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Comments of the Competitive Enterprise Institute, et al., on the SEC's Proposal to Mandate Climate Change Risk Disclosure

June 11, 2021

The causes, consequences, and potential future risks of climate change to businesses and society are too uncertain to require companies to calculate and disclose climate risk in their disclosure statements, annual reports and other public documents.,

From the comments:

“What information related to climate risks can be quantified and measured?”

That is the foundational question. ESG and climate activists believe corporations should be required to report the magnitude and probability of the financial losses they could incur due to the physical impacts of climate change. They also want companies, especially fossil-fuel companies, to report their “transition” and “liability” risks—the losses they may incur as climate policies devalue and strand their assets and courts compel them to pay compensation to climate change victims.

However, objective quantification and measurement of such risks is often impossible. Climate risk assessments typically depend on multiple assumptions fraught with uncertainties. Speculative risk guestimates are of little financial value to investors.

In short, no one knows the future impact of climate change 20, 50, and 100 years from now, and the farther out the projection, the history of economic forecasting shows, the more likely such projections are to be wrong. Corporations and investment funds should not be expected to do the impossible and disclose risk they cannot possibly realistically forecast. 

Author
Marlo Lewis, Jr. is a senior fellow at the Competitive Enterprise Institute (CEI), where he writes on global warming, energy policy, and other public policy issues.
mlewis@cei.org