 1: Department of Labor
Beyond mandating disclosure standards, an additional method for decreasing portfolio’s
climate risk is to require that government fiduciaries consider environmental, social, andgovernance factors in their pension fund investment decisions. This alternative route to reduced
climate risk leverages demand as opposed to regulation to drive increased disclosure. By
increasing the demand for high performing ESG stocks, pension funds can incentivize companies
to report on ESG factors through a consumer-oriented approach. Pension funds are the strongest
candidate for creating enough, or withholding enough, demand to change corporate reportingCopyright 2015. No quotation or citation without attribution.
behavior because of their enormous assets under management and government-influenced
investment theses.
In fact this approach has recently been piloted. On October 22, 2015 the Department ofLabor announced that pension fund fiduciaries should consider ESG factors in their investment
decisions. In response to the new guidance issued for retirement plans covered by the Employee
Retirement Income Security Act, Secretary of Labor Thomas E. Perez went one step further andexplicitly stated that, "investing in the best interests of a retirement plan and in the growth of acommunity can go hand in hand." Through this action the Department of Labor influenced theallocation of $24.5 trillion in retirement and pension assets. However, demand-side, consumeroriented initiatives often lack high standards of monitoring. Therefore, it could be expected thatthe Department of Labor’s increased demand for ESG abiding firms results in greenwashing or
low compliance.
b. Alternative 2: Attorney General
Enforcement for transparent climate risk disclosure could alternatively come from the
U.S. Justice Department. Currently, Exxon Mobil is under investigation to determine whether theenergy company properly informed its investors of the profit risks that might arise due todecreased demand for fossil fuels. In response to the New York Attorney General Eric
Schneiderman’s case against them, Exxon stated publically on its website that it "has included
information about the business risk of climate change for many years in [its] 10-K, Corporate
Citizenship Report and in other reports to shareholders." The case is to determine whether Exxon
disclosed all material information to shareholders as soon as it understood them, especiallyduring recent years.
The ramifications of this case echo far. If the Justice Department, the U.S.’s arbiter of thelaw, is taking on Exxon, the second largest public corporation in America, over climate
disclosure, it is safe to say that climate disclosure is significant. It is also safe to say thatcompetitors are taking note. However, improving disclosure through fear of investigation is only
effective depending on how credible a threat companies deem public precedent-setting
investigations.
c. Alternative 3: Voluntary disclosure
The initial initiative behind climate risk disclosure coalesced around organizations
promoting voluntary disclosure. The leader of such initiative is CDP, formerly the Carbon

Copyright 2015. No quotation or citation without attribution.
Disclosure Project, which seeks to augment the SEC’s 10K reporting standard specific to climate
risk. Using the same template as a 10K, CDP prompts public companies to respond to questions
about direct and indirect quantified emissions, consideration of environmental policies, andcarbon pricing among others. Although the number of participating companies has grown to over
2,000, voluntary disclosures will only remain appealing to leaders. Unless the voluntary
disclosure movement grows to be so large that it looks egregiously suspicious to not participate,laggards will opt out. However, voluntary disclosure plays an instrumental role in standard
setting and iterating on disclosure methodology. Another leading organization, The
Sustainability Accounting Standards Board (SASB), seeks to do just that. SASB’s mission is todevelop and disseminate accounting standards for sustainability issues to help public
corporations disclose material information to investors. Voluntary disclosure is an essentialbuilding block towards mandatory disclosure.
d. Alternative 4: Exchanges
Yet another link in the disclosure chain is exchanges. At a unique nexus between issuers
and investors, stock exchanges play a unique role in shaping the sustainability of capital markets.
Stock exchanges set the standards for the depth, consistency and comparability of corporate
disclosure and some have begun to set minimal standards for sustainability disclosure as aprerequisite for companies to list. For example, The World Federation of Exchanges in
November issued 34 material ESG metrics to include in disclosure guidance. Actions like thisare significant because they set consistent and comparable standards across markets.
VII. Endnotes:
i “Value at Risk: Climate Change and the Future of Governance,” Ceres, April 2002
ii Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia,

V. Bex and P.M. Midgley, Climate Change 2013: The Physical Science Basis. Contribution ofWorking Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate
Change, IPCC, 2013, Cambridge University Pressiii Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I.

Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlömer, C. von Stechow, T.
Zwickel and J.C. Minx, Climate Change 2014: Mitigation of Climate Change. Contribution ofWorking Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate
Change, IPCC, 2014, Cambridge University Press

Copyright 2015. No quotation or citation without attribution.

iv “Copenhagen Accord,” U.N. Framework Convention on Climate Change, United Nations,

December 18, 2009
v “NRC: Advancing the Science of Climate Change,” National Research Council, The National

Academies Pressvi Richard Heede, “Tracing anthropogenic carbon dioxide and methane emissions to fossil

fuel and cement producers, 1854-2010,” Journal of Climatic Change, V 122
vii International Energy Agency/OECD, World Energy Outlook: 2012, 2012viii Carbon Tracker Initiative, “Unburnable Carbon: Are the world’s financial markets

carrying a carbon bubble?,” 2011, http://www.carbontracker.org/wpcontent/uploads/2014/09/Unburnable-Carbon-Full-rev2-1.pdf
ix Bill McKibben, “Global Warming’s Terrifying New Math: Three simple numbers that add

up to a global catastrophe – and that make clear who the real enemy is,” Rolling Stone, July19, 2012
x Carbon Tracker Initiative in association with the Grantham Research Institute on Climate

Change and the Environment, “Unburnable Carbon 2013: Wasted capital and stranded
assets,” 2013, http://www.carbontracker.org/wp-content/uploads/2014/09/UnburnableCarbon-2-Web-Version.pdf
xi Oliver Tietjen and Michael Pahle, “Analyzing Investment Risks in Conventional andRenewable Energy Dominated Electricity Markets,” International Association for Energy
Economics, December 10, 2014
xii Busch and Raschky, “Value-at-Risk of Carbon Constrains an Input Oriented Approach of

Resource Scarcity,” Wuppertal Institute for Climate, Environment and Energy, 2004
xiii Ralph Cavanagh, Ashok Gupta, Dan Lashof, Marika Tatsutani, “Utilities and CO2

emissions: Who bears the risks of future regulation?,” The Electricity Journal, Volume 6,
Issue 2, March 1993
xiv “Cool Response: The SEC and Corporate Climate Change Reporting—SEC Climate

Guidance & S&P 500 Reporting: 2010-2013,” Ceres, February 2014,
http://www.ceres.org/resources/reports/cool-response-the-sec-corporate-climatechange-reportingxv Carbon Tracker Initiative, “Oil & Gas Majors: Fact Sheets,” August 2014,

http://www.carbontracker.org/wp-content/uploads/2014/09/CTI-Oil-Gas-MajorsCompany-Factsheets-August-2014-EXEC-SUMMARY.pdf

Copyright 2015. No quotation or citation without attribution.
xvi Bloomberg Carbon Risk Valuation Tool, Bloomberg Professional, November 2013
xvii Bokenkamp, Karl, et al. "Hedging carbon risk: Protecting customers and shareholders

from the financial risk associated with carbon dioxide emissions." The Electricity Journal
18.6 (2005): 11-24.
xviii Sheila Bonini and Steven Swartz, “Profits with purpose: How organizing forsustainability can benefit the bottom line,” McKinsey & Company, 2014
and “Sustainable Capitalism,” Generation Investment Management, February 2012
xix Skjaerseth and Skodvin, “Climate change and the oil industry: common problems,different strategies,” Global Environmental Politics, Vol 1, 2001

xx Karl Schultz, “Gaining Competitive Advantage in a Carbon-constrained World: Strategies

for European Business,” European Management Journal, Vol 23, Issue 4, August 2005.

xxi Timo Busch and Volker Hoffmann, “Emerging carbon constraints for corporate risk

management,” Ecological Economics, Volume 62, May 15, 2007xxii 17 C.F.R. § 211, 231, and 241 (2010 effective Feb. 8)xxiii Vijn, et al., “Reporting the Business Implications of Climate Change in Sustainability

Reports,” KPMG Global Sustainability Services and the Global Reporting Initiative, 2007xxiv Ben Caldecott and Jeremy McDaniels, “Financial Dynamics of the Environment: Risk,

Impacts, and Barriers to Resilience,” Working Paper for UNEP Inquiry into the Design of a
Sustainable Financial System, July 14, 2014
xxv Levy and Kolk, “Strategic responses to global climate change: conflicting pressures on

multinationals in the oil industry,” Business Politics, 2002
xxvi Ben Caldecott and James Tilbury, “Stranded Assets and Scenarios,” Christian Carey

Discussion Paper, January 28, 2014xxvii 17 C.F.R. § 230.408

xxviii Given that 73% of 3,895 U.S. public companies listed on major stock exchanges did not

mentioned "climate change" or "global warming" in their 2013 filings. (According to “Most
U.S. Companies Ignoring SEC Rule to Disclose Climate Risks,” Hirji, InsiderClimate News,
September 19, 2013,
http://insideclimatenews.org/news/20130919/most-us-companies-ignoring-sec-ruledisclose-climaterisks?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A%20solvecli
mate%2Fblog%20%28InsideClimate%20News%29&utm_content=Netvibes) at least 2,843
companies are in violation of withstanding SEC climate disclosure standards. AccountingCopyright 2015. No quotation or citation without attribution.
for .5 hour per comment letter and 1,680 annual hours per FTE, to generate at least 2,843
comment letters the SEC should hire 1 FTE. However, to engage laggardly companies
through further responses, the SEC should hire an additional 1 FTE who will spend
approximately 1 hour per comment letter conversation for roughly 1,420 companies.
xxix Most current SEC staff are not trained in climate risk nor do they have the capacity tokeep up-to-date with the burgeoning field.

xxx Assuming that an individual trained in climate finance would be hired as a “highly

trained accountant” at SK-13 with approximate annual salary of $100,000, hiring two
climate finance employees full-time will cost $200,000 annually. (According to“Opportunities for Accountants with SEC,” SEC,
http://www.sec.gov/jobs/jobs_accountants.shtml)
xxxi Special interest industries include electric power generation, oil & gas, mining,transportation, real estate, manufacturing, insurance, agriculture, and apparel.
Principles for Responsible Investment (PRI) Initiative, Principle 6 number of signatories
as of April 2013, http://www.unpri.org/about-pri/about-pri/xxxii