SEC Urged by World Resources Institute and Calvert Funds

to Enforce Environmental Disclosures

AP 31jan01

[WRI Press Release below]

WASHINGTON - Federal regulators have failed to enforce rules requiring companies to disclose their financial risks from environmental regulations, a mutual fund company and an environmental group said yesterday.

Calvert Funds and the World Resources Institute asked the Securities and Exchange Commission to increase its enforcement actions and urged corporations to more fully disclose environmentally related risks.

Investors can be hurt by companies' failure to fully disclose the potential impact on their finances from environmental regulations and uncertainties, the two entities said.

Such information "ought to be in the public record," Robert Repetto, an economist and senior fellow at the World Resources Institute, told reporters. The institute is a policy research center and environmental advocacy group.

'There's been very little enforcement effort in this area," he said, referring to the SEC.

SEC spokesman John Heine said he could not comment on what the SEC may or may not be doing in response to the concerns raised.

A corporate practices expert suggested that the SEC may have had difficulty defining which risks companies must define under re-

porting rules.

"Clearly, companies would comply with whatever the SEC would define as material" information that could affect earnings, said Lou Thompson, president and chief executive officer of the National Investor Relations Institute, an association of corporate officers and investor relations consultants.

Calvert Funds of Bethesda, Md., a subsidiary of the Ameritas-Acacia Companies, describes itself as a socially responsible investment firm that manages $6.8 billion in assets.

The criticisms made by the mutual fund company and the environmental group were based on two recent reports by the latter: "Coming Clean: Corporate Disclosure of Financially Significant Environmental Risks" and "Pure Profit: The Financial Implications of Environmental Performance."

The studies analyzed 13 pulp and paper companies. They found that at least half of the 13 face "expected negative impacts" from environmental rules or potential rules that could affect the companies' stock value.

Georgia-Pacific Corp., one of the 13 companies, said it follows all SEC disclosure guidelines.

"Although we make every effort to identify and disclose environmental risks, estimating environmental exposure with scientific precision is not possible," Georgia-Pacific added."

WRI and Calvert ask corporations to disclose financially material environmental information to shareholders and SEC

WRI Press Release 30jan01

Washington, D.C.  -- The World Resources Institute (WRI) and Calvert Funds today called on corporate managers to fully comply with government requirements on reporting their environmental risks, and on the Securities and Exchange Commission (SEC) to strengthen its enforcement of rules intended to protect investors.

Their actions are based on the findings of two recent WRI reports, Coming Clean: Corporate Disclosure of Financially Significant Environmental Risks and Pure Profit: The Financial Implications of Environmental Performance.

WRI developed a rigorous method for assessing a corporation's environmental risks and it was tested on 13 pulp and paper companies. WRI's research revealed that environmental issues could markedly influence input costs, revenues, asset values, competitive advantage and shareholder values. At least half of the 13 companies analyzed face expected negative impacts from environmental issues of at least 5 percent of total shareholder value, while several face expected impacts approaching or exceeding 10 percent.

Yet a review of the 10K, 10Q, and 8K statements filed by the companies in 1998 and 1999 revealed that few companies adequately disclosed the financial risks or potential competitive impacts arising from their exposures to known environmental uncertainties.

Although the WRI research examined only pulp and paper companies, it is not the only sector in which company reports are incomplete concerning their environmental exposure. "Many other business sectors that are materially affected by environmental issues and regulations would typically have similar patterns of environmental exposure and nondisclosure," said the reports' co-author Dr. Robert Repetto.

This lack of disclosure infringes SEC rules designed to protect investors. The SEC's guidelines and rules require companies to report not only information about current conditions affecting the firm, but also any known risks and uncertainties that are likely to have future significant financial effects. In particular, Item 303 of Regulation S-K requires a Management Discussion and Analysis (MD & A) in which companies are required to disclose known future uncertainties and trends that may materially affect financial performance.

"Few companies do a good job of reporting on environmental liabilities and risks. Our research shows that companies with significantly different environmental performance and risks are often indistinguishable from each other when evaluated by their annual reports. This lack of transparency could pose a heightened risk for investors, " said Dr. Julie Fox Gorte, Calvert's senior environmental and technology analyst.

Corporations' lack of disclosure cannot be explained by a lack of relevant information among companies within the industry. Company representatives participated in identifying important impending environmental trends affecting the industry and in estimating probable outcomes of those issues.

Despite explicit statements promising vigorous enforcement of disclosure requirements for financially material environmental risks, the SEC's enforcement efforts in this area have been minimal. Of more than 5,000 administrative proceedings initiated by the SEC over the last 25 years, only 3 are based on alleged insufficient disclosure of environmental risks or liabilities. Over the same period, the SEC has brought only one civil action against a company on the grounds of inadequate environmental disclosure.

To remedy this problem, WRI and Calvert Funds recommend several changes:

• The SEC should issue guidelines to reinforce and clarify existing rules regarding disclosure of material environmental exposures under Item 303, Regulation S-K, and informing registrants that these rules will be enforced. In addition, the SEC should clarify its guidance regarding the reporting of uncertain financial risks posed by prospective environmental regulations and liabilities.

• Without waiting for SEC action, corporations should begin to disclose more fully their known, financially material environmental risks and uncertainties.

• The SEC should honor its previous commitments by bolstering its enforcement resources to ensure that companies fully comply with environmental disclosure requirements.

Calvert Funds is an environmentally and socially responsible investment firm based in Bethesda, MD with $6.8 billion in assets under management. It is a subsidiary of the Ameritas-Acacia Companies. For more complete information about any Calvert mutual funds, including fees and expenses, call 800-368-2748 for a prospectus or visit our Website at www.calvert.com. Read it carefully before investing or sending money. #3335. 01/01.

For more information contact Dianne Saenz, Manager, Social Products & Policy, Calvert Funds Tel: 301-657-7082, E-mail: dianne.saenz@calvert.com