On February 2, 2010, the SEC issued the written interpretive release that it approved last week to guide how public companies should evaluate the impacts of climate change in their communications with shareholders. As companies in the energy industry should note, the guidance does not change the existing principles of corporate disclosure, founded on an assessment of materiality and likelihood. That said, the structure and perspective of the guidance suggest that the SEC expects to see greater attention being given to the evaluation and disclosure of risks and opportunities arising from climate change.

The guidance expressly notes that generic disclosure in Risk Factors may not be sufficient. With respect to disclosure under Management’s Discussion and Analysis (Item 7 – MD&A), the interpretive release states that, unless a company can determine that climate change legislation or regulation is not reasonably likely, the company must assume that the legislation or regulation will be enacted and must then evaluate the potential materiality of the resulting effects – based on a specific understanding of the company’s greenhouse gas emissions and “other operational matters.”

For a more detailed examination of this issue, visit: http://bgllp.com/sec_climate_guidance_feb10