Climate Change Securities Disclosures Resource Center
This page summarizes the Securities and Exchange Commission's interpretive release on including climate change within disclosure documents, and collects additional resources on climate and securities disclosures.
This page is intended as a reference resource and should not be construed as legal advice. Actual disclosures, where highlighted or presented, are provided solely as examples. Please contact the Center at ColumbiaClimate@gmail.com with comments or recommended additions for this resource page.
The Securities and Exchange Commission published an interpretive release, effective Feb. 8, 2010, to guide U.S. public companies on the SEC’s existing disclosure requirements related to climate change. The SEC Guidance is available here [PDF].
The SEC Guidance follows several years of activity by state attorneys general, institutional investors, environmental groups, and others to clarify the climate change disclosure requirements of public companies. For example, Ceres, the New York State Attorney General, the California Public Employees' Retirement System, and other parties, representing public treasuries and pension funds, major investment and asset management firms, and other institutional investors, began submitting formal petitions for climate change related disclosure guidance to the SEC in 2007. Some of those parties filed supplemental petitions in 2008 and 2009.
In 2008, the N.Y. Attorney General reached settlement agreements requiring disclosure of material climate change risks with three power companies: Xcel Energy, Dynegy Inc., and The AES Corporation.
On June 12, 2008, the Investor Network on Climate Risk and other 40 other signatories wrote to the SEC, requesting improvement in the disclosure of climate change risks in securities filings.
Prior to the SEC’s guidance, several organizations have provided monitoring and tracking of voluntary and state-mandated disclosures regarding greenhouse gas emissions and climate related risks. These include The Climate Registry, The Carbon Disclosure Project, and The Global Reporting Initiative. The SEC guidance makes clear that while most of the information submitted to these groups was submitted voluntarily, some of the information disclosed may also be subject to the SEC's disclosure requirements.
Rules Triggering Disclosure
The SEC guidance points to the four most pertinent sources of climate change related disclosure requirements, all contained in Regulation S-K (17 CFR Part 229):
The SEC guidance specifies four subjects that may trigger the disclosures required by Regulation S-K. These four topics are “examples of climate change-related issues that a registrant may need to consider,” and are intended as a starting point, rather than a comprehensive list of subjects a registrant should consider. For all subjects, the guidance advises registrants to consider positive consequences and potential opportunities, not merely the negative consequences of a particular law, regulation, or business trend.
The four subjects identified in the SEC guidance are:
Below we provide resources that may be helpful in a registrant's consideration of each of these areas.
Impacts of Legislation and Regulation
The SEC guidance advises registrants to consider the impact of federal, state, and local laws and regulations, and whether disclosure is required under Items 101, 103, 503(c), or 303 of Regulation S-K, or under another SEC rule or regulation. For Item 503(c) risk factors, the guidance states that, “[r]egistrants should consider specific risks they face as a result of climate change legislation or regulation and avoid generic risk factor disclosure that could apply to any company.” The guidance also discusses a two-step analysis for disclosure under MD&A in Item 303: First, the registrant must evaluate whether the pending legislation or regulation is “reasonably likely to be enacted”; second, management must determine whether the legislation or regulation "is reasonably likely to have a material effect on the registrant, its financial condition or results of operations."
For federal legislation, SCCCL maintains a Legislative Resource Center, which tracks bills being discussed in the current U.S. Congress and provides links to bill texts, committee hearing transcripts and webcasts, useful analyses and reports, and news and blog articles. The Legislative Resource Center can be a helpful resource for assessing the status of federal climate change related legislation; its referenced analyses and reports will be helpful in ascertaining the potential impacts of such legislation on particular sectors of the economy.
For federal regulations, SCCCL maintains a Regulation Tracking Service, which tracks the status of climate change related regulations, findings, and interpretations promulgated by the U.S. Environmental Protection Agency and other federal government bodies, including the SEC, Executive Office of the President, Department of Transportation, and Department of Energy. This Regulation Tracking Service can be a helpful resource in assessing the status and potential impacts of federal regulation.
For local ordinances and regulations, SCCCL maintains a Municipal Climate Change Laws Database, which presents a selection of local laws, mostly in New York state, that are related to energy efficiency, green buildings, and renewable energy.
The SEC Guidance notes that registrants should consider whether international accords relating to climate change will impact their business and should disclose those impacts that are material. Registrants that are reasonably likely to be affected by international agreements should monitor the progress of any potential international agreement and consider their possible impact in satisfying the disclosure requirements.
Indirect Consequences of Regulation or Business Trends
This topic comprises opportunities or risks that may develop as a result of legal, political, and scientific changes related to climate change. The consequences may include decreased demand for existing products and services or increased demand for new products and services that create or utilize alternative energy sources or that produce lower emissions. The SEC advises that these trends may need to be disclosed in MD&A, and those that are significant enough may need to be disclosed in the description of business. Another risk highlighted by the SEC is the potential reputational risk related to any required disclosure of the registrant's greenhouse gas emissions or other environmental impacts. As this is something of a catch-all category, the following list of resources is not exhaustive and will be frequently updated. If you know of a helpful resource that is not listed, please contact us.
SCCCL and Arnold & Porter maintain a U.S. Climate Litigation Case Chart, which compiles climate change related case law, categorized by the type of claim. The Case Chart can be a helpful resource in recognizing and assessing potential legal claims and risks. SCCCL also maintains a Non-U.S. Climate Litigation Case Chart, which compiles case law generated outside of the United States.
Ceres, 21st Century Corporation: The Ceres Roadmap to Sustainability (March 2010).
Ceres has published numerous other reports related to different sectors and issues, which are available here.
Energy Information Administration (EIA), U.S. Department of Energy. The EIA, among other responsibilities, compiles statistics related to demand and supply of different types of energy, greenhouse gas emissions, energy costs, environmental mediation costs, and other important items.
Environmental Defense Fund Innovation Exchange.
Investor Network on Climate Risk, Climate Resolutions Tracker.
Pew Center on Climate Change Business Environmental Leadership Council.
Pew Center on Climate Change, Adapting to Climate Change: A Business Approach (April 2008).
PricewaterhouseCoopers, Sustainability and Climate Change publications.
World Resources Institute, Next Practice Collaborative: Business Leadership and Climate Change.
World Resources Institute, Sharpening the Cutting Edge: Corporate Action for a Strong, Low -Carbon Economy (2009).
Physical Impacts of Climate Change
Climate change has the potential to have significant physical impacts as a result of the effects of increased severity of weather phenomena and sea level rise on physical infrastructure, water resources, and the like. The SEC advises registrants that may be vulnerable to severe weather or other climate-related events to consider disclosing the material risks of those events. The following resources identify some of the physical impacts of climate change on different geographical areas in the U.S. as well as on different sectors and industries.
California Climate Action Team Biennial Report
(2009). Identifies impacts of climate change on California’s public health, infrastructure, and natural resources, as well as the economic impacts of climate change on various sectors (including agriculture and energy).
U.S. Global Change Research Program, Global Climate Change Impacts in the U.S.
(Full Report) (2009). Individual chapters on specific regions are also available for download: Alaska
, Great Plains
, as are individual chapters on economic and social sectors: Agriculture
, Human Health
, Water Resources
Reports, Articles, and Other Resources on Disclosure of Climate Change Related Issues
Acclimatise (Amando, J.-C., Fayolle, V. and J. Firth), Corporate Disclosure of Physical Climate Change Risks and Adaptation, Client Note, (Nov. 2011).
Acclimatise (Amando, J.-C., Fayolle, V. and J. Firth), A Look at 2010-2011 Guidance and Disclosure on Climate Impacts and Adaptation, Insight Note No. 1, (2011).
Bureau of National Affairs (BNA), The Business Impacts of Climate Change (EHS Strategies, May 2008).
Calvert Investments, Ceres, and Oxfam America published a guide for companies and investors on disclosure and management of climate impacts titled Physical Risks from Climate Change
- Center for Energy and Environmental Security (CEES), Environmental Defense Fund, and Ceres, Reclaiming Transparency in a Changing Climate: Trends in Climate Risk Disclosure by the S&P 500 from 1995 to the Present (2009).
Ceres, the Institutional Investors Group on Climate Change (UK), and the Investors Group on Climate Change (Australia/New Zealand) have created three industry-specific climate disclosure frameworks, for oil and gas
, electricity production
, and automobiles
- Ceres, Murky Waters? Corporate Reporting on Water Risk, 2010.
LexisNexis and American College of Environmental Lawyers, The SEC and Climate: Disclosure Requirements (LexisNexis Global Climate Change Special Pamphlet Series, Jan. 2010).
Li-Wen Lin, Corporate Social and Environmental Disclosure in Emerging Securities Markets, 35 N.C. J. INT'L L. & COM. REG. 1-32 (2009).
National Association of Insurance Commissioners (NAIC), Climate Change and Global Warming Task Force
. Conducts an annual Insurer Climate Risk Disclosure Survey, which is mandatory for all insurers with annual premiums of $500 million or more.
Andrew B. Schatz, Note, Regulating Greenhouse Gas Emissions by Mandatory Information Disclosure, 26 VA. ENVTL. L. J. 335 (2008).
Perry E. Wallace, Climate Change, Fiduciary Duty, and Corporate Disclosure: Are Things Heating Up In the Boardroom?, 26 VA. ENVTL. L. J. 293 (2008).
The Sabin Center for Climate Change Law has compiled a catalog of links to and excerpts from the 2009 annual reports and 2010 third quarter statements filed with the SEC by 160 Fortune 500 companies. SCCCL believes this resource will be useful for those researching the state of climate change related disclosures. It may be particularly useful to those wishing to compare a pre-SEC Guidance report (2009 10-K) to post-SEC Guidance reports, to determine whether and how the SEC’s Guidance has affected disclosures.
The spreadsheet includes companies from 19 industries (industry categories are taken from the 2010 Fortune 500). The industries included are: Airlines; Chemicals; Construction and Farm Machinery; Energy; Food Production; Forest and Paper Products; Industrial Machinery; Insurance: Property and Casualty (Stock); Metals; Mining, Crude Oil Production; Motor Vehicles and Parts; Oil and Gas Equipment, Services; Petroleum Refining; Pipelines; Railroads; Transportation and Logistics; Trucking and Truck Leasing; Utilities: Gas and Electric; and Waste Management. The full list of industries, including the 48 that are not included in the spreadsheet, is available here.
The default sorting of the spreadsheet is by Industry, but a user can change this by going to Data->Sort.
Download the spreadsheet here (.xls, approx. 1 MB)