Companies must consider the effects of global warming and efforts to curb climate change when disclosing business risks to investors, the U.S. Securities and Exchange Commission said.
Guidelines approved today require companies to weigh the impact of climate-change laws and regulations when assessing what information to include in corporate filings, the commission said. The SEC is responding to investors who said companies aren’t providing enough data on the potential risks to their profits and operations from environmental-protection laws.
“I do not believe that public companies today are doing the best job they possible can do with respect to their current mandated disclosures,” SEC Commissioner Elisse Walter said today. The decision “is designed to improve the quality of disclosures filed by U.S. public companies for the benefit of investors.”
In the 3-to-2 vote, the commission said companies in the U.S. should also consider international accords, indirect effects such as lower demand for goods that produce greenhouse gases, and physical impacts such as the potential for increased insurance claims in coastal regions as a result of rising sea levels.
Here are Chairman Mary Schapiro’s full remarks on this:
Next, we will consider a recommendation to provide public companies with interpretive guidance on existing disclosure requirements as they relate to business or legislative events on the issue of climate change.
An interpretive release, as this is known, does not create new legal requirements or modify existing ones — it is merely intended to provide clarity and enhance consistency.
To that end, the Commission is not making any kind of statement regarding the facts as they relate to the topic of “climate change” or “global warming.” And, we are not opining on whether the world’s climate is changing; at what pace it might be changing; or due to what causes. Nothing that the Commission does today should be construed as weighing in on those topics.
The Commission is also not considering amending well-defined rules concerning public company reporting obligations, nor redefining long-standing interpretations of materiality. These rules and interpretations have served investors well for decades, and provide both the framework and flexibility necessary to apply to changing facts and circumstances. If something has a material impact on a company then it is something that needs to be disclosed — that has always been the case.
What the Commission is considering is whether to provide guidance that can help public companies in determining what does and does not need to be disclosed.
The discussions, debates and decisions that are taking place in the U.S. and elsewhere on this topic have implications under our existing, long-standing disclosure rules.
It is neither surprising nor especially remarkable for us to conclude that of course a company must consider whether potential legislation — whether that legislation concerns climate change or new licensing requirements — is likely to occur. If so, then under our traditional framework the company must then evaluate the impact it would have on the company’s liquidity, capital resources, or results of operations, and disclose to shareholders when that potential impact will be material. Similarly, a company must disclose the significant risks that it faces, whether those risks are due to increased competition or severe weather. These principles of materiality form the bedrock of our disclosure framework.
Today’s guidance will help to ensure that our disclosure rules are consistently applied, regardless of the political sensitivity of the issue at hand, so that investors get reliable information.
