Author: James Brusslan
President Biden continues to make responding to climate change one of his highest priorities and is taking measures that will have impacts across the economy. In this regard, the SEC is expected to issue new regulations which will likely require public companies to compile and disclose specific climate change information. (See our previous article from July 2021 – “SEC May Soon Require Affirmative Climate Change Disclosure” – for more information.)
The SEC has not yet issued proposed rules, and pending anticipated legal challenges, the rules may not be fully enforceable until early 2023. Nonetheless, the SEC has made it clear that, based on its 2010 Climate Change Guidance, many public companies have substantial current disclosure requirements. Public companies should not wait for the new climate change disclosure rules. Instead, in addition to preparing for the new, more extensive climate change disclosure rules, public companies should review the current requirements, and ensure that they are now addressing climate change in their SEC filings.
On September 22, 2021, the SEC published a “Sample Letter to Companies Regarding Climate Change Disclosures.” In the introduction, SEC states that a number of its current rules may require disclosure related to climate change. Such disclosures include: (a) the impact of pending or existing climate change-related legislation, regulations, and existing accords, (b) the indirect consequences of regulation or business trends, and (c) the physical impacts of climate change. SEC further explains that its Division of Corporate Finance selectively reviews SEC filings. Based on these reviews, SEC has published a sample letter that the Division may issue to companies regarding their inadequate, or absence of, climate-related disclosures. The Sample Letter to “ABC Corporation” includes the following comments, which provide insight as to the SEC’s current climate change disclosure expectations:
The Sample Letter goes on to say that the company and management are responsible for the accuracy and adequacy of the disclosures.
While the SEC has not indicated who will receive the letters, public companies should not wait until the SEC issues its final comprehensive climate change disclosure rule. Instead, public companies would be wise to address the climate change issues outlined in the Sample Letter in their current SEC filings.