The SEC Enters the Fray on Climate Risk Disclosure - NR&E | Winter 2011
In 2010, the Securities and Exchange Commission (SEC) issued a document to provide guidance to publicly traded companies as to how to apply SEC rules to climate risk disclosure. The SEC discussed four items in Regulation S-K that apply to climate risk: Item 101, Item 103, Item 303, and Item 503. These items relate respectively to capital expenditures to comply with climate or greenhouse gas (GHG) regulations, climate litigation, management discussion and analysis related to climate and GHG regulations and impacts, and discussion of climate risk factors in SEC filings. In applying these regulatory disclosure items to climate risk, the SEC in its guidance document states that the four principal areas in which its rules may require disclosure relating to climate change are the impact of existing or pending legislation or regulations that relate to climate change; the effect of treaties or other international accords; the consequences, both positive and negative, including reputational harm, of regulations or business trends related to climate change matters; and the physical impacts of climate change. This article will review these disclosure issues in the context of the guidance recently issued by the SEC and how management should evaluate and respond to the myriad of risks and issues relating to climate risk disclosure arising from SEC regulations, voluntary disclosure programs, and existing and developing state and EPA GHG regulations.