The study, led by the University of California, Davis, found that only 6.1% of firms headquartered in counties impacted by wildfires mention that information in their annual reports known as 10-Ks. These are filings with the U.S. Securities and Exchange Commission that are required by law to keep investors aware of a company’s financial condition.
Wildfires can cause things like damage to inventory or disruptions to supply chains, said Paul Griffin, professor at the UC Davis Graduate School of Management and lead author of the study.
“We know that there’s an impact because they’re right there in those counties,” Griffin said. “But they’re not disclosing that. And so they’re misinforming the public.”
Instead, many companies use vague language to acknowledge wildfire risks to their business, Griffin said.
“You could talk about ‘chronic weather risk’ without actually having to mention that ‘we’re exposed to wildfires,’ ” he added.
Griffin and his co-authors looked at more than 80,000 10-K reports between 1996 and 2018. They found mostly utilities and banking firms with large tangible assets reported wildfire risks, but only if they’ve already been impacted by a blaze.
One example, according to the study, is California-based public utility Pacific Gas & Electric, which has been found to be at fault for multiple wildfires due to equipment failure. The company didn’t disclose the risk of wildfires until after its risk and liability were publicly reported.
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