EMERGING CLIMATE CHANGE ISSUES: Impacts on Disclosure Obligations of U.S. Public Companies

Posted on November 14, 2008 by Patricia Barmeyer

 Public companies are feeling pressure to make disclosure of the risks posed by climate change. The SEC has to date declined to issue any climate change-specific guidance, but existing SEC regulations are broad enough to require disclosure, if the information would be important to the “reasonable investor.” Investors and shareholders are increasingly vocal about their desire to have that information.

            In the absence of SEC action, New York Attorney General Cuomo has used state law to obtain settlements from Xcel Energy and Dynegy that require specific disclosures regarding the financial risks from probable climate change regulation and from the physical impacts of climate change. Even more significant is the pressure coming from major purchasers. Wal-Mart, for example, is requiring all its suppliers to report on their GHG emissions and their strategies to reduce their carbon footprints. 

            The timing, scope and details of the anticipated national program to regulate GHG emissions are still unknown, making it difficult to predict the risks and implications of climate change and its regulation for any individual company, However, even in the face of these uncertainties, disclosure is increasingly the norm, rather than the exception. All public companies need to be analyzing the risks posed by climate change and, depending on the business, should be considering disclosure of those risks in their public filings.

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