Intelligize® Climate Change Disclosure Report: SEC Shifts Enforcement Focus from Missing Information to Inaccurate Reporting

February 10, 2022

NEW YORK — As public scrutiny of corporate environmental, social, and governance records has increased during the Biden administration, the U.S. Securities and Exchange Commission has shifted its focus in policing what companies disclose in public filings about the impact of climate change on their businesses, according to a new report issued today by corporate compliance analytics provider Intelligize®.

Intelligize’s Climate Change Disclosure Report: From Omission to Commission examined comment letters issued by the SEC to companies both before and after the agency’s Division of Corporate Finance published a sample comment letter on climate change-related disclosure in September 2021, which updated guidance from 2010. Intelligize found that enforcement before 2021 focused on information missing from filings, while post-2021 enforcement has focused on the quality and accuracy of companies’ climate change disclosure – including potentially problematic assertions about their environmental sustainability records.

“While the 2010 interpretive guidance retains its authority, the 2021 sample letter offers a window into the agency’s current thinking and enforcement priorities regarding environmental sustainability disclosure,” said Intelligize Senior Director Rob Peters. “The SEC comment letters we reviewed give us concrete examples across a range of industry sectors.”

The report’s discussion of comment letters on the Intelligize platform that address climate change includes examples of SEC comments directed at companies’ reporting of risk factors, management discussion and analysis (MD&A), and general disclosures in their securities filings.

Since mid-2021, the SEC has issued at least three comment letters asking companies to address climate disclosure in the general disclosure section of their filings. The letters all request that companies justify or remove positive statements made about their environmental records, including claims of carbon neutrality.

Intelligize found that the SEC has issued relatively few comment letters focused on risk factor disclosures, with those letters including requests for more specificity regarding “transition risks” – including legislative and regulatory changes, market trends, credit risks, and technological changes.

While the 2010 guidance does not affirmatively state that the MD&A section is the appropriate place to discuss climate change topics, the 2021 sample letter suggests that may be the case. The few comment letters that address MD&A disclosure, however, suggest that issuers could include climate-related disclosure in either the MD&A or the risk factors section.

The SEC’s 2010 guidance on climate change disclosure has proved to be durable, even in the face of updated facts and circumstances, according to the report. The comment letters to issuers on climate-related disclosure between 2010 and today also provide a look at how companies have accepted the reality of climate change, and are more eager to discuss their “green” credentials. Accordingly, the SEC has shifted its enforcement focus from omissions of disclosure to commissions of inaccurate reporting.


About LexisNexis Legal & Professional
LexisNexis Legal & Professional® is a leading global provider of legal, regulatory and business information and analytics that helps customers increase productivity, improve decision-making and outcomes, and advance the rule of law around the world. As a digital pioneer, the company was the first to bring legal and business information online with its Lexis® and Nexis® services. LexisNexis Legal & Professional, which serves customers in more than 160 countries with 10,400 employees worldwide, is part of RELX, a global provider of information-based analytics and decision tools for professional and business customers.

About Intelligize
Intelligize is the leading provider of best-in-class content, exclusive news collections, regulatory insights, and powerful analytical tools for compliance, transactional and investor relations professionals.

Intelligize offers a web-based research platform that ensures law firms, accounting firms, corporations, and other organizations stay compliant with government regulations, build stronger deals and agreements, and deliver value to their shareholders and clients.

Headquartered in New York City, Intelligize serves Fortune 500 companies, including Starbucks, IBM, Microsoft, Verizon and Walmart, as well as many of the top global law and accounting firms.

In 2016, Intelligize became a wholly owned subsidiary of LexisNexis®, a leading global provider of content-enabled workflow solutions designed specifically for professionals in the legal, risk management, corporate, government, law enforcement, accounting and academic markets.

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