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,26 February 2003 | New York

Overview

Is environmental information material to investors? If so, when? And are companies disclosing this information in ways that would enable analysts and fund managers to accurately judge its financial impact? At its March 2002 meeting on the disclosure of environmental information, the Commission for Environmental Cooperation of North America found that environmental information reported by companies (whether as mandated by securities regulators, or voluntarily) was rarely being used in mainstream financial analysis. The present meeting reviewed the conclusions drawn in the previous workshop, and the explanations that were suggested for the lack of demand for environmental information on the part of the mainstream financial community, namely that:

1. There is a lack of specificity regarding environmental disclosure requirements in securities law and minimal enforcement of the existing requirements.
2. Management in the financial sector is skeptical about the financial impact of environmental liabilities.
3. The lack of relevant and comparable environmental information being reported prevents comparative analysis.

The February meeting was held in collaboration with United Nations Environment Programme Finance Initiatives (UNEP FI), supported by PricewaterhouseCoopers LLP and the American Bar Association Section of Environment Energy and Resources, and hosted by HSBC at their offices in New York. Seven main themes emerged from this meeting:

1. Reporting requirements as they pertain to environmental information are subjective
2. Many stakeholders are requesting and many firms report information not specifically required under securities regulation
3. Information that appears to be potentially material often goes unreported
4. Reporting requirements as they pertain to environmental information often go unenforced
5. Lack of enforcement and definitions produce a disincentive to disclose potentially material environmental information
6. The need for financially meaningful and understandable methods by which to incorporate environmental information into financial analysis
7. Next steps / key outcomes, including:
• A call to continue the debate.
• A call to continue to further develop internationally credible quantitative research on the financial materiality of environmental information.
• A call for government to enforce existing regulation and application of GAAP accounting standards.
• A call on industry and civil service to cooperate in the:
• Developing of sector-specific disclosure practices for
  environmental information that will render the information
  easily analyzable in coordination with financial information.
• Clarification of existing regulatory frameworks.