July 18, 2002

Mr. Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

Re: SEC File # S7-16-023

Dear Secretary Katz,

We write to respond to the Security Exchange Commission's question on the scope of the proposed rule: "Should (the SEC) require more disclosure by companies about their process of making estimates, or in other areas of discretion relating to recognition and measurement on financial statements."

We agree with the Commission that improved financial disclosure and strict guidelines regarding auditor independence are critically needed to ensure the health of our financial markets and to restore investor confidence.

In particular, we draw your attention to a critical area of disclosure, the disclosure of financially significant environmental risk. Accurate and consistent disclosure of environmental risk is needed to protect investors from the adverse impact of undisclosed liabilities, obligations and impairments. Moreover, such disclosure is consistent with the direction President George W. Bush urged in his speech on March 7, at the Malcolm Baldrige National Quality Award, when he stated: "A firm should be loyal to the community, mindful of the environment."

To this end we urge the Commission to address the disclosure of financially material environmental liabilities. Information collected by other federal agencies underscores the urgent need for SEC attention to the matter. For example, in 1998, the Environmental Protection Agency's Office of Enforcement and Compliance Assurance completed a study that found that 74 percent of companies failed to report in their 10-Ks cases in which environmentally related legal proceedings could result in monetary sanctions over $100,000. The failure to report these events is a violation of SEC rule S-K, and leaves investors at a distinct disadvantage, because they cannot fully assess a corporation's assets and liabilities.

Complete and accurate disclosure of financially significant environmental liabilities is important to help investors understand portfolio risk. We expect that the Commission would concur that such disclosure provides investors with information critical to their ability to anticipate and quantify contingent obligations or impairments of assets due to major environmental obligations, regulations, or litigation.

In order to clarify the intent of the SEC's material disclosure requirements with respect to financially significant environmental liabilities and help ensure compliance with existing material financial disclosure requirements, we urge the Commission to adopt the standards for estimation and disclosure of environmental liabilities developed by the American Society for Testing and Materials International (ASTM), the 2001 Standards Guide for Disclosure of Environmental Liabilities [E 2173-01]. These standards, which were developed by a consensus process conducted by one of our nation's leading engineering organizations, provide guidance to companies for the accurate estimation of environmental liabilities and explicitly require reporting companies to aggregate environmental liabilities to determine whether they exceed the SEC's materiality threshold. The ASTM's development of these standards has been backed by the insurance industry, in response to the current paucity of information about the financial significance of environmental liabilities. Disclosure consistent with the ASTM standards would provide investors with standardized information critical to their evaluation of the financial risk associated with a company's environmental liabilities.

Complete and accurate disclosure of financially material environmental risk furthers the Commission's mission of protecting investors and the public and protecting and restoring public confidence in our markets and in publicly traded companies. We would be pleased to discuss this matter further, and look forward to the Commission's response.


Jill Ratner, President
Rose Foundation for Communities and the Environment