Guidance on Disclosure Requirements: SEC Provides Guidance to Public Companies on Climate Change Disclosure

Sullivan & Cromwell LLP - February 5, 2010

The SEC recently published an interpretive release to provide guidance to public companies regarding application of the SEC’s existing disclosure requirements to climate change matters. The SEC is alerting registrants to the increasing importance of climate change-related regulation and the potential effects of that regulation on companies’ operations and financial performance. The release points out specific areas of an annual report (such as the description of business, legal proceedings, risk factors and management’s discussion and analysis) where detailed discussion of impacts of climate change would be appropriate, and reviews topics related to climate change which could trigger disclosure requirements, such as:

  • Impact of significant developments in federal and state legislation and the difficulties involved in assessing the timing and effect of pending legislation, especially for registrants that are particularly sensitive to greenhouse gas regulation;
  • Impact of international treaties or accords on businesses, especially for registrants with operations outside the United States that are or will soon become subject to such standards;
  • Indirect consequences of legal, technological or scientific developments, such as increased demand for goods that results in lower greenhouse gas emissions or reputational damage arising from the public’s perception of greenhouse gas emissions; and
  • Physical impact of climate change, notably the devastating results of severe weather conditions.

Registrants will wish to take these views into account in preparing their Form 10-K’s, annual reports to shareholders and other disclosure documents.