On January 27, 2010, the Securities and Exchange Commission ("SEC") voted to adopt interpretive guidance addressing public company disclosure standards in connection with climate change. While this interpretive guidance is not intended to impose new standards, it does serve as an important reminder for public companies, potentially as part of their disclosure controls and procedures, to assess whether climate change may have a material impact upon their business and financial condition. For details, go to Reed Smith's client bulletin that discusses this development.
Among the disclosure areas the forthcoming interpretive guidance will address, according to the SEC press release, are the following:
- Impact of legislation and regulation. When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material.
- Impact of international accords. A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.
- Indirect consequences of regulation or business trends. A company should consider, for disclosure purposes, the actual or potential indirect consequences it may face because of climate change-related regulatory or business trends.
- Physical impacts of climate change. Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.
Given the SEC's high-profile stamp of authority on this topic, public companies should expect a greater focus by the SEC staff and third-party observers in reviewing and evaluating disclosure practices about the material impact of climate change.