11724219854_05a04a50dd_oThe New York Attorney General has been investigating Exxon Mobil for failing to disclose to its investors the risk that climate change may have on the value of the company’s assets, including its extensive oil reserves, which some claim must remain in the ground if necessary future reductions in carbon emissions are to be achieved. As the controversy around Exxon Mobil’s carbon-related financial reporting continues, other entities are moving forward to address so-called climate change or “carbon asset” risk. In fact, the institutional investment fund CalPERS now requires that companies it chooses to invest in have at least one member of its governing board with climate expertise.

Support for changes in accounting standards seems to be growing, as evidenced by a recent climate disclosure task force initiated by the Financial Stability Board to help firms understand, manage, and disclose carbon-related risks. The US Department of Labor also recently issued guidance designed to encourage, although not necessarily require, greater transparency in reporting on climate change risks. Other organizations such as Ceres and the Carbon Disclosure Project have tracked reporting activities and worked extensively with firms interested in implementing carbon reporting, as well as engaged companies to take broader sustainability actions.

In the wake of the UN global climate accords reached in Paris last December, one might suspect that the definition of “fiduciary duty” of corporate boards of directors has fundamentally changed in a post-COP21 world. The UN’s Global Compact offers guidance to boards which choose to take on sustainability broadly as a strategic issue. Given a board’s responsibility to assess risk and oversee strategic actions, assessing the firm’s climate change risk and disclosing that risk in its financial reporting to investors would seem to be an integral aspect of its role. Yet, clearly climate and carbon risk reporting is far from universal, just as incorporating sustainability fully into enterprise risk has not necessarily been widely adopted outside the rubric of environmental, social and governance actions.