SEC Begins to Issue Comment Letters on Climate Disclosures
As indicated by the sample comment letter provided by the SEC in September 2021, the SEC has begun issuing comment letters to companies concerning climate disclosure issues in their filings. To date, there do not appear to be that many of these letters--according to public reports, at least five companies have received such letters: Allbirds, Inc.; Warby Parker; Olaplex Holdings, Inc.; Cintas Corporation; and Palo Alto Networks, Inc.
Based on the currently-known information, there does not appear to be anything particularly surprising about these comment letters. Some of the statements in them appear to directly echo the sample comment letter, or be effectively identical--e.g., "Please advise us what consideration you gave to providing the same type of climate-related disclosure in your SEC filings as you provided in your CSR report." (Sample Comment Letter) cf. "Please advise us what consideration you gave to providing the same type of climate-related disclosure in your SEC filings as you provided in your CSR report." (Cintas Corporation); "If material, discuss the physical effects of climate change on your operations and results. This disclosure may include . . . quantification of material weather-related damages to your property or operations; . . . [and] any weather--related impacts on the cost or availability of insurance." (Sample Comment Letter) cf. ("If material, discuss the significant physical effects of climate change on your operations and results. This disclosure may include quantification of material weather-related damages to your property or operations and any weather-related impacts on the cost or availability of insurance." (Palo Alto Networks, Inc.) . The guidance provided by the sample comment letter appears to be attuned to the actual comment letters issued by the SEC.
Broadly speaking, these comment letters are focusing on the issues that the SEC had identified as being of concern, including differences between corporate social responsibility reports and SEC filings, whether companies have taken the physical effects and indirect consequences of climate change into account, and demanding additional information or support for various climate-related statements in the public disclosures. Additionally, none of the public responses by companies is especially noteworthy--most of these statements are fairly innocuous (e.g., "The Company has not experienced any material physical effects of climate changes on its operation or results . . . If, in the future, the Company experiences significant physical effects attributable to client change on its operations or results of operations, the Company will include appropriate disclosures in future annual reports.") (Palo Alto Networks, Inc.).
One potential item of interest is that these comment letters and their responses may have an impact on the climate change disclosure rules the SEC ultimately adopts. For example, the SEC may reach the conclusion that it needs to promulgate disclosure rules that demand more specific information from companies.
Since mid-2021, the SEC has issued at least three comment letters asking companies to address climate disclosure in the general disclosure section of their filings. The letters all request that companies justify or remove positive statements made about their environmental records, including claims of carbon neutrality. Intelligize found that the SEC has issued relatively few comment letters focused on risk factor disclosures, with those letters including requests for more specificity regarding “transition risks” – including legislative and regulatory changes, market trends, credit risks, and technological changes.