SEC climate change risk disclosure

Published|29.01.10

Guidance on the disclosure of the material risks created by “the impact that business or legal developments related to climate change may have” is to be released by the United States Securities Exchange Commission (SEC). The SEC is not creating a new legal requirement for disclosure, but is rather clarifying the fact that climate change impacts can create material risks for businesses which may need to be disclosed by companies under existing law.

On the 27 January 2010 the SEC voted to publish an ‘Interpretive Guidance on Disclosure Related to Business or Legal Developments Regarding Climate Change’. The SEC publishes interpretive guidance documents to provide clarity and ensure consistency on topics of mandatory disclosure for use by listed companies. This new guidance is the world’s first national corporate disclosure guidance on climate risk from a regulatory body.

The SEC considers that both mitigation (reducing greenhouse gas emissions) and adaptation (assessing and managing the risks of inevitable changes in climate) may constitute sources of material business risks which may need to be disclosed to investors.

To help in better understanding what the risks of a changing climate could be, we have compiled a comprehensive set of resources which are available from the investors section of our website. These resources include cross-sectoral reports on climate change risks and opportunities, as well as sector-specific literature for the energy, oil and gas, mining, water and real estate sectors.

The SEC’s guidance highlights the following areas as examples of how climate change risks may trigger mandatory disclosure:

• Impact of legislation and regulation: companies should evaluate whether existing or pending laws or regulations on climate change may constitute material risks.


• Impact of international accords: companies should consider and, when material, disclose the risks on its business of international accords and treaties on climate change.


• Indirect consequences of regulation or business trends: companies should consider whether the legal, technological, political and scientific developments regarding climate change may create material risks which would need to be disclosed.


• Physical impacts of climate change: Companies should evaluate the business materiality of the direct impacts of climate change on natural resources, assets, equipment, materials, processes and workforce.

Further details on the SEC interpretive guidance can be found on the SEC website.

This regulatory development follows the multiple petitions filed with the SEC by investor coalitions. Similar investor pressures exist in other countries around the world and may similarly result in climate risk disclosure requirements.

Some of the largest institutional investors in the US have welcomed the SEC guidance: “We’re glad the SEC is stepping up to the plate to protect investors. Ensuring that investors are getting timely, material information on climate-related impacts, including regulatory and physical impacts, is absolutely essential. Investors have a fundamental right to know which companies are well positioned for the future and which are not.” (Anne Stausboll, CEO, California Public Employees’ Retirement System). Our own work for UK pension funds and fund managers ‘Managing the Unavoidable: investment implications of a changing climate’ sets out the concerns facing investors and the challenges for business.

The National Association of Insurance Commissioners has also recently approved a mandatory requirement for insurers with annual premiums of US$500 million or more to disclose climate risks to regulators, shareholders and the public as of May 2010. These insurers will need to report against a set of questions.

Acclimatise has developed an index to analyse the quality of corporate disclosures. Our reports for the Carbon Disclosure project based on the Acclimatisation Index^TM can be found on the investors section of our website.

Acclimatise can help your company understand your disclosure requirements with regards to the risks of inevitable climate change. For further information, please contact Alastair Baglee at a.baglee(at)acclimatise.uk.com.