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."
The origin of the Commission’s guidance goes back to September 18, 2007, when a coalition that included state officials having regulatory, enforcement, and fiscal management responsibilities, alongside institutional and asset management firms and conservation groups, petitioned the Commission for the guidance. In its petition, the coalition reviewed current law for disclosure of climate risks, the climate-related risks faced by publicly traded companies, the importance of disclosure to investors, the inadequacy of current SEC filings and voluntary disclosures, and the reasons why the Commission should clarify corporate disclosure obligations. The coalition subsequently supplemented its petition filing on June 28, 2008, informing the Commission of events including: the passage of the Energy Independence and Security Act (2007); the passage of the Consolidated Appropriations Act which funded USEPA to develop a rule requiring reporting of GHG emissions above certain thresholds; proposed legislation (Lieberman Warner Climate Security Act of 2007); the initiation of various state and regional actions, and the increase in climate-related litigation cases among others. In light of these developments, the coalition requested the Commission to expedite the issuance of the guidance.
With the SEC’s announcement, it stated that the guidance provides examples where companies should make climate change related disclosure based on the impact of: 1) pending and promulgated US legislation and regulation; 2) passage of international accords and treaties; 3) identification of risks and opportunities resulting from legal, technological, political and scientific developments; and 4) climate-related environmental impacts (e.g. sea-level rise, increase storm and flooding etc.) on their business. As of this blog post, the Commission has not posted the guidance on its website and stated that it will be posted “as soon as possible.” Stay tuned.
