FYI: Excerpted from SEC press release
Recently, the Securities and Exchange Commission ("SEC" or "Commission") decided to provide public companies with interpretive guidance on existing SEC disclosure requirements as they apply to business or legal developments relating to the issue of climate change. This is a significant event in terms of adding clarity to businesses regarding discloser requirements. In essence, the Commission’s interpretive release offers guidance on a number of existing rules that may require a company to disclose the impact that business or legal developments related to climate change may have on its business. The relevant rules cover a company’s risk factors, business description, legal proceedings, and management discussion and analysis. Federal securities laws and SEC regulations require disclosures by public companies as information for investors. The Commission's interpretive guidance will be of interest to businesses and investors as it may provide needed clarity and perhaps some consistency for public companies and their investors. It is important to note that the guidance does not require disclosure of a carbon footprint throughout a company's supply chain or to develop a corporate policy regarding greenhouse gas emissions. However, for those preparing annual reports, it is advisable to analyze the interpretive guidance in the context of disclosures regarding greenhouse gas emissions and climate change developments in business and law.
According to the SEC release (#:2010-15) on January 27, 2010, the SEC's interpretative guidance highlights the following areas as to where climate change may trigger disclosure requirements: (1) Legislation and Regulation: A company should consider whether the impact of certain existing laws and regulations regarding climate change is material, including the potential impact of pending legislation and regulatory changes. (2) Impact of International Agreements: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change. (3) Indirect Consequences of Regulation or Markets: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. A company should consider the actual or potential indirect consequences it may face due to climate change related regulatory or business trends, such as an increase or decrease in emission levels. (4) Physical Impacts of Climate Change: A Company should also evaluate the actual and potential material impacts of environmental matters on their business.
Importantly, a company should view this most recent development in the context of the E.P.A. determination last month impacting the regulation of carbon dioxide emissions, pending federal legislation, regional and state mandates, and even the New York attorney general requiring certain companies to more fully explain their climate change risks to investors.
For more information, feel free to email Vincent DeVito at vdevito@bowditch.com.
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