SEC Releases Sample Climate Change Disclosure Letter


Northampton, MA –News Direct– Workiva

Through: Steve soter

The Securities and Exchange Commission has posted a letter template highlighting potential disclosures public companies should consider related to climate change.

Commission staff are working on a proposal for a mandatory climate risk disclosure rule, which we should see in the coming weeks. The template letter posted Wednesday is a signal the SEC intends to build on its 2010 climate disclosure guidelines, which state-owned enterprises should have followed from the start.

If you had questions about how to apply the 2010 guidelines, you might feel both grateful and nervous about the template letter. The good news is that the letter provides a practical summary of considerations for implementing the 2010 guidelines. The bad news is that the SEC has just fired a shot across the arc to state unequivocally that you might be missing a few things in your current disclosures.

Among regulators, investors and other stakeholders, interest in Environmental, social and governance (ESG) reporting has grown considerably on both sides of the Atlantic. The European Union has already made rapid progress with its recent Proposal for a directive on corporate sustainability reporting (CSRD), and we look forward to a proposal from the SEC on additional information on climate change. In the meantime, regulators are closely monitoring existing disclosures, including those potentially affected by Wednesday’s model letter. US authorities are investigating the asset management arm of Deutsche Bank AG, which the former head of sustainability said did not quite live up to public statements about ESG, The Wall Street Journal reported.

Key points to remember

Be sure to read the SEC full announcement and letter template for yourself, but this is what dawned on me about what companies should definitely consider before their next SEC filing:

  • The SEC expects consistency between corporate social responsibility (CSR) reports and your SEC reports, especially for important items

  • If there is a significant climate-related dispute, government initiative, new law, agreement, or any other regulatory change that is clearly affecting your business, you really need to talk about it in your 10-K or 10-Q.

  • If your investments for climate-related projects are significant, or if your compliance or insurance costs have been materially affected by climate-related factors, this should be disclosed and quantified

  • Indirect consequences of regulations or climate-related trends are also important, such as a drop in demand for goods or services that produce significant greenhouse gases or depend on carbon-based energy sources.

  • If factories, buildings or operations are threatened due to climate-related events such as hurricanes, drought or sea level rise, this should be reported.

Watch this space as we cover more on the SEC and climate change. Subscribe to the blog so you don’t miss a thing.

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