Despite the attention it's getting from some investor groups and new guidance aimed at compelling more reporting, corporate climate risk disclosure still has a long way to go, according to an analysis of 100 large-cap U.S. companies' climate risk disclosures.

Very few companies address all of the issues outlined in the Securities and Exchange Commission's climate risk guidance in their most recent Form 10-K disclosures, an ISS Corporate Services report shows.

Only 20 percent of companies address both regulatory and physical risk from climate change, according to the report, "Climate Risks: How 100 Companies Are Responding to New SEC Guidelines," which is based on an analysis of the 100 largest U.S. companies by market capitalization that had filed their Form 10-K in the first quarter of 2010.

"There is vast room for improvement in both the quality and quantity of companies' disclosure of these risks to investors," says Mallika Paulraj, author of the report.

Still, the report notes that it's early days. The SEC climate risk guidelines were issued in February 2010, which meant companies had little time to take the guidance into account in preparing their 2009 10-Ks. And while ISS notes that some companies have reported for years on climate change in their securities filings, "they remain the exception rather than the norm. Even leading companies still have large reporting gaps in their disclosure practices."

Only 51 of the 100 companies in the analysis mentioned risks from climate change in their 2009 annual reports, and most don't outline company-specific risks, according to ISS.

Quantification of climate risks and articulation of mitigation strategies were in many cases weak or missing in the 2009 statements.

The analysis shows that climate risk disclosure varies considerably both within and across industry sectors. The sectors with the highest level of climate risk disclosure come from energy-intensive sectors that consume large amounts of fossil fuels, including energy, materials, and utilities, with 100 percent, 92 percent, and 83 percent of companies disclosing, respectively.

The healthcare and industrial sectors had the least amount of climate disclosure, with 14 percent and 23 percent of those companies mentioning climate risk, respectively. That's "especially surprising for the industrial sector, as their assets are particularly vulnerable to changing energy prices and more severe weather events that could damage their infrastructure and limit future water supplies," the report states. The healthcare sector also could be affected by a spread of tropical diseases and stresses from heat waves that increase mortality risks, ISS notes.

Beyond reporting a general exposure to climate risk, 44 percent of the companies went further by disclosing specific regulatory risks from international, U.S., and/or state level greenhouse gas emission controls. Again, the energy, materials, and utilities sectors were the highest disclosers, while the healthcare and industrial sectors were the lowest disclosers, according to ISS.

Just 22 percent of the companies discuss ways in which their products and business lines might take advantage of climate change opportunities. Only 24 percent address physical risks to their assets posed by climate change.

Among the sample studied, disclosure of physical risks of climate change lags reporting on regulatory risks by a substantial margin. Companies in the materials, consumer staples, and utilities sectors had the highest disclosure of physical risk, with more than half of companies in those sectors listing the risk. Only 33 percent of energy companies reported on such exposure, just one company in the technology sector and one consumer discretionary company mentioned physical risk, and no healthcare or industrial companies disclosed such risk. Together, the latter four sectors represented more than half of the companies analyzed.

Of the 100 companies analyzed, those in the materials and utilities sectors were most likely to mention opportunities from climate change, followed by companies in the energy and technology sectors. Companies in the healthcare and financial services sectors disclosed the fewest opportunities.

The 58-page report also includes suggestions companies can consider when disclosing their climate risks and details examples of disclosure best practices.

The complete report is available upon request by emailing marketing@isscorporateservices.com