SEC Issues Sample Comment Letter to Companies Regarding Climate Change Disclosures | Alston & Bird

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The Securities and Exchange Commission continues to show increased interest in climate change and how companies are adapting to it. Our Securities group is examining why companies should evaluate their process for assessing the materiality of climate change issues and review past disclosures for potential gaps.

  • What SEC Staff Look For In Their Review Of Climate Change Information
  • Consistency between corporate social responsibility reports and records
  • Current implications of climate change and climate-related legislative and policy changes

On September 22, 2021, staff in the Division of Corporation Finance of the United States Securities and Exchange Commission (SEC) issued a letter containing examples of comments on, or lack of, climate-related disclosures that staff may post to companies in the future in accordance with the 2010 Climate Change Guidance. The information covered by the 2010 guidance concerns the impact of climate-related legislation and regulations, trade trends and the direct impact of climate change itself.1

As the SEC focuses more on climate change issues, there has been an increase in the number of comment letters regarding climate change disclosures. While the SEC is still due to come up with full climate-related disclosure rules by the end of the year, it looks like the comment letter template is an intermediate step to encourage companies to focus on these issues now. .

The sample comment letter illustrates what the SEC considers common disclosure gaps and highlights topics that may merit special attention in documents filed with the SEC. While the precise answers vary by company and industry, the letter provides commentary on what staff can typically look for in their review.

Commentary on Consistency with Corporate Social Responsibility Reports

The letter includes a commentary comparing the scope of information provided in a corporate social responsibility (CSR) report to that provided in a filing with the SEC.

Companies should be prepared to explain any difference in the depth or substance of the information provided between annual reports and sustainability reports. This is important because some companies’ CSR reports can be as long as their annual reports.

Comments on risk factors

Two of the comments focus on systemic risks posed by potential policy or regulatory changes or significant litigation risks. Businesses must look to the future by anticipating future burdens imposed directly or indirectly by climate change. We believe the next few years are likely to be just as eventful, if not more, than the past few in terms of climate change policy and litigation.

Comments on financial conditions and results of operations

The remaining comments in the letter focus on the current implications of climate change and climate-related legislative and policy changes.

These comments include requests to:

  • Identify pending or existing climate-related laws, regulations and international agreements, and describe any significant effects on business.
  • Identify any significant past and / or future capital expenditures for climate-related projects.
  • Discuss the material side effects of climate regulation or business trends.
  • Discuss the material physical effects of climate on operations and results.
  • Quantify any significant increase in compliance costs related to climate change.
  • Disclose any significant purchase or sale of carbon credits or offsets and their effects.

In light of this letter and the trend of increased interest in climate change, companies should assess their process for assessing the materiality of climate change issues and review past disclosures for potential gaps. The letter does not give explicit guidance on which companies will be required to provide climate change information, or in what context, but it is likely that the SEC will continue to mandate more extensive climate change information across industries. The letter, along with the 2010 guidance, should be used as a framework from which to anticipate possible SEC comments and tailor future disclosures.


1 For more information on the 2010 guidance and previous SEC statements, please see our notices: “SEC Filers Can Expect a New Climate from the Biden Administration“(March 5, 2021) and”The Long Term Comes with Time – Financial Services Regulators and Investors Prepare for Climate Change Reforms»(December 1, 2020).

Download the PDF of the opinion

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