The piece below was authored by our friend Hank Boerner, Chairman of the Governance & Accountability Institute, Inc. on the newly approved SEC guidance relating to climate change risk. Feel free to contact Business Wire with any questions regarding this update.
SEC DECISION RAISES THE BAR FOR CORPORATE (ISSUER) DISCLOSURE ON SUSTAINABILITY RISKS
One more shoe drops – this one a size 15 or more – in the rising and accelerating importance of ESG & Sustainability corporate key performance indicators and ESG-related factors for investment management and financial analysis, as well as for corporate senior executives, boards, and management specialists (e.g., investor relations officers, legal counsel, corporate secretaries, ESH managers, marketing officers).
On January 27, 2010 the SEC Commissioners approved an “Interpretive Release” (issuer guidance) on existing disclosure requirements related to business risk on the issue of climate change. (The vote was 3-2 along political party lines.)
The SEC did not make statements on, recognize, or endorse positions (pro or con) on climate change. It did not create new legal requirements or modify existing requirements. It did not refine the definitions of materiality to include “climate change” or “global warming.”
The SEC decision, says Chair Mary Schapiro, “…will help public companies in determining what does and does not need to be disclosed…will provide clarity and enhance the consistency of disclosure…the discussions, debates and decisions taking place in the USA and elsewhere on this topic have implications under our existing, long-standing disclosure rules…”
Four critical areas were addressed:
- The Impact of Legislation and Regulation (corporate disclosure issue: how will these if proposed or adopted affect the company?)
- The Impact of International Accords (the EU has “carbon” regulations; “Cap & Trade” legislation is being considered by the federal government; global accords could follow – disclosure issue: how would/do these affect the company?)
- Indirect Consequences of Regulation Business Trends (disclosure issue: what legal, technological, political and scientific developments [regarding climate change] may create new risks or opportunities for the company?)
- Physical Impacts of Climate Change (disclosure focus: the company should evaluate the actual or potential material impacts of environmental matters on their business. Note that the SEC has mandated certain environmental disclosure over the past 30 years.)