Study: Only 8% of California public companies in wildfire-prone regions disclose risk to investors

Only 6.1% of publicly traded U.S. firms and 7.9% of California’s 5,377 companies with headquarters in counties prone to wildfires report the level of risk as required to do so by government regulators, according to a recent U.C. Davis study.

Pursuant to the U.S. Securities Exchange Act of 1934, companies are asked to disclose these “material” risks in annual 10-K reports. Investors seek out this information to determine whether to do business with the companies.

The author of the 48-page study, titled “Threatened by wildfires: What do firms disclose in their 10-Ks?” and released Dec. 21, 2022, pored through 86,000 documents to arrive at the findings.

The study’s researchers looked at 10-K reports between 1996 and 2018, with the North Bay having faced several wildfires after the end of the study period. The form requires companies to indicate their threat of disasters. The study’s author focused on areas of wildfire threats and whether companies made the indication.

“Despite a growing awareness of the strategic importance of climate change, firm-level disclosures of extreme weather and climate-related risks and events remain the exception rather than the norm,” said the study’s author Paul Griffin, a professor at the university’s Graduate School of Management. “Disclosure is a sign that firm is taking these events seriously and will take action itself to mitigate the risk.”

Firms in Sonoma, Napa, Marin, Lake, Mendocino and Solano counties are familiar with the risk, having endured five years of wildfire threats so pervasive the seasons are now labeled “fire years” by fire officials.

As examples, Vintage Wine Estates and Keysight Technologies, both with Santa Rosa headquarters, as well as Novato-based Bank of Marin and BioMarin Pharmaceutical of San Rafael, mention wildfire risk in various sections of their annual reports, according to their respective U.S. Securities and Exchange Commission filings.

When the deadly Tubbs Fire roared through six local counties in October 2017, it destroyed more than 5,600 structures, among them businesses, such as the Hilton Hotel at Fountaingrove. The Glass Fire in 2020 took out more than 1,500 buildings, including wineries.

That’s the type of risk the form aims to disclose.

“They should be listing it, and their accountants should know about it,” said Brian Reed, CEO of Santa Rosa-based Summit State Bank, adding that his company reports the risk potential each year to the SEC.

For a financial institution, the risk implies a company’s facility may not only be destroyed or damaged, but its customer’s properties or finances may be impacted by the disasters.

“We’ve had customers impacted by these fires,” he said.

So, is the lack of reporting among other firms an oversight or intentional?

“When you think about it, you and I both know, that (percentage) number should be significant. I think people (in business) make the assumption that they’re safer than they are,” said Tony Hildesheim, chief operating officer of Sonoma County-based Redwood Credit Union, because companies are often located in urban areas. “We all know concrete doesn’t stop fire. It’s a false sense of security.”

Redwood Credit Union is a privately-held company, so it is not subject to the requirement.

Just the threat of a natural disaster prompted the company to open an “alternative” 180,000-square-foot headquarters in Napa County near the airport on Devlin Road. One building opened two years ago, while the other was ready to go in September 2022.

The credit union refers to the expansion as part of its “redundancy” program. In case a major wildfire breaks out in Sonoma County, full operations shift to neighboring Napa and vice versa.

“Our goal was to diversify,” Hildesheim said. Tapping into another region for a burgeoning workforce was another reason, he added.

To enhance its operations’ security, Redwood Credit Union also stores its computer mainframe in a bunker at an industrial park northeast of Sacramento where the former McClellan Air Force Base was situated.

From the investors’ point of view

Zachary Kushel, Marin Sonoma Impact Ventures fund founder and managing partner, said he believes Redwood Credit Union opening headquarters in different counties represents a good example of businesses covering their bases.

“We saw this with investment banks after 9/11. Banks opened in other areas,” said Kushel, who operates his investment firm out of Corte Madera. “But I don’t think we need to single out wildfire.”

Greg Friedman, chief strategy officer at New York-based financial management firm Wealthspire Advisors, agreed.

“Pretty soon, we’ll need to look at floods and earthquakes. The question isn’t the threat of being in the fire zone, it’s: ‘what is your disaster recovery plan’ (once it occurs)?” the Marin County venture capitalist said. “(Still), I don’t think (the threats) have been a deterrent to investors.”

Friedman conceded that wineries with sprawling acreage in rural landscapes may have more risk involved.

“We’ve had investors ask about wildfires, and analysts always ask about it. This is why we diversify (our operations),” Terry Wheatley, president of Vintage Wine Estates, said referring to managing wine properties in different locations. “While it’s always a concern, (the wildfire threat) hasn’t impacted our investments.”

Susan Wood covers law, cannabis, production, tech, energy, transportation, agriculture as well as banking and finance. For 27 years, Susan has worked for a variety of publications including the North County Times, Tahoe Daily Tribune and Lake Tahoe News. Reach Wood at 530-545-8662 or

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