Public companies have an obligation to disclose in their SEC filings material climate-related risks that could affect their finances and operations.
In this connection, in February 2018, the U.S. Government Accountability Office issued a report summarizing a study carried out regarding (i) the steps taken by the SEC since 2010 to clarify the disclosure requirements for climate-related matters; (ii) the steps taken to examine the changes made by companies in their disclosure; and (iii) the constraints faced by the SEC in reviewing climate changes disclosures.
- Steps to clarify disclosure
requirements:
- In 2010, the SEC issued a guidance regarding disclosure related to climate change (https://www.sec.gov/rules/interp/2010/33-9106.pdf). Among other things, this guidance establishes four categories of climate-related risks (legislation and regulation, international accords, indirect consequences of regulation or business trends and physical impacts) and provides examples of how they could trigger disclosure requirements.
- Additionally, the SEC has been issuing comment letters on companies' climate-related disclosures.
- Steps to examine changes in
disclosures:
- In response to a request of the Senate Committee on Appropriations, the SEC issued two reports to Congress in 2012 and 2014 that examined changes to climate-related disclosure of 60 companies from six different industries. The reports concluded that there were no noticeable changes from year to year.
- In April 2016, the SEC requested feedback from stakeholders on the effectiveness of the disclosure requirements on topics such as climate change, resource scarcity, corporate social responsibility and good corporate citizenship. In December 2017, the SEC staff indicated they were considering the recommendations received.
- Constraints faced: The SEC invariably faces certain constraints when reviewing the disclosures, mainly due to (i) companies' judgement on materiality of the information to be disclosed; and (ii) varying disclosure format among reporting companies.
The announcement and the report issued by the U.S. Government Accountability Office are available at:
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