Coal Company Agrees to Greater Disclosure of Climate Change Risk

Steven Lofchie Commentary by Steven Lofchie

Following an investigation by New York Attorney General ("NYAG") Eric T. Schneiderman, Peabody Energy Corporation (“Peabody”) agreed to resolve allegations that it failed to adequately disclose the company's financial risks related to climate change. Peabody, "the largest publicly traded coal company in the world" allegedly violated Section 352 of New York General Business Law Article 23-A ("Investigation by Attorney-General," otherwise known as "The Martin Act") and Section 63(12) ("General Duties") of New York Executive Law by disclosures (i) "denying the ability to reasonably predict the future impact of any climate change regulation on its business" and (ii) concerning the projections by the International Energy Agency ("IEA") for the future of coal. The NYAG agreed to discontinue the investigation if the company committed "to ending certain representations to investors and the public that minimize the company's financial risks related to climate change."

Specifically, the agreement requires that the company:

  • provide disclosures concerning the company's projections regarding the impact on its business of certain potential laws, regulations and policies involving climate change, and regarding different scenarios used by the IEA in its projections of demand for coal in its quarterly report filed with the SEC on November 9, 2015;

  • not represent in any public communication that it is unable reasonably to project or predict the range of impact that any future laws, regulations and policies relating to climate change or coal would have on its markets, operations, financial condition or cash flow;

  • describe the IEA's scenarios for the global demand for coal correctly and in good faith in its public communications; and

  • also cite the Agency's "two less favorable projections," if the company cites demand projections under the IEA's Current Policy Scenario

In his press release, Attorney General Schneiderman asserted that "full and fair disclosures by [this company] and other fossil fuel companies will lead investors to think long and hard about the damage these companies are doing to our planet."


By implication and steadfast pursuit of this action, the NY Attorney General is making the case that any investor in a fossil fuel company is contributing to the "damage these companies are doing to our planet." It would be interesting to know what the Attorney General believes that his office should or could do with respect to those investors (or for that matter, suppliers and users) who are said to be contributing to such damage.

Regarding the coal company's statement that it could not reasonably predict the future, here is a snippet from a report selected at random from various reports on the IEA Web site; (warning, they are numerous and long):

"Whatever long-term path oil demand takes, it will surely continue to fluctuate from one year to the next in response to volatile oil prices, economic swings, weather variations and one-off events, such as natural disasters. The average IEA crude oil import price - a proxy for international prices - required to balance demand and supply differs markedly across the scenarios, according to differences in how policy intervention affects underlying market conditions" (World Energy Outlook 2012 - Global Energy Trends at 83-4).

This quote seems fairly consistent with the coal company's purportedly misleading statement that predicting the future is hard.

In its press release, the coal company provides the following description of the settlement: "Following an extensive eight-year investigation initially discussed in the company's 2007 disclosures, Peabody has agreed to amend its disclosures. There is no other action associated with this settlement, no admission or denial of wrongdoing and no financial penalty. The company has always sought to make appropriate disclosures."

It seems clear that this action was a political exercise. But it is worth asking: how much money was spent on this investigation? Did the expense constitute a reasonable use of N.Y. State resources? Were fossil fuels used, directly or indirectly, in the course of the investigation? Did persons investigating the company have a conflict of interest if they were consumers of fossil fuels that the company distributes as disclosed in public filings with the SEC?

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