Marten Law: SEC Issues Interpretive Guidance on Climate Change Disclosure Requirements for Public Companies

In this Emerging Issues Analysis, Dustin Till of Marten Law Group discusses the new interpretive document (the Guidance) from the Securities and Exchange Commission. The Guidance informs public companies of their disclosure obligations to investors as to how climate change laws and regulations will impact them. Mr. Till explains that guidance from the SEC is normally treated as binding.
"Climate change poses a wide range of new business risks for publicly traded companies and their investors. The rapidly growing array of federal, state, and local climate change regulations, including Congressional proposals for a national cap-and-trade program, has created significant regulatory (and economic) uncertainty for businesses in all sectors of the economy, particularly businesses with energy-intensive operations."
"SEC's Guidance responds to investors' growing concerns about climate risks, and provides a roadmap for evaluating such risks under existing SEC regulations. The Guidance does not change the standard of 'materiality' for determining when environmental liabilities must be disclosed. Under SEC Regulations S-K, 7 'material' information regarding environmental liabilities must be disclosed in periodic filings with the SEC and in public offering disclosures."
"The Guidance first identifies existing SEC rules that may require disclosure related to climate change. For example, the costs and effects of complying with environmental laws, including state and federal climate change laws, must be disclosed as part of a registrant's description of its business. Environmental litigation that is material to the registrant's business or financial condition must also be disclosed. Litigation-related disclosure obligations are of particular note to utilities, carbon-based fuel producers, and other energy-intensive industries in light of pending climate change tort cases."
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