SEC Issues Climate Change Disclosure Compliance Letters
As previously discussed in a post on the Manufacturing Law Blog, the U.S. Securities and Exchange Commission (SEC) is increasing scrutiny of how thoroughly companies evaluate and disclose Environmental, Social, and Corporate Governance (ESG) risk, specifically climate change, and the impacts such risk may have on a company’s operations. In the latest move in this area by the SEC, the Division of Corporation Finance has published a sample letter, and commentary, to demonstrate the types of letters it intends to issue to public companies regarding their climate change disclosures or lack of the same.
The sample letter includes requests for disclosure of material impacts from the physical effects of climate change on operations and results. Examples of such effects include impact of severe weather on property and operations, weather-related impacts to major customers or suppliers, and weather-related impacts on the cost and availability of insurance. Also included is the following general request:
We note that you provided more expansive disclosure in your corporate social responsibility report (CSR report) than you provided in your SEC filings. 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.
While climate change is not explicitly referenced in the SEC’s rules, the SEC has increasingly made it clear that it will be following through with its increased focus on the appropriateness of climate change disclosures. Even if your company does not receive a form of the sample letter from the SEC, now is a good time to use the sample letter to review the appropriateness of your company’s climate change disclosures. Additional information on the SEC’s focus on climate change and ESG risks can be found here.