Patricia Thrower Barmeyer, Keith M. Townsend, Lewis B. Jones, John C. Bottini, Attorneys, King & Spalding; General Editor Bradley M. Marten
Climate change can impact companies in a variety of ways. To help you and your corporate clients identify the types of business risks posed by climate change and how these risks fit within the existing framework governing environmental disclosures in Securities and Exchange Commission filings and financial statements, LexisNexis has published a new pamphlet, entitled The SEC and Climate: Disclosure Requirements. Along with an examination of current practices regarding climate disclosures, the pamphlet provides practitioners with suggested best practices going forward. An excerpt, consisting of the two sections of the pamphlet, is provided below.
To purchase the complete pamphlet, click here. This handy pamphlet is one of the many offerings in the new LexisNexis Global Climate Change Special Pamphlet Series.
§ 1.01 Introduction to Environmental Disclosures in SEC Filings and Financial Statements
Regardless of one’s personal views about climate change, most would agree that it presents certain risks that could have a material financial impact on many businesses. In addition to potential financial impacts related to physical changes in the environment, such as impacts to facilities due to rising sea levels, the risks associated with climate change include impacts that are highly likely to materialize whether the science is correct or not, such as increased costs of regulatory compliance as well as changes in the competitive environment. These risks require companies to consider climate change in the context of their environmental disclosure obligations for filings with the Securities and Exchange Commission (SEC) and other financial statements. Crafting environmental disclosures in SEC filings and financial statements is no easy task, especially when such disclosures concern a subject as unsettled as the law and policy governing climate change. Nevertheless, investors’ knowledge of the risks of climate change grows by the day, and companies must therefore examine what they can (or must) do to meet investors’ growing demand for more information.
This pamphlet identifies the types of business risks posed by climate change and how these risks fit within the existing framework governing environmental disclosures in SEC filings and financial statements. The pamphlet then examines current practices regarding climate disclosures as well as the many private and public efforts to reform those practices. Finally, the pamphlet provides practitioners with suggested best practices going forward.
§ 1.02 Business Risks Posed by Climate Change
Changing Regulatory Environment — As discussed in other pamphlets in this series,1 federal and state governments have proposed, and in some cases implemented, a number of provisions that will require certain industries to take immediate and costly actions to measure, report, and control their greenhouse gas emissions. Depending on the nature of one’s business, compliance with these new laws and regulations (as well as significant penalties for noncompliance) may impose a considerable operational cost — whether in the form of a direct carbon tax or a requirement to purchase emission allowances under a cap-and-trade program.
Changing Physical Environment — The threat that climate change poses for the earth’s physical environment has been well-documented by domestic and international experts and agencies.2 Rising sea levels, desertification, and more severe weather events are some of the many effects that many scientists believe will result from increased levels of greenhouse gases in the earth’s atmosphere. Companies whose operations are particularly influenced by geography and weather patterns may stand to lose (or win) from the physical changes to the earth’s environment that experts have predicted.
Changing Commercial/Competitive Environment — Climate change may also re-shape economic opportunities by creating markets for new technologies and increasing competition and by changing operational costs for existing industries. Major greenhouse gas emitters will see increased competition for marketable emission credits and technology designed to reduce emissions. State- or federal-mandated renewable portfolio standards will likewise present opportunities for alternative or renewable energy industries. As consumers become more educated on climate change issues, retailers may be forced to take action to address climate change or face harm to their reputation.
Increasing Insurance and Energy Costs — Climate change is also likely to impact the costs of both insurance and energy. Indeed, in March 2009, the National Association of Insurance Commissioners acknowledged that such financial risks exist and therefore adopted a mandatory requirement that large insurance companies disclose climate change risks to regulators.3 Energy producers in greenhouse-gas intensive industries will likewise face increased costs from international, national, and/or regional initiatives to reduce greenhouse gas emissions. Both energy and insurance companies are likely to attempt to pass these increased costs down to their consumers.
1 See, e.g., Mary Ellen Ternes, EPA’s Mandatory Greenhouse Gas Reporting Rule (Bradley M. Marten ed., LexisNexis Global Climate Change Special Pamphlet Series); and David W. Tundermann, State by State Greenhouse Gas Regulation (Bradley M. Marten ed., LexisNexis Global Climate Change Special Pamphlet Series).
2 See, e.g., Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act; Final Rule, 74 Fed. Reg. — (Dec. 2009) (outlining EPA’s formal findings concerning the evidence of currently observed physical changes attributable to the anthropogenic rise in atmospheric greenhouse gases). As of mid-December 2009, the final Endangerment Findings, which were signed by U.S. EPA Administrator Lisa Jackson on December 7, 2009, were not yet published in the Federal Register. A pre-publication version of the Findings is available on the EPA’s website at http://www.epa.gov/climatechange/endangerment/downloads/FinalFindings.pdf.
3 Press Release, National Association of Insurance Commissioners, Insurance Regulators Adopt Climate Change Risk Disclosure (March 17, 2009).
Patricia Thrower Barmeyer is a partner in King & Spalding’s Atlanta office and the head of the firm’s Environmental Practice Group. She joined the firm in 1990 after serving 17 years as an assistant attorney general for the State of Georgia. At King & Spalding Ms. Barmeyer has concentrated her practice in environmental litigation in the areas of water, waste, air, and coastal resources. Ms. Barmeyer also heads up the firm’s Climate Change Task Force. Since 2006 Chambers USA Leading Lawyers for Business has ranked Ms. Barmeyer as a “Star Individual,” and the top environmental lawyer in Georgia. Chambers 2009 describes her as “a brilliantly connected superstar with a truly outstanding environmental practice.” Chambers 2008 noted her “levelheaded, fact-oriented, logical” approach and “forceful but civil” style. Ms. Barmeyer was recently named Best Lawyers’ 2010 Atlanta Environmental Lawyer of the Year, and she is a Fellow of the American College of Environmental Lawyers. Ms. Barmeyer has a J.D., cum laude, from Harvard University and a B.A. from Hollins College.
Keith M. Townsend is a partner in King & Spalding’s Corporate Practice Group. Mr. Townsend has significant experience in advising public company clients on SEC reporting and disclosure requirements, corporate governance issues and other corporate/securities matters. This work includes advising public company clients and their boards on best practices for climate change disclosure and related controls. Mr. Townsend also has significant experience working on more than 45 corporate finance transactions raising proceeds in excess of $14 billion. He has represented both issuers and underwriters in connection with initial and secondary public offerings, “shelf” offerings, “at-the-market” offerings, Rule 144A offerings and other private placement transactions, tender offers, consent solicitations and other liability management transactions. Mr. Townsend’s clients and transactions have spanned a number of industries, including the real estate, life sciences, healthcare, technology, consumer products, manufacturing and banking industries. Finally, Mr. Townsend has experience representing both acquirors and sellers in public and private merger and acquisition transactions.
Mr. Townsend received his Bachelor of Arts degree, summa cum laude, from the University of Tennessee in 1996 where he was a member of Phi Beta Kappa. Mr. Townsend received his J.D. from the University of Virginia School of Law in 1999 where he graduated Order of the Coif. He is a member of the State Bar of Georgia, the Atlanta Bar Association and the American Bar Association. Mr. Townsend has also been named as a “Rising Star” by Georgia Super Lawyers and as a “Up-And-Coming” corporate lawyer by Chambers.
Lewis B. Jones is a counsel on King & Spalding’s Tort & Environmental Litigation Practice Group. Mr. Jones is recognized by Best Lawyers in America (2010) and by Chambers USA as a “leading individual” within the Georgia environmental bar. Chambers USA reports that Mr. Jones is regarded by clients as “a bright legal scholar who understands how to position issues strategically.” His practice concentrates on water resources as well as general environmental litigation. He has extensive experience with the Endangered Species Act and wetlands permitting issues as well as the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). Mr. Jones has also published articles and advised clients on matters related to climate change and the corporate disclosure of environmental liabilities.
Mr. Jones received his J.D. from the Harvard Law School in 1989, an M.S. in Land Resources from the University of Wisconsin-Madison in 1995, and a B.A. in mathematics from the University of the South in Sewanee, Tennessee in 1989. He serves on the editorial board of the Eastern Water Law & Policy Reporter and is Co-Chair of the American Bar Association’s 2010 Eastern Water Law conference.
John C. Bottini is an associate in King & Spalding’s Tort Litigation & Environmental Practice Group. His practice focuses on all aspects of environmental law, including regulatory compliance, permitting, due diligence, and litigation in the areas of air, water, and waste, as well as the defense of toxic tort cases. Mr. Bottini has significant experience in air matters, especially Prevention of Significant Deterioration (PSD) permitting for electric utilities. He has also advised clients on climate change legislation, carbon credit transactions, and EPA regulations governing greenhouse gas emissions.
Mr. Bottini joined King & Spalding after serving as a law clerk for two years to the Honorable Catherine D. Perry of the United States District Court for the Eastern District of Missouri. He received his J.D. from the University of Virginia School of Law and a Bachelor of Science degree in Biology and Economics from Davidson College. Mr. Bottini is a member of the State Bar of Georgia, the Atlanta Bar Association, and the American Bar Association.
Bradley M. Marten, founder and Managing Partner of Marten Law PLLC, is consistently ranked by his peers as one of the nation's top environmental lawyers. He is a Regent of the American College of Environmental Lawyers and Chairs its Policy Committee. He is listed as a top environmental lawyer in the Best Lawyers in America, Chambers, and the International Who's Who of Environmental Lawyers, and been recognized in many other publications for his work in the environmental law field over a 25 year career. Brad represents both corporate and public clients in matters touching on most of the major environmental and energy practice areas. He is the General Editor for the LexisNexis Global Climate Change Special Pamphlet Series.