SEC Approves Guidance on Climate Change Disclosures


The SEC voted on Wednesday to release interpretive guidance related to the potential impact of climate change and climate change regulation on businesses.


The guidance, which does not create new legal requirements or modify existing ones, outlines four areas where the commission says issuers should examine their disclosure obligations.


The first topic, the impact of legislation and regulation, emphasizes that issuers should look not just at existing regulations, but also at potential regulation that could be implemented in the future.


“It is neither surprising nor especially remarkable for us to conclude that of course a company must consider whether potential legislation—whether that legislation concerns climate change or new licensing requirements—is likely to occur,” said SEC Chairman Mary Schapiro in a prepared statement. “If so, then under our traditional framework the company must then evaluate the impact it would have on the company’s liquidity, capital resources, or results of operations, and disclose to shareholders when that potential impact will be material.”


Second, just as issuers are expected to examine whether legislation and regulations will have a material impact on their businesses, the SEC says a company should also evaluate the effects on its business of international accords and treaties that relate to climate change or govern greenhouse gas emissions.


Third a company should consider actual and potential indirect consequences of climate change-related regulation or business trends. In comments before the commission, Meredith Cross, director of the Division of Corporation Finance, said the guidance includes examples of indirect consequences such as reduced demand for goods that produce significant greenhouse gas emissions and increased competition to develop innovative new products to satisfy demand for cleaner goods.


And finally, issuers should consider actual and potential impacts of the physical effects of climate change on their businesses.


Schapiro emphasized that the commission’s intent is to provide clarity and enhance consistency on existing SEC rules. “The commission is not making any kind of statement regarding the facts as they relate to the topic of  ‘climate change’ or ‘global warming,’” she said. “And, we are not opining on whether the world’s climate is changing; at what pace it might be changing; or due to what causes.”


However, the commission made it clear that it intends to keep its eye on this issue. Cross said the SEC would monitor the release’s impact on company filings as part of the agency’s disclosure review program.


Commissioners Kathleen L. Casey and Troy A. Paredes, voted against the measure, pointing to recent challenges to climate change science. They also cited concerns about whether additional guidance is necessary in light of other issues on the SEC agenda and whether additional disclosures would be useful for investor decision making.


The interpretive guidance will be available here when it is published.


—Matthew G. Lamoreaux ( is a JofA senior editor.



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