Four Twenty Seven Comments to the SEC

Comment Letter from Four Twenty Seven to Securities and Exchange Commission on Concept Release S7-06-16. (Download full letter here)

 

July 21, 2016

Dear Mr. Fields,

I write on behalf of Four Twenty Seven, Inc., a climate risk analytics and market intelligence firm. We submit this letter of comment for your consideration on SEC Concept Release S7-06-16: Business and Financial Disclosure Required by Regulation S-K.

We warmly welcome the SEC’s renewed engagement and consideration of climate change risk and sustainability issues in corporate risk disclosure. Providing guidance around climate risk disclosures is a critical step not only to help ensure financial markets will not be blindsided by predictable risks, but also to ensure that investors send the appropriate price signals to the decision-makers for the underlying assets – from corporate boards to public officials and real estate owners – thus providing an incentive to better prepare for and adapt to the physical impacts of climate change.

Our comments stem from years of working closely with Fortune 500 corporations to help them understand climate change impacts, quantify risk and monetize costs. The analysis we provide are used by these corporations to inform whether any climate-related risk they face may reach the materiality threshold, and to fulfill disclosure and reporting needs including 10-K filings, CDP reports and SASB metrics. We anticipate this type of analysis will need to become widespread for corporations to comply with the forthcoming guidance from the TCFD, and wanted to share our lessons learned from our past and current work.

Our comments, detailed below following the questionnaire structure, center around two key takeaways:

  1. The Guidance released in 2010 on climate change disclosure was a useful contribution to framing the breadth of issues to be considered around climate change impacts on corporate value and equity risk, but has not been used and applied by the industry as it should have. We recommend the SEC enforces systematically its requirement to disclose material risks, include those related to climate change.
  2. Corporations should be required to provide greater details on how they are incorporating climate data into decision-making processes and perform vulnerability assessments at the asset-level for both corporations and investors, even if the disclosure itself is consolidated. They should demonstrate that they are utilizing fully the wealth of climate data and projections that are available, and leverage sophisticated techniques and models to incorporate uncertainty into their decision processes. Climate risk analysis should rely on common standards, assumptions and scenarios to enable comparison across assets and across markets.

We hope our comments are of use and are available should you have any follow-up questions.

 

Download Four Twenty Seven’s Comment Letter (FourTwentySeven_SEC_ConceptRelease_CommentLetter) for our detailed comments on the SEC Concept Release.

Related comment letters from other stakeholders for the SEC Concept Release are also available for download for information: