Publication of a sample climate change disclosure letter


Environmental, social and governance (“ESG”) factors have captured the attention of the SEC in recent years. In September, building on earlier guidance, the SEC’s Division of Corporate Finance released a sample comment letter requesting additional information from companies related to climate change. The letter does not create a substantive new law, but it illustrates the SEC’s increased interest in ESG and climate-related disclosures under the Biden administration.

On February 2, 2010, the SEC released its Guide to Climate Change Disclosure (Release No. 33-9106), an interpretive statement guiding public companies on how to apply the SEC’s existing disclosure requirements to change. climate and its impact on businesses. The 2010 Guide addressed four climate-related disclosure topics, including: 1) the impact of national laws and regulations related to climate change, 2) the impact of international agreements related to climate change, 3) indirect consequences of regulations and trade trends. , and 4) the physical impacts of climate change. Sheppard Mullin’s review of this 2010 focus can be found here: SEC Interpretive Statement on Climate Change Disclosure | Sheppard Mullin Richter & Hampton LLP – JDSupra.

Since the start of the Biden administration, the SEC has focused on promoting ESG information in order to provide investors with more information on how companies will both impact and be impacted by climate change. In February 2021, Allison Herren Lee, then Acting Chairman of the SEC, asked the Division of Corporate Finance to increase its focus on climate-related disclosures. In March 2021, the SEC also created a task force to tackle violations of its ESG disclosure requirements. In recent months, SEC Chairman Gary Gensler has also indicated that the SEC will put more emphasis on ESG-related disclosures and indicated that the SEC will propose a mandatory climate risk disclosure rule by now. the end of 2021.

The September 2021 template letter states that it is intended to help the SEC better understand the business information required under its 2010 guidelines. The letter can be found here: | Sample Letter to Businesses Regarding Climate Change Disclosures. The SEC template letter requests additional information on the following topics:


Risk factors

  • Significant impacts of climate-related transition risks on the business, its financial condition and its operating results, including policy and regulatory changes, market trends, credit risks or technological changes

  • Significant litigation risks related to climate change

Management report and analysis of the financial position and operating results

  • Current or pending international laws, regulations and agreements related to climate change that may have a material effect on the business, financial condition and results of operations

  • Significant past and / or future capital expenditures for climate-related projections

  • Indirect consequences of climate-related regulations and trade trends, including:

    • the effect on demand for goods and services that produce significant greenhouse gas emissions or are linked to carbon-based energy resources

    • increased demand for goods resulting in lower emissions than competing products

    • increased competition to develop new innovative products that result in reduced emissions

    • increased demand for the production and transmission of energy from alternative energy sources, and

    • anticipated reputational risks resulting from operations or products that produce significant greenhouse gas emissions

  • Significant physical effects of climate change on operations and results, including:

    • severity of the weather

    • quantification of damage to property or operations due to bad weather

    • potential for indirect impacts of weather conditions affecting major customers or suppliers

    • decreased agricultural production capacity in areas affected by drought or other weather-related changes, and

    • weather-related impacts on the cost or availability of insurance

  • Quantification of any significant increase in compliance costs related to climate change

  • The purchase or sale of carbon credits or offsets by the business and its impact on the business, financial condition and results of operations

SOEs should view the SEC template letter as further insight into the agency’s priorities with respect to climate-related disclosures and ESG. Disclosures should include full information consistent with the potential issues raised in the letter, both to provide additional information to investors and to avoid scrutiny by the SEC. The SEC’s efforts to promote climate-related disclosures will increase corporate transparency about how different companies are contributing to and being affected by climate change, making environmental factors a greater consideration for business leaders and investors. .

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.Revue nationale de droit, volume XI, number 307

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