As of 12/15/23, Impax has updated its fossil fuel policy. Learn more here.

Antarctic sea ice has shrunk to its smallest area on record.1 Energy sector methane emissions are 70% higher than official sources say.2 And half of humanity will be exposed to life-threatening risks due to climate change by 2100.3 Those were just a few of the climate change-related news items to hit my inbox one recent morning.

Each day brings fresh reminders that climate change is accelerating and having substantial impacts. But why is this relevant for investors? Most investors might not think Antarctica has much impact on financial markets, but if its continental ice melts, sea levels would rise an estimated 200 feet/60 meters. As sea levels rise, coastal storms stand to become even more damaging and costly. Already, we’ve seen the toll dangerous storms can take ― Consolidated Edison spent approximately $1 billion improving the resilience of New York City’s electric infrastructure after Hurricane Sandy revealed in 2012 how vulnerable it was to severe coastal storms.

Climate change is already having major financial and economic impacts. Consider, for example:

  • Rising temperatures, the expansion of plant pathogens, increased incidence of flooding and drought, and saltwater incursion are already affecting world food production. A recent NASA report noted that maize yields may decline by nearly a quarter, and wheat yields by around 17%, as soon as 2030.4 Climate change impacts are happening now, and will worsen in the future.
  • Some kinds of insurance are already becoming much more expensive due to climate change. The reinsurance firm Swiss Re predicts that climate risks will add $183 billion to property insurance costs by 2040.5
  • A recent academic paper found that stocks that were less vulnerable to hurricane losses outperform more vulnerable stocks by 8.9% per year.6

What the SEC can do

The US Securities and Exchange Commission (SEC) will soon issue a rule covering climate risk disclosures. Here’s what we hope the SEC will include in its climate disclosure rule:

1. Require comprehensive emissions reporting.

  • Mandatory reporting of Scope 1 and Scope 2 emissions: At a minimum, any rule covering emissions reporting should include both Scope 1 (emissions from companies’ own operations) and Scope 2 (emissions from purchased electricity). Most larger companies report these now, but reporting is voluntary, it may not cover all company facilities, and current patchwork reporting makes it difficult to compare a company with its peers.
  • Mandatory statement of policy regarding Scope 3 emissions: Scope 3 emissions ― those associated with companies’ value chains, both upstream and downstream ― are likely the largest sources of emissions for most companies. Mandatory reporting of Scope 3 emissions would give investors a more complete picture of companies’ exposure to climate transition risks and would reveal where they have the greatest opportunities to reduce their climate footprints. Yet, Scope 3 emissions are the most difficult to count, and we recognize the time and expense it would take companies to report them. For that reason, we urge the SEC to require companies to report their statement of policy regarding Scope 3 emissions, with actual disclosure of Scope 3 emissions optional for now and mandatory after a phase-in period, with possible exemptions for smaller companies.

2. Disclose locations of key company assets. Physical climate risk associated with extreme weather events — storms, floods, wildfires, sea level rise — threaten any company; it is estimated that two-thirds of large companies around the world have at least one asset at high risk because of the physical hazards created by a warming climate.7 To price physical risks accurately, investors need to understand where significant assets — those whose loss or damage would be a material event — are located, but company reporting of this information is inadequate. Impax recently engaged with listed US companies in the S&P 500 Index, pressing them to voluntarily disclose the locations of key assets. We have also filed a Petition for Rulemaking with the SEC, urging them to require such disclosure. We believe such reporting should be mandatory rather than voluntary, wherever possible.

3. Require TCFD reporting. The SEC should mandate Task Force for Climate-Related Financial Disclosure (TCFD) reporting. Many companies produce TCFD reports now, but some are incomplete; in particular, there is little reporting on scenario analyses of the risks created by different temperature pathways. We recognize that not all companies are equipped to conduct scenario analysis currently, and mandatory TCFD reporting won’t necessarily require companies to do so, but it will signal and incentivize companies to do more robust reporting.

We have a choice. We can either understand climate risks and opportunities better — and make better informed investment choices based on that understanding — or we can wait for the inevitable surprises that could jeopardize the value of our portfolios. Financial markets don’t appreciate surprises. It’s best to know what might happen so we can make the best choices today to keep our nest eggs from cracking in the future.


1 John Ainger, “Antarctic Sea Ice Shrinks to Smallest Surface Area on Record,” Bloomberg Quint, Feb. 22, 2022.

2 Noah Browning, “Energy Sector Methane Emissions 70% Higher Than Official Figures – IEA,” Reuters, Feb. 23, 2022.

3 The Intergovernmental Panel on Climate Change, “IPCC Sixth Assessment Report,” Feb. 2022

4 Ellen Gray, “Global Climate Change Impact on Crops Expected Within 10 Years, NASA Study Finds,” NASA, Nov. 2, 2021.

5 Swiss Re Institute, “The Economics of Climate Change: No Action Not an Option,” April 2021.

6 Alexander Braun, Julia Braun and Florian Weigert, “Hurricane Risk and Asset Prices,” SSRN, Oct. 29, 2021.

7 S&P Global, “Physical Risks,” www.spglobal.com/esg/education/essential-sustainability/climate/physical-risks?gclid=CjwKCAjwr56IBhAvEiwA1fuqGiu-w j6EseQ3n-k4VGkGyNA2oyLUmhEROMk3eZJge1jyD1gCKrtnXBoCs8cQAvD_BwE. Accessed Sept. 15, 2021.

IMPX-20220329-1028

Julie Gorte, Ph.D.

Senior Vice President for Sustainable Investing

Julie is a leading figure in Impax Asset Management’s sustainable investing work, coordinating systemic engagement and the financial implications of integrating sustainability into investment decision-making. Julie researches the connections between sustainability and economic performance. She also tracks and develops insights into the impact of public policy on investment and communicates with public policymakers to help make public policy more favourable to sustainability and sustainable investing. Julie is a member of our Gender Analytics team and the Impax Sustainability Centre.

Prior to joining the firm, Julie headed up the social investment strategy at Calvert. She has held senior roles at the Congressional Office of Technology Assessment, The Wilderness Society, and the Environmental Protection Agency.

Julie serves on the boards of the Endangered Species Coalition, E4theFuture, Clean Production Action, the Forum for Sustainable and Responsible Investment (US SIF) and is the board chair of the Sustainable Investments Institute. She holds a Ph.D. and a master’s degree in resource economics from Michigan State University and has a bachelor’s degree in forest management from Northern Arizona University.

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