Finance C’tee requires firms to report environmental risks

Requirement follows environmental catastrophe in the Gulf of Mexico; companies must disclose risks that could materially effect financial performance.

By LILACH WEISSMAN / GLOBES
China oil spill 311 AP (photo credit: Associated Press)
China oil spill 311 AP
(photo credit: Associated Press)
Companies will be required to disclose environmental risks of their operations in prospectuses that they file with the Israel Securities Authority, according to regulations passed by the Knesset Finance Committee on Wednesday.
“Following the environmental catastrophe in the Gulf of Mexico, which caused huge losses to investors in British Petroleum, including losses by pension funds, the approved regulations will help prevent a similar case happening in Israel,” said Gilad Erdan, Environmental Protection Minister at the Knesset Finance Committee meeting in Jerusalem on Wednesday.
“Expanding the reporting requirements by corporations is an important step to include environmental effects of companies’ activities and the consequent financial exposure. Expanding the transparency will lead to better management of environmental affairs by companies.”
The new regulations will require companies to disclose environment risks that could have a material effect on their financial performance. The details will inform investors and the public of the effects of the companies’ activities on the environment, how they are dealing with these risks, and what are the financial risks derived from them.
Companies will also be required to disclose in prospectuses and financial reports the costs and investments made, or which are expected to be borne for dealing with environment matters, such as rehabilitation and repair of environmental damages, and the procurement of technologies to reduce or prevent future environmental harm.
In addition, companies will also have to disclose in prospectuses past and present legal or administrative proceedings against them, and the financial liabilities related to environmental proceedings or the authorities.
Other requirements disclosure of environmental management of companies’ activities, such as supervision and control mechanisms and measures taken to reduce environmental risks.
The regulations were jointly formulated by Environmental Protection Ministry and the Israel Securities Authority.