SEC Issues Climate Change Disclosure Guidance - Not a Statement Regarding Climate Change "Facts"
On January 27, 2010 the Security Exchange Commission (SEC) announced it had voted approval to issue “interpretative guidance” on the existing disclosure requirements as they apply to business and legal developments relating to climate change. The SEC stressed in its announcement that: 1) the interpretive guidance is meant to provide clarity and enhance disclosure consistency; 2) the commission is not making any statement regarding the facts relating to climate change, global warming, pace of warming, or causes; and that 3) it is not changing reporting, and materiality rules. That said, the Commission’s vote was split along “party lines” among the agency's republican and democratic commissioners. Kathleen Casey reportedly criticized the SEC vote as "transparently political and such a breathtaking waste of the commission's resources."
Continue Reading...AES resolves investigation by NY Attorney General Cuomo with agreement to disclose climate-change risks to investors
In his latest use of New York's Martin Act as an environmental enforcement tool, on November 19, 2009, New York Attorney General Andrew M. Cuomo announced an agreement with The AES Corporation requiring AES to disclose material risks associated with climate change in its annual report to the Securities and Exchange Commission. The agreement resolves an investigation that began with Mr. Cuomo’s September 14, 2007 letters and accompanying subpoenas to AES and four other energy companies.
Continue Reading...SEC's Division of Corporate Finance revises guidelines for shareholder proposals covering climate risks
On October 27, 2009, the SEC’s Division of Corporate Finance revised its guidelines regarding the grounds on which a public company can exclude from its proxy materials shareholder proposals relating to environmental, financial or health risks, including those seeking disclosure of climate-related risks. Issued as part of Staff Legal Bulletin No. 14E (CF) (“SLB 14E”), the revised guidance seeks to address the Division’s concern that the existing analytical framework may have led to the “unwarranted exclusion” of proposals related to an evaluation of risk – formerly seen as an aspect of ordinary business operations and therefore excludable under Rule 14a-8(i)(7) – but which focus on “significant policy issues.”
Continue Reading...Will the CFTC oversee all US carbon-related trading?
On July 6, 2009, the Carbon Market Oversight Act of 2009 (CMOA) (S. 1399) was introduced in the Senate by Sen. Dianne Feinstein (D-Calif.) and Sen. Olympia Snowe (R-Maine). If passed, the CMOA would amend the Commodity Exchange Act to create federal oversight for markets that trade carbon allowances and carbon derivatives and grant full oversight authority for all carbon-market trading to the Commodity Futures Trading Commission (CFTC). Sen. Feinstein cited estimates from experts that the new carbon markets could generate “upwards of $100 billion to $370 billion in economic activity each year”. The bill has been referred to the Senate Committee on Agriculture, Nutrition, and Forestry.
The CMOA differs in several key respects from the American Clean Energy and Security Act of 2009 (ACES) (H.R. 2454), sponsored by Rep. Henry A. Waxman (D-Calif.) and Rep. Edward J. Markey (D-Mass.) and passed by the House on June 26, 2009. With respect to carbon-trading oversight, ACES divides authority between the CFTC and the Federal Energy Regulatory Commission (FERC), giving FERC oversight of cash-based allowances trading and the CFTC oversight of carbon futures and derivatives trading.
Continue Reading...House Agriculture Committee contributes to a bumper crop of proposed climate change legislation
On March 12, 2009, House Agriculture Committee Chairman Collin C. Peterson (D-Minn.) announced that the committee, which has jurisdiction over the Commodity Futures Trading Commission ("CFTC"), is seeking comments from agricultural, environmental and other groups and members of the public on priorities for future climate change legislation. The committee has prepared an instruction letter and a questionnaire, with responses due by April 10, 2009.
Rep. Peterson’s announcement follows the committee’s February 12, 2009, passage of H.R. 977, The Derivatives Markets Transparency and Accountability Act of 2009 (“DMTAA”). Although the DMTAA has received attention primarily for its provisions addressing financial derivatives – including authorizing the CFTC to suspend U.S. trading of so-called “naked” credit default swaps under certain circumstances and requiring that most over-the-counter derivatives be cleared through central clearinghouses – the bill would also require carbon offsets and emissions allowances to be traded on a designated contract market under CFTC oversight.
Continue Reading...Dynegy Inc. agrees with New York Attorney General Andrew Cuomo to disclose material risks related to climate change
Following in the footsteps of Xcel Energy's August 2008 landmark settlement with New York Attorney General Andrew M. Cuomo, on October 23, 2008, Mr. Cuomo announced an agreement with Dynegy Inc. under which Dynegy will include disclosures of material risks related to climate change in its Form 10-K filings. The agreements with Dynegy and Xcel are the fruits of Mr. Cuomo's innovative use of New York's Martin Act as an environmental enforcement tool, which began with the New York Attorney General's September 14, 2007 letters and accompanying subpoenas to Dynegy, Xcel, AES Corporation, Dominion Resources, and Peabody Energy. Mr. Cuomo's inquiries regarding AES Corporation, Dominion Resources, and Peabody Energy are said to be "ongoing."
Continue Reading...Investors ask SEC to include climate risk disclosure obligations in revised oil and gas reporting requirements
In response to a June 26, 2008 SEC proposal to modify the oil and gas reporting requirements, a group of investors and environmental organizations (including the California Public Employees’ Retirement System and Ceres) submitted a letter to the SEC on September 8, 2008 urging the SEC to consider climate-related risks in the course of revising the reporting requirements. The group's comment letter follows the release in late July of a WWF (formerly World Wildlife Fund) study, "Unconventional Oil", which reports that "increased investment in unconventional fossil fuels, such as Canadian oil sands and US oil shales, may dangerously contribute to climate change" and "demonstrates the significant investor risk associated with these unconventional oils." Among the study's conclusions: "Oil sands extraction produces three times the carbon emissions of conventional oil production, whilst oil shale extraction produces up to eight times as much."
Continue Reading...New York AG uses Martin Act to reach climate-risk disclosure agreement with Xcel Energy
In an August 27, 2008 press release, the Office of New York State Attorney General Andrew M. Cuomo announced an agreement with Xcel Energy, one of the country’s largest owners of coal-fired power plants, that would require Xcel to disclose to investors the financial risks posed by global warming. According to an August 27, 2008 New York Times article, the agreement is “the first of its kind in the country" and "could open a broad new front in efforts by environmental groups to pressure the energy industry into reducing emissions of greenhouse gases that contribute to global warming.” (The terms of the agreement can be found in the Assurance of Discontinuance Pursuant to Executive Law § 63(15).)
Continue Reading...Global emissions index launched by Dow Jones and the Chicago Climate Exchange
Dow Jones and the Chicago Climate Exhange have announced a new index of actively traded European Union Allowances (EUA) futures contracts on the European Climate Exchange. The two new indexes, Dow Jones/CCX European Carbon Index and Dow Jones/CCX Certified Emissions Reductions (CER) Index, are the first in a series of global emissions indexes to be offered by Dow Jones and the Chicago Climate Exchange.
Continue Reading...Climate risk disclosure requirements: Senate Appropriations Committee seeks guidance from SEC
Investors, legislators and others continue their efforts to require that publicly-traded companies enhance their disclosure of material business risks posed by climate change. In one of the most recent examples, the Senate Appropriations Committee’s July 14, 2008 report on the 2009 Financial Services and General Government Appropriations Bill (S. 3260) included language calling on the Securities and Exchange Commission to provide guidance on the appropriate disclosure of climate risk:
The Committee is aware that a petition was filed with the Commission on September 18, 2007, calling for the issuance of an interpretative release clarifying the application of existing law to the disclosure of risks associated with climate change. The Commission is encouraged to give prompt consideration to this petition and to provide guidance on the appropriate disclosure of climate risk.
Report at 108.
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