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SEC Moving Forward on Climate Disclosures

March 17, 2022

On March 15, 2021, acting Securities and Exchange Commission (SEC) Chair Allison Herren Lee formally sought comments on climate change-related disclosures in annual 10K and quarterly 10K public company filings. It was apparent from the questions raised that consistent, comparable, and reliable information on climate issues and climate risk was the focus of the questions raised.

On Sept. 22, 2021, the SEC Division of Corporation indicated to the public that they would be scrutinizing company SEC disclosures on climate change in comparison to other company disclosures in other public forums. The SEC provided a “sample letter” that may be issued questioning the company’s climate change disclosures or to explain the difference between identified public disclosures. To date, Clark Hill attorneys have not identified any recipient of the SEC’s “sample letter.”

The public response to the SEC’s March 2021 request was widespread, including trade associations, environmental organizations, asset managers, research organizations, major corporations, and academics. Generally speaking, the comments ranged from robust approval of vast corporate disclosures on climate change to remaining at status quo based on the SEC’s existing 2010 climate change guidelines. In summary, most responses indicated that climate change disclosures could be improved and many responses requested that the focal point should remain with the concept of “materiality,” which has a long track record and legal history with the SEC filings for 10K/10Q.

For those familiar with SEC Regulation S-K and S-X filings, climate change disclosures might be relevant to Item 101-Description of Business, Item 103-Legal Proceedings, Item 503(c)-Risk Factors, Item 303-Management’s Discussion and Analysis. Example topics of emerging issues of concern for SEC climate change disclosures include, but are not limited to:

  • Physical and transitional climate risks to companies and supply chains.
  • Regulatory and legislative developments related to climate change.
  • Shareholder resolutions and other corporate engagement efforts.
  • Litigation and enforcement actions related to corporate disclosure issues.
  • Environmental, social, and governance (ESG) reporting frameworks.
  • ESG investing and potential “greenwashing” issues related to investments.
  • The relation of climate and other ESG risks.

Recently, the SEC Chair, Gary Gensler, announced that an Open Meeting and webcast will be held on Monday, March 21, 2022, at 11:00 a.m. (ET)

The SEC matters to be considered are “. . . whether to propose amendments that would enhance and standardize [SEC] registrants’ climate-related disclosures for investors.” Clark Hill attorneys urge you to attend the webcast, if possible. If draft proposed rules are issued, interested parties likely will have 45 days or more to respond.

Note that in recent opposition to the SEC’s efforts to require additional climate change disclosures, the United States Senate Banking Committee Republicans sent a letter to the United States Department of Treasury Secretary, Janet Yellen, which stated in part:

“We write to express concern about the potential damaging effects to national security from the unprecedented efforts of federal financial agencies to develop regulations that some intend to use for limiting U.S. energy producers’ access to credit and capital. . . . The economic toll, as well as the destruction, casualties, and instability from Russia’s energy-based warfare are so significant that we urge you to immediately pause the development of all climate-and energy-related regulations within the Treasury Department and to urge all other federal financial regulators to follow suit.”

Clark Hill attorneys have been following these important climate change developments and were involved in supplying comments to the SEC’s March 2021 request and providing advice to companies and trade associations in climate change disclosures. Contact us to advise you on possible SEC Rule changes and how to stay ahead of this important topic of climate change disclosures.

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