SEC releases sample letter to companies on environmental disclosures | Sheppard Mullin Richter & Hampton LLP


Environmental, social and governance (“ESG”) factors have been at the forefront of the SEC’s attention in recent years. In September, building on earlier guidance, the SEC’s Corporate Finance Division released a model comment letter asking companies for additional information about climate change. The letter does not create a substantive new right, but it illustrates the SEC’s heightened interest in ESG and climate-related disclosures under the Biden administration.

On February 2, 2010, the SEC issued its Climate Change Disclosure Guidelines (Version No. 33-9106), an interpretive statement guiding public companies on how to apply existing SEC disclosure requirements to climate change. climate change and its impact on businesses. The 2010 guidance addressed four climate-related disclosure topics, including: 1) the impact of national climate change-related legislation and regulations, 2) the impact of international agreements related to climate change, 3) the indirect consequences of regulations and commercial trends. , and 4) the physical impacts of climate change. Sheppard Mullin’s review of these 2010 guidelines can be viewed here: SEC Interpretative Publication on Climate Change Disclosure | Sheppard Mullin Richter & Hampton LLP – JDSupra.

Since the start of the Biden administration, the SEC has focused on promoting ESG-related disclosures to provide investors with more information about how companies will both impact and be affected by climate change. In February 2021, then-Acting SEC Chair Allison Herren Lee called on the Corporate Finance Division to pay more attention to climate-related disclosures. In March 2021, the SEC also created a task force to address violations of its ESG disclosure requirements. In recent months, SEC Chairman Gary Gensler also indicated that the SEC would place more emphasis on ESG-related disclosures, and indicated that the SEC would propose a mandatory climate risk disclosure rule for by the end of 2021.

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


  • Whether the company provided more detailed information in its corporate social responsibility report (CSR report) than in SEC filings

Risk factors

  • Significant impacts of climate-related transition risks on the business, its financial condition and results of operations, including political and regulatory changes, market trends, credit risks or technological changes
  • Significant risks of litigation related to climate change

Management report and analysis of the financial situation and operating results

  • Current or future legislation, regulations and international 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 business trends, including:
    • the effect on demand for goods and services that produce significant greenhouse gas emissions or are tied to carbon-based energy resources
    • increased demand for goods that result in lower emissions than competing products
    • increased competition to develop innovative new products that lead to reduced emissions
    • increased demand for power generation and transmission 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:
    • weather severity
    • quantification of damage caused by weather conditions to assets or operations
    • potential for indirect weather impacts affecting key customers or suppliers
    • reduced agricultural production capacity in areas affected by drought or other weather-related changes, and
    • weather-related impacts on the cost or availability of insurance
  • Quantify any significant increase in compliance costs related to climate change
  • The purchase or sale of carbon credits or offsets by the company and its impact on business, financial condition and operating results

Public companies should consider the SEC template letter as additional insight into the agency’s priorities with respect to climate and ESG-related disclosures. Disclosures should include complete information consistent with potential issues raised in the letter, both to provide additional information to investors and to avoid scrutiny by the SEC. The SEC’s effort to promote climate-related disclosures will increase corporate transparency about how different companies contribute to and are affected by climate change, making environmental factors a greater consideration for business executives and managers. investors.

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