Today, the U.S. Securities and Exchange Commission voted 3-2 to issue guidance for how publicly traded companies should handle reporting related to climate change. The SEC considered and approved “a recommendation to publish an interpretive release to provide guidance to public companies regarding the Commission's current disclosure requirements concerning matters relating to climate change.” Although SEC regulations and guidance clearly require the disclosure of material costs and risks associated with litigation, regulatory compliance, and certain other risks, the extent to which these requirements actually required disclosures related to climate change were unclear. In the opinion of many, this ambiguity may have resulted in the underreporting in SEC filings of material information related to climate change.

According to the fact sheet released by the SEC, the guidance approved today will provide information regarding when certain material information should be disclosed. Such information may include impact of current and future greenhouse gas regulations and laws; the effects of international climate change agreements; the effects of legal and technological developments; and physical impacts of climate change, such as impacts on real estate values. Further analysis to follow.