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Tag Archives: Climate

SEC Issues Climate Change Guidance

Last week the SEC posted to its website guidance regarding disclosure related to climate change. The guidance does not create new rules; rather, it helps explain current rules. In general, a company might be expected to make climate-change related disclosures in its risk factors, business description, legal proceedings, and management discussion and analysis. Some of the key aspects of the guidance include:

  • Risk factor disclosure may require a description of existing or pending legislation that relates to climate change;
  • When disclosing pending legislation, first consider if it is reasonably likely to come to fruition; if yes, disclose the legislation unless it will not have a material effect on financial condition even if it becomes law;
  • Consider disclosure of both negative and positive known trends, such as pending legislation. For example, some companies may presumably benefit from a “cap and trade” system by operating below their emissions allotment. (However, it would be difficult to make meaningful positive disclosures without knowing what the “cap” would be);
  • Whether an item of disclosure is material depends on the substantial likelihood that an average investor would consider it important;
  • Consider and disclose the potential affects of international treaties and accords, the business consequences of regulation (such as increased demand for goods that result in lower emissions), and the physical impacts of climate change (such as how severe weather would affect the supply chain).

The guidance is not intended to be a statement on the political aspects of climate change. In voting to release the guidance

Climate Change Disclosure Guidance

On January 27, 2010, the SEC will hold an open meeting to consider publishing an interpretive release to provide guidance to public companies regarding the Commission’s current disclosure requirements concerning matters relating to climate change.  Current SEC requirements are unclear as to what, if any, climate change issues must be disclosed in SEC filings such as the annual report on Form 10-K.  Many companies do not mention climate change in their filings; however, a growing number are disclosing climate-related risks such as the physical effects of climate change on the business and how government regulation of greenhouse gases would affect the business.

New guidance should provide clarification for companies potentially impacted by climate change as they prepare their annual reports on Form 10-K.  …

Energy Company Agrees to Climate Change Disclosures

Xcel Energy has agreed to expand its disclosure of risks associated with climate change in its filings with the SEC. The announcement by Xcel comes in response to a subpoena issued by New York Attorney General Andrew Cuomo seeking information on the company’s plans to build an electric power plant in Pueblo, Colorado.

The most recent Form 10-K for Xcel includes disclosures under the following risk factors:

  • “We are subject to environmental laws and regulations, compliance with which could be difficult and costly.”
  • “We are subject to physical and financial risks associated with climate change.”
  • “We may be subject to legislative and regulatory responses to climate change, with which compliance could be difficult and costly.”

Mr. Cuomo is also negotiating with AES Corporation, Dominion Resources, Dynegy, and the Peabody Energy Corporation under a mantle of protecting investors’ right to know all associated risks of climate change.

For a discussion of when companies are required to make disclosures regarding climate change and its associated risks, see the attached law alert prepared by Porterwright.  …