On January 27, 2010, the Securities and Exchange Commission (SEC) voted to provide publicly traded companies with interpretative guidance regarding disclosure requirements relating to climate change. The guidance, which will be published on the SEC Web site and in the Federal Register, states such companies must take into consideration the impacts of climate change when disclosing risks to investors. Click here to read the press release and to see Chairperson Schapiro's discussion of the interpretative guidance. The decision to provide interpretative guidance was approved in a 3-2 vote at the SEC's Washington headquarters. The guidance will highlight the potential impacts that climate change may have on companies and what these impacts mean for disclosure. The SEC has provided examples of four areas which may trigger disclosure requirements. First, a company should include the impact of existing domestic legislation and regulation, and in certain circumstances, the potential impact of pending legislation and regulation related to climate change. Second, a company should consider the material risks of international accords and treaties relating to climate change. Third, a company should consider the indirect consequences of regulation or business trends, including legal, technological, political, and scientific developments regarding climate change and the new opportunities and risks posed by such development. Lastly, a company should evaluate the physical and material impacts of climate change on its business.Although proponents of the guidance, including environmental groups and certain institutional investors, applaud the vote as an effort to ensure consistent disclosure of bottom-line risks to shareholders, not everyone is pleased. Issued on the same day as Obama's State of the Union address, it drew fire from republicans on Capitol Hill and at the Commission. House Energy and Commerce Committee ranking member Joe Barton of Texas and fellow committee republican Greg Walden of Oregon wrote Chairperson Schapiro a letter in advance of the decision meeting. This letter questions the SEC's statutory authority to issue such guidance, asks how many environmental scientists the SEC currently employs, and inquires as to the civil and criminal penalties associated with non-compliance. The lawmakers call the undertaking "transparently political and such a breathtaking waste of the Commission's resources." Click here to read the letter.Chairperson Schapiro appeared mindful of the criticism and underscored that the guidance should not be considered an agency statement about climate change.What this means to you: The SEC interpretative guidance on climate change may affect your business. The guidance will be published "as soon as possible" on the SEC Web site and in the Federal Register. The attorneys in Stinson's Climate Change Group and Corporate Finance Group have experience in this area and are able to assist.
For additional information on this alert, or to join a coalition for comments, contact Climate Change Practice Group members Mark Johnson at 816.691.2724 or email@example.com, or Stephanie Lindsay at 816.691.2785 or firstname.lastname@example.org