Securities and Climate Change Alert
January 28, 2010
Authors:
Kristy T. Harlan
kristy.harlan@klgates.com
+1.206.370.6651
Sean M. Jones
sean.jones@klgates.com
+1.704.331.7406
Stephen K. Rhyne
steve.rhyne@klgates.com
+1.704.331.7441
K&L Gates includes lawyers practicing
out of 35 offices located in North
America, Europe, Asia and the Middle
East, and represents numerous GLOBAL
500, FORTUNE 100, and FTSE 100
corporations, in addition to growth and
middle market companies,
entrepreneurs, capital market
participants and public sector entities.
For more information, visit
www.klgates.com.
SEC Issues Interpretive Release on Climate
Change Disclosure
At its meeting on January 27, 2010, the Securities and Exchange Commission (SEC),
by a 3-to-2 vote, approved an interpretive release to provide guidance to public
companies regarding disclosures to be made in SEC filings about the consequences
of climate change, including potential regulation and legislation. As SEC Chair
Mary Schapiro indicated in her comments when introducing the release: “[It] does
not create new legal requirements or modify existing ones—it is merely intended to
provide clarity and enhance consistency.” Nonetheless, based on the discussion at
the meeting in which the release was adopted, the issuance of the release indicates
that the SEC is expecting public companies to undertake a rigorous analysis in
considering what disclosures should be included in their SEC reports. The release
will be effective when it is published, which is expected to be imminently.
In its press release announcing the interpretive release, the SEC said that its guidance
“highlights the following areas as examples of where climate change may trigger
disclosure requirements:
•
Impact of Legislation and Regulation: When assessing potential disclosure
obligations, a company should consider whether the impact of certain existing
laws and regulations regarding climate change is material. In certain
circumstances, a company should also evaluate the potential impact of pending
legislation and regulation related to this topic.
•
Impact of International Accords: A company should consider, and disclose
when material, the risks or effects on its business of international accords and
treaties relating to climate change.
•
Indirect Consequences of Regulation of Business Trends: Legal,
technological, political and scientific developments regarding climate change
may create new opportunities or risks for companies. For instance, a company
may face decreased demand for goods that produce significant greenhouse gas
emissions or increased demand for goods that result in lower emissions than
competing products. As such, a company should consider, for disclosure
purposes, the actual or potential indirect consequences it may face due to climate
change related regulatory or business trends.
•
Physical Impacts of Climate Change: Companies should also evaluate for
disclosure purposes the actual and potential material impacts of environmental
matters on their business.
Securities and Climate Change Alert
The SEC indicated that it is not considering
amending the rules regarding public company
reporting obligations or long-standing interpretations
of materiality, but is instead providing guidance to
help public companies determine what climate
change-related disclosures need to be made pursuant
to the existing disclosure rules governing a
company’s risk factors, business description, legal
proceedings, and management’s discussion and
analysis. For additional information, please see our
alert from December 2009, “Climate Change
Disclosure for U.S. Public Companies,” which
describes the current SEC disclosure standards and
requirements as they relate to climate change,
including Regulation FD’s prohibition against
selective disclosure of material information. The
alert also discusses various factors public companies
should consider when evaluating what disclosures
are appropriate. These factors include many of the
significant legislative, regulatory and litigation
developments that occurred in 2009.
Additionally, in another December 2009 alert,
“Addressing Climate Change Through Corporate
Governance,” we discuss these 2009 developments,
as well as the increased investor and competitive
focus on climate change, and suggest certain
corporate governance practices that can be key tools
in addressing this changing landscape.
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K&L Gates includes lawyers practicing out of 35 offices located in North America, Europe, Asia and the Middle East, and represents numerous
GLOBAL 500, FORTUNE 100, and FTSE 100 corporations, in addition to growth and middle market companies, entrepreneurs, capital market
participants and public sector entities. For more information, visit www.klgates.com.
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This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon
in regard to any particular facts or circumstances without first consulting a lawyer.
©2010 K&L Gates LLP. All Rights Reserved.
January 28, 2010
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