Climate Change Disclosures: Securities and Exchange Commission Releases Sample Letter to Businesses | Mitchell, Williams, Selig, Gates & Woodyard, PLLC


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The Securities and Exchange Commission (“SEC”) issued a September 22 announcement (“Announcement”) that includes a template letter (“Sample Letter”) to companies regarding climate change disclosures.

The sample letter was prepared by the Division of Corporation Finance (“Division”) of the SEC.

The SEC has rules in place that generally require public companies to disclose (among other things) known trends, events and uncertainties that are reasonably known to have a material effect on the financial condition or operating performance of the company through annual declarations and others. Information is generally considered important if there is a substantial probability that a reasonable investor will consider it to be important in making an investment decision.

The SEC provides advice on certain topics of general interest to corporate investment communities through interpretive news releases. The 2010 guidelines were released, addressing the SEC’s perspective on how existing disclosure requirements apply to companies with respect to climate-related issues. These guidelines identified four elements of the SK Regulation deemed most likely to require climate-related disclosure in company annual returns.

The four elements discussed included:

  • Company Description
  • Legal proceeding
  • Risk factors
  • Management discussion and analysis

The SEC’s September 22 announcement, including the model letter, notes in part that:

. . . Companies must also disclose, in addition to the information expressly required by the Commission Regulation, “other material information, if any, which may be necessary to make the required declarations, in light of the circumstances in which they are made, not misleading ”.

Further, he notes that the Division “selectively reviews deposits” made under the Securities Act and the Exchange Act:

. . . monitor and improve compliance with applicable disclosure requirements.

The model letter prepared by the Division is characterized as containing examples of comments it can make to companies regarding their climate-related disclosure or lack of such disclosure. The sample comments are not, however, considered to be an exhaustive list of issues that businesses should consider.

A copy of the announcement and letter template can be downloaded here.

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