A roundup of topics International Treasurer is investigating.
The Securities and Exchange Commission made two decisions yesterday that could cause corporate treasury departments a fair bit of trouble.
The first was to approve interpretative guidance on disclosure relating to how climate change will affect a company’s business. This comes in four flavors: how future global warming legislation or regulation will affect a company, the impact of international accords, indirect consequences of regulation or business trends and the physical impacts of climate change.
While some large investors and global warming special interest groups have urged the SEC to add climate change to the list of risks a company should disclose, the process of evaluating that risk will require some heroic assumptions. And, if it becomes an important issue for investors, companies may find it useful to hedge it somehow. That could be a welcome boon for the tiny weather derivatives market. It will certainly be good news for global warming consultants.
The second missive from the SEC was its approval of new rules relating to money market funds. Going forward, these funds will need to hold more liquid assets, and will need to disclose their mark-to-market value with a 60-day lag. The first measure will make it harder for the funds to generate any yield for their investors—including those treasury personnel tasked with investing corporate cash. The second measure is largely cosmetic—the behavior of a short-duration portfolio can change dramatically from day to day, so data released with a 60 day lag is of little diagnostic use.
Also, if the new rules cause investors to pull more money out of these funds—and the assets under management in this sector were already in a freefall—there will be less cash for them to invest in short-term corporate securities, which could affect liquidity in the commercial paper market.