My partner Tom Wood circulated this preliminary alert this afternoon:

"Earlier today the U.S. Securities & Exchange Commission (SEC) approved interpretive guidance intended to inform public companies how climate change must be taken into account when applying existing disclosure requirements. Specifically, the SEC's interpretative guidance highlights the following areas as examples of where climate change must be considered in crafting disclosures:

  • The direct effects of existing and pending environmental regulation, legislation and international accords and treaties on the company’s business, its operations, risk factors and in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A);
  • The indirect effects of climate change legislation and regulation on a company’s business—this could include new opportunities or risks posed by legal, technological, political and scientific developments related to climate change; and
  • The actual and potential effect on a company’s business and operations resulting from physical changes to the planet resulting from climate change.

"The interpretive guidance specifies that public companies must have adequate knowledge of their greenhouse gas emissions—a requirement that is consistent with recent EPA regulations requiring many (but not all) significant greenhouse gas emitters report their direct emissions starting in calendar year 2010. The SEC stated “management should ensure that it has sufficient information regarding the registrant’s greenhouse gas emissions and other operational matters to evaluate the likelihood of a material effect arising from the subject legislation or regulation.”

Unsurprisingly, the SEC said that registrants must weigh whether climate change related information is material or not. In doing so, they said that if it was a close question, the company should decide in favor of disclosure."

The complete language of the interpretive guidance has not yet been released. Corporate securities partners C. J. Voss and Ron McFall are reviewing the issue and will be issuing an Energy Law Alert on the topic. If you'd like to sign up for our Energy Law Alerts, click here.