January 31, 2023

Volume XIII, Number 31


January 30, 2023

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SEC Continues to Drive ESG — Climate Change Disclosure Takes the Wheel

In late September, the SEC’s Division of Corporation Finance continued signaling the increased importance of ESG initiatives in its mission by publishing a sample comment letter similar to what it may provide to issuers when reviewing their filings. The letter comes after a stream of other signaling, most notably from then-Acting Chair Allison Lee in March of 2021, when she announced she was asking SEC staff to evaluate disclosure rules “with an eye toward facilitating the disclosure of consistent, comparable, and reliable information on climate change.”

Although the SEC has not released new disclosure rules since its 2010 Climate Change Guidance, this letter provides additional direction to companies trying to figure out what to make of Lee’s March announcement. The letter highlights two areas companies should make sure they link to material climate change consequences when making their disclosures, risk factors and the management’s discussion and analysis, each discussed in more detail below:

  • Risk Factors: When considering risk factors, the letter emphasizes that companies should include transition risks (such as operational or compliance burdens caused by policy change, market trends related to climate change that may alter operations, or technological changes that may impact business) and litigation risks related to climate change. Interestingly, it does not clarify where those litigation risks steam from, leaving the term broad.

  • Management’s Discussion and Analysis: Companies are advised they may receive comment if they do not more closely integrate climate change into their outlook of the company, both in terms of response to legislation and in terms of specific company outcomes (such as decreased demand for goods or services producing significant emissions or weather-related events that might impact operations). While all of the discussion and analysis factors include a materiality qualifier, the sample letter makes it clear the expectation is for companies to take the time to wrap their heads around how climate change will impact their bottom line so as not to mislead consumers.

The letter also leaves readers with one additional piece of insight: The SEC is keeping an eye on corporate social responsibility (CSR) reports. Where companies provide more expansive commentary on their climate-related disclosure in their CSR reports than their SEC filings, they might have to explain the difference, even though CSR reports are not standardized and are not required disclosure to the SEC. Whether this hints at a future CSR requirement as a result of the ESG agenda, only time will tell.

There is little doubt the SEC is taking a more proactive approach on climate change specifically and on ESG topics more broadly. Current Chair Gary Gensler has indicated  the staff is working on rule proposals to address broad categories of information that fall under the ESG umbrella, including climate risk, human capital, and cybersecurity. Those proposals may be published prior to year end.

In the meantime, companies should review the SEC’s 2010 Guidance Regarding Disclosure Related to Climate Change to get a feel for the SEC’s thinking in this regard. In addition, companies should consider the effectiveness of their disclosure controls and procedures to ensure they facilitate disclosure of material climate change information in their SEC filings. The public comment period on climate change disclosures remains open on the SEC website, but the Commission has made it clear: Companies better get their ducks in a row when it comes to how (and how much) climate change will impact them across their businesses as they make public disclosures.

*Caitlin Throne is currently pending license approval 

© 2023 Dinsmore & Shohl LLP. All rights reserved.National Law Review, Volume XI, Number 279

About this Author

David J. Lavan, Dinsmore, Corporate Litigation Attorney, SEC Registration

David is a partner in the Corporate Department who focuses his practice on all aspects of SEC registration, reporting and compliance. He routinely advises clients on public and private offerings of debt and equity, disclosure matters, corporate governance and accounting issues. As a former government bond broker, David provides clients with unique insights into the financial marketplace, counseling them on transactional and regulatory matters, as well as litigation. He represents both public and private companies, as well as independent board and committee members,...

Caitlin Throne Law Clerk Dinsmore Law Firm
Law Clerk

Caitlin focuses her practice on corporate law. Her prior experience includes working with private equity clients to evaluate market performance and potential acquisitions. She earned her J.D. from The Ohio State University Moritz College of Law.


  • The Ohio State University Moritz College of Law  (J.D., magna cum laude, 2021)

    • Ohio State Law Journal, executive editor

    • Three CALI Awards for Excellence, including Debtor and Creditor Law

  • Carleton College  (B.A., cum laude, 2015)...