This afternoon, Corp Fin posted a sample letter to companies containing illustrative comments regarding climate change disclosures. Presumably, the goal is to help companies think about and craft their climate-related disclosure.

Corp Fin begins by noting that, under its 2010 guidance (see this PubCo post), depending on the facts and circumstances, climate change disclosure could be elicited in connection with a company’s description of business, legal proceedings, risk factors and MD&A. The disclosure might include both physical risks and transition risks, such as

  • “the impact of pending or existing climate-change related legislation, regulations, and international accords;
  • the indirect consequences of regulation or business trends; and
  • the physical impacts of climate change.”

In addition, Corp Fin explains, there is a more open-ended requirement: companies must also disclose “such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.”

The letter includes nine sample comments, some with multiple components, covering topics such as

  • what consideration the company gave to providing the same type of climate-related disclosure in its SEC filings as it provided in its more expansive corporate social responsibility report
  • climate-related transition risks “such as policy and regulatory changes that could impose operational and compliance burdens, market trends that may alter business opportunities, credit risks, or technological changes.”
  • material climate-related litigation risks
  • in light of significant developments, the impact of material pending or existing climate change-related legislation, regulations and international accords
  • material past and/or future capital expenditures for climate-related projects
  • indirect consequences of climate-related regulation or business trends, such as decreased or increased demand for goods or services based on production or reduction of significant GHG emissions, increased competition to introduce lower-emission products, increased demand for alternative energy products, and reputational risks resulting from operations or products that produce material GHG emissions
  • material physical effects (including damage quantification) of climate change such as severe weather, changes in sea level, arability of farmland, extreme fires and water availability and quality, indirect impact of weather on major customers or suppliers, decreased agricultural production capacity and the cost or availability of insurance
  • quantification of increased climate-related compliance costs
  • material carbon credits or offsets