SEC Hoping to Increase Policing of Climate Change Disclosures

Penguin IslandThese pages rarely comment on Securities and Exchange Commission matters, but a recent article in Corporate Counsel Weekly captured our attention – “SEC Policing of Climate Disclosure May Pick Back Up.”

The 2010 SEC climate change guidance required companies to disclose the business risks of climate change to investors. Corporate Counsel Weekly notes that most companies made only boilerplate disclosures or none at all. The article quotes Mary Shapiro, the former chair of the SEC, “I sense today a strong interest in this issue again at the SEC,” suggesting that the Commission may begin requiring better and more detailed disclosures.

Count this author among those not surprised that companies remained at a loss as to how to characterize the risks of climate change. Under longstanding SEC regulations, companies are already required to disclose material business risks, trends and uncertainties to their investors. For many companies, forcing enhanced disclosures on climate change is at best an invitation to speculate. As Ms. Shapiro reportedly admitted, climate change is “highly politicized.” A recent opinion piece in Monday’s Wall Street Journal titled “The Phony War Against CO2” illustrates the complex politics and differing views on the topic.

Forcing climate change disclosures from companies with no apparent connection to climate change issues invites non-experts to speculate about the range of potential climate outcomes and their associated, potential business risks. Isn’t there already enough non-expert speculation on climate change? Investors, and the SEC, are better served by resisting the temptation to force public company speculation and commentary on climate change, unless the company has a specific, good-faith basis for including climate change among those material business risks it is already required to disclose.

About David McCay

Dave is a partner in the firm’s litigation and land use groups where he assists clients in the resolution of complex real estate, environmental and business disputes. He also represents property owners, developers and municipalities in local land use permitting matters. Dave is active in the Boroughs+ region serving recently as the Chair of the Southborough Economic Development Committee and of the Marlborough Regional Chamber of Commerce. He is also a member of the Board of Directors of the 495/MetroWest Partnership and the Marlborough Economic Development Corporation. Outside of the office, Dave is an avid cyclist competing in road races and criteriums across New England. He lives in Southborough with his wife and two sons.
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