SEC Issues Guidance On Companies’ Climate-Change Disclosures

The Securities and Exchange Commission (SEC) has provided public companies with interpretive guidance on existing SEC disclosure requirements as they apply to business or legal developments relating to the issue of climate change.

Specifically, the SEC's interpretative guidance highlights the following areas as examples of where climate change may trigger disclosure requirements:

– Impact of legislation and regulation. When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material, the SEC says. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.

– Impact of international accords. A company should consider, and disclose when risks or effects on its business of international accords and treaties relate to climate change.

– Indirect consequences of regulation or business trends. Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products.

Therefore, the SEC says, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate-change-related regulatory or business trends.

– Physical impacts of climate change. Companies should also evaluate, for disclosure purposes, the actual and potential material impacts of environmental matters on their business.

The SEC's interpretive releases do not create new legal requirements nor modify existing ones, but are intended to provide clarity and enhance consistency for public companies and their investors, the SEC notes.

The full interpretive release is available here [PDF].

SOURCE: U.S. Securities And Exchange Commission

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