United States: Corporate Climate Change Reporting: Recent Developments

As world leaders coalesced in Paris to agree on an historic treaty to commit nearly 200 countries to a global greenhouse gas reduction target, a similar, renewed focus has been brought recently across borders to enhance corporate disclosure to stakeholders on the effects of climate change on their operating and financial results. Corporate climate change reporting remains a fragmented and inconsistent practice around the world and even within many countries, largely because disclosure practices have been driven by ad hoc corporate social responsibility, or CSR, initiatives using any number of voluntary standards such as the Global Reporting Initiative's G4 Sustainability Reporting Guidelines and CDSB's Climate Change Reporting Framework. Of late, however, there has been some push to crystallise and harmonise reporting, at least on the national level. Here, we discuss the most significant recent enforcement, regulation and industry initiative developments as related to corporate climate change reporting to stakeholders.

The Principal US "Requirement" to Date: the 2010 SEC Climate Change Disclosure Interpretive Release

To date, the most significant document at the US federal level calling for corporate climate change disclosure is the 2010 interpretive release issued by the US Securities & Exchange Commission, or SEC. At the time it was issued, the SEC stressed that the guidance was not intended to change existing SEC disclosure requirements, nor was it intended to change long-standing SEC interpretations of materiality. Nonetheless, the mere issuance by the SEC of the guidance resulted in a significant change in the landscape of climate change reporting by public companies in the United States.

In the guidance, the SEC highlighted four areas where climate change may trigger disclosure requirements when evaluating materiality related to a company's business, risk factors, legal proceedings and operating and financial review:

  • The impact of any existing or pending climate change legislation or regulation.
  • The risks or effects of climate change-related international accords or treaties.
  • The actual and potential indirect consequences of climate change-related regulation or business trends, such as increased or decreased demand for goods or services.
  • The actual and potential physical impacts of climate change, such as increased droughts or storms, other changes in weather or rising sea levels.

There has been no new US federal requirement on corporate climate change reporting since the 2010 guidance. Other key US federal reporting requirements did emerge around the same time, such as a 2009 rule by the US Environmental Protection Agency, or EPA, requiring large source emitters of greenhouse gasses and certain fossil fuel suppliers and vehicle manufacturers to disclose their emissions data annually. However, the EPA rule applies only to certain industry sectors or large greenhouse gas emitters, not all public companies listed in the United States, and the requirement is to report to a designated environmental regulator rather than to all stakeholders.

New York Attorney General Enforcement and Settlements on Climate Change Disclosure

So far there has not been any significant SEC enforcement related to climate change reporting. The principal federal effect of the 2010 guidance has been increased but relatively informal SEC correspondence to reporting companies commenting about their disclosure on the subject.

In this context, the New York Attorney General, or AG, has emerged as the most visible US public body policing climate change reporting. Invoking broad anti-fraud state statutes known as the Martin Act and the Executive Law, the AG initially issued subpoenas in 2007—before the SEC interpretive release—to five companies to collect information on what investigations they were historically conducting and what they had concluded at the time about the effects of climate change on their businesses, in order to determine whether their disclosure to investors on these effects was inadequate. The five companies were four power generators, AES, Dynegy, Xcel and Dominion Resources, and Peabody Energy, the world's largest private sector coal producer. Although the SEC guidance had yet to be issued in 2007, media and investor interest in climate change reporting had already gathered considerable steam.

Without the subpoenas progressing to a formal claim or the imposition of fines, three of the four power generators—AES, Dynegy and Xcel—agreed to beef up their climate change disclosure. The more interesting settlement was with Peabody last November, again without a formal claim or the imposition of fines, but in the much more robust disclosure landscape now. The Peabody settlement focussed on two allegations:

  • Peabody's statements that the company could not reasonably predict the future impact of any climate change regulation were inconsistent with the fact that the company and its consultants had looked into the issue at some length and had projected material and severe impacts from certain potential regulations.
  • Peabody "cherry-picked" disclosure of projections by the International Energy Agency, or IEA, on the future of the coal market as impacted by climate change developments. For example, Peabody mostly omitted reduced demand projections based on IEA's "New Policies Scenario," which assumes implementation of announced government carbon commitments/policies and which IEA considers its central scenario. Peabody frequently discussed demand only in the more favourable context of IEA's "Current Policies Scenario," which assumes announced government commitments/policies will not necessarily be implemented and is the scenario likely to result in a rise in global temperatures of 6ºC. This was not black and white—more the case of a significant imbalance in the disclosure.

The Peabody settlement is likely to send industrial companies back to the drafting table to determine whether their disclosure aligns with internal projections or awareness of climate change impacts, including the cost of regulatory compliance, changes in market demands for products, and physical impacts such as weather patterns or changes in the availability of raw materials. Peabody crystallised the notion that it is no longer acceptable for a company to report that it does not know or cannot predict impacts when it is at least aware of a range of meaningful possibilities, even if it is not certain which one will arise.

In addition, companies are likely to revisit points in their disclosure where projections are made as to market/demand for any product, and to consider whether those projections reflect all conventional scenarios on the impact of climate change regulation on demand or are imbalanced in favour of any one scenario.

AG's Subpoena to Exxon Mobil

Days before the Peabody settlement the AG issued its most high profile climate change-related subpoena yet: to Exxon Mobil. Although the subpoena is not public, it reportedly seeks information back to 1977 on what the company knew and when on the impacts of climate change, in order to compare against the company's disclosure. The AG's subpoena reportedly followed an investigative series published by InsideClimate News and the Los Angeles Times that reported that Exxon scientists were warning company executives as far back as nearly four decades ago of the potentially catastrophic consequences of global warming. Exxon Mobil has denied any inadequacy with its historic disclosure on the matter and has, perhaps unsurprisingly, missed a 4 December deadline to hand over documents to the AG going back that far. As a next step, the AG and Exxon Mobil are likely to agree a new schedule for document production in 2016.

Financial Stability Board Task Force on Climate Related Financial Disclosures

In late September, Mark Carney, the normally guarded governor of the Bank of England, surprised many listeners at a Lloyds of London dinner by speaking of the "potentially huge" losses investors faced from climate change regulation that could make vast reserves of fossil fuels "literally unburnable." On the heels of this speech, the Financial Stability Board or FSB, an international body chaired by Mr. Carney that coordinates national financial authorities and international standard-setting bodies to develop financial sector policies, announced on 4 December that it has established a task force to develop "voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to lenders, insurers, investors and other stakeholders."

The task force is headed by ex-New York mayor Michael Bloomberg and will consider "the physical, liability and transition risks associated with climate change and what constitutes effective financial disclosures in this area." In particular, the FSB noted that the "wide range of existing disclosure schemes relating to climate or sustainability highlights the need for companies and relevant stakeholders to reach a consensus on the characteristics of effective disclosures and examples of good practices."

That a mainstream financial organisation, rather than organisations focused on environmental, sustainability or governance issues, has highlighted the importance of uniform climate change reporting marks a turning point in this area. The task force is aiming to publish its recommendations by the end of 2016.

Recent European Developments

The United Kingdom and the European Union as a whole have also seen some noteworthy developments recently in climate change disclosure requirements. The United Kingdom, which already required disclosure of relevant environmental issues by "quoted companies" in their directors' reports, now requires quoted companies to disclose annual greenhouse gas numerical emissions data in their directors' reports. While many public UK companies have already been providing such data in their CSR reports for some time, the disclosure has been a voluntary, industry-led and somewhat ad hoc practice until this requirement, which was introduced by the UK Climate Change Act 2008 and came into effect in October 2013.

Specifically, under the implementing Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, quoted companies are required to disclose the annual quantity of their greenhouse gas emissions in tonnes of carbon dioxide equivalent (i) from the combustion of any fuel or the operation of any facility, and (ii) separately, from the purchase of electricity, heat, steam or cooling by the company for its own use. The regulations do not prescribe a methodology for quantification, but the company must disclose the methodology used. "Quoted companies" are UK-organised companies whose shares are listed on the London Stock Exchange's Main Market, any main exchange in the European Economic Area, or the NYSE or Nasdaq.

The same regulations imposed an expanded requirement on quoted companies to report, in the strategic report part of their annual report, on their environmental policies and the effectiveness of those policies. This is a general environmental requirement and not specific to the subject of climate change.

Meanwhile, the European Union recently adopted a directive calling for large companies Europe-wide to disclose annually non-financial matters to stakeholders, including environmental matters. Whilst this requirement is also not specific to climate change matters, it is the first time company disclosure to stakeholders under the environmental rubric has become a clear, standard requirement as an EU matter.

Specifically, Directive 2014/95/EU on the disclosure of non-financial and diversity information—which amended Accounting Directive 2013/34/EU, and which came into force on 5 December 2014 and requires Member State implementation by 6 December 2016—requires large EU corporates to disclose in their annual report (or in a separate filing that is filed with their management report or made available on their website) relevant and useful information on their policies, main risks and outcomes relating to at least:

  • environmental matters, including greenhouse gas emissions;
  • social and employee-related matters;
  • respect for human rights;
  • anticorruption and bribery issues; and
  • diversity in their board of directors.

There is significant flexibility for companies to tailor the disclosure through the use of recognised international, European or national guidelines, such as the Global Reporting Initiative's Sustainability Reporting Guidelines, the UN Global Compact Principles, the OECD Guidelines for Multinational Enterprises or ISO 26000. In this way again, the EU Directive begins to formally regulate voluntary, widespread but inconsistent CSR disclosure practice by large companies.

The large companies covered by the Directive are companies incorporated in EU Member States that:

  • have more than 500 employees;
  • are "public interest" organisations, which include, among others, EU exchange-listed companies; and
  • have a balance sheet of at least €20 million or a net turnover of at least €40 million.

Subject to certain exceptions, through the EU Transparency Directive, this Directive applies equally to non-EU companies that have a listing of transferable securities on a regulated EU exchange.

What is abundantly clear from the Paris climate agreement is that legal requirements for companies to reduce greenhouse gases will continue to emerge and become more stringent. As they do, so will requirements for corporates to disclose both their carbon footprint and the impact that carbon regulations—and carbon awareness— have on their businesses. Such is the traction in this area that the OECD published in November its report on Climate Change Disclosure in G20 Countries: Stocktaking of Corporate Reporting Schemes, linked here: http://www.oecd.org/daf/inv/mne/Report-on-Climate-change-disclosure-in-G20-countries.pdf. France's Grenelle II legislation and Denmark's Finance Statements Act 2008 are yet further examples, and several other countries or groups of countries such as Australia, Canada and the European Union's Emissions Trading System already require at least reporting of greenhouse gas emissions by regulated entities to a government regulator.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Jones Day
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Jones Day
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions