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In October, the commission decided to allow shareholder resolutions that seek information from companies on the financial risks they face from social and environmental issues, including climate change.

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The decision reversed a rule that prevented investors from directly asking companies about the impacts of climate change and other pressing concerns on their bottom line. The SEC is also evaluating a formal request from investors last June that companies be required to disclose material ESG environmental, social and governance risks. Easy and understandable access to accurate, comparable information regarding these very real risks - and climate change is certainly one of them - is essential to protect the investments our states depend on.

The study was based on an analysis of K and F filings by global companies in Investors and other groups who were signatories to the climate disclosure petitions with the SEC include:. Thompson, Jr. The report was part of a larger shift towards broad adoption of climate-reporting in recent years, encouraged by the Australian government and by shareholders. As the risks to companies associated with climate change have become more fully realized as a result of severe weather events and more aggressive regulations aimed at curbing GHG emissions, reporting frameworks have been developed in order to allow investors to better understand how companies are managing these risks.

The most prominent of these reporting frameworks is that of the TCFD. For each category, the TCFD recommends disclosures to help investors and others to understand how reporting organizations assess climate-related risks and opportunities. Further, the TCFD has provided guidance to support organizations in developing climate-related financial disclosures in line with the recommendations, while supplemental guidance is provided for certain sector-specific considerations. As such, it does not appear that mandatory reporting will be required by the government.

In a similarly turbulent regulatory environment, a proposal has been made in the United States, which ultimately withdrew from the Paris Agreement following the election of Donald Trump. For example, if a supplier's costs increase, that could have a significant impact on its customers if those costs are passed through, resulting in higher prices for customers. These markets also could allow companies that have more allowances than they need, or that can earn offset credits through their businesses, to raise revenue through selling these instruments into those markets.

Some companies might suffer financially if these or similar bills are enacted by the Congress while others could benefit by taking advantage of new business opportunities. In addition to legislative, regulatory, business and market impacts related to climate change, there may be significant physical effects of climate change that have the potential to have a material effect on a registrant's business and operations.

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These effects can impact a registrant's personnel, physical assets, supply chain and distribution chain. They can include the impact of changes in weather patterns, such as increases in storm intensity, sea-level rise, melting of permafrost and temperature extremes on facilities or operations. Changes in the availability or quality of water, or other natural resources on which the registrant's business depends, or damage to facilities or decreased efficiency of equipment can have material effects on companies.

For some registrants, financial risks associated with climate change may arise from physical risks to entities other than the registrant itself. For example, climate change-related physical changes and hazards to coastal property can pose credit risks for banks whose borrowers are located in at-risk areas. Companies also may be dependent on suppliers that are impacted by climate change, such as companies that purchase agricultural products from farms adversely affected by droughts or floods.

There have been increasing calls for climate-related disclosures by shareholders of public companies.

Environmental Law and Sustainability for Business

This is reflected in the several petitions for interpretive advice submitted by large institutional investors and other investor groups. The companies agreed in the settlement agreements to enhance their disclosures relating to climate change and greenhouse gas emissions in their annual reports filed with the Commission.

Although some information relating to greenhouse gas emissions and climate change is disclosed in SEC filings, [ 22 ] much more information is publicly available outside of public company disclosure documents filed with the SEC as a result of voluntary disclosure initiatives or other regulatory requirements. The Registry is a non-profit collaboration among North American states, provinces, territories and native sovereign nations that sets standards to calculate, verify and publicly report greenhouse gas emissions into a single public registry.

The Registry supports both voluntary and state-mandated reporting programs and provides data regarding greenhouse gas emissions. The Carbon Disclosure Project collects and distributes climate change information, both quantitative emissions amounts and qualitative risks and opportunities , on behalf of institutional investors. Sixty-eight percent of the companies that responded to the Carbon Disclosure Project's investor requests for information made their reports available to the public. The Global Reporting Initiative has developed a widely used sustainability reporting framework.

The GRI framework sets out principles and indicators that organizations can use to measure and report their economic, environmental, and social performance, including issues involving climate change. Sustainability reports based on the GRI framework are used to benchmark performance with respect to laws, norms, codes, performance standards and voluntary initiatives, demonstrate organizational commitment to sustainable development, and compare organizational performance over time.

These and other reporting mechanisms can provide important information to investors outside of disclosure documents filed with the Commission. Although much of this reporting is provided voluntarily, registrants should be aware that some of the information they may be reporting pursuant to these mechanisms also may be required to be disclosed in filings made with the Commission pursuant to existing disclosure requirements.

The Commission first addressed disclosure of material environmental issues in the early s. The Commission issued an interpretive release stating that registrants should consider disclosing in their SEC filings the financial impact of compliance with environmental laws, based on the materiality of the information. These topics were the subject of several rulemaking efforts, extensive litigation, and public hearings, all of which resulted in the rules that now specifically address disclosure of environmental issues. Earlier, beginning in , we began to develop and fine-tune our requirements for management to discuss and analyze their company's financial condition and results of operations in disclosure documents filed with the Commission.

More recently, the Commission reviewed its full disclosure program relating to environmental disclosures in SEC filings in connection with a Government Accountability Office review. Item of Regulation S-K requires a registrant to describe its business and that of its subsidiaries. The Item lists a variety of topics that a registrant must address in its disclosure documents, including disclosure about its form of organization, principal products and services, major customers, and competitive conditions.

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The disclosure requirements cover the registrant and, in many cases, each reportable segment about which financial information is presented in the financial statements. If the information is material to individual segments of the business, a registrant must identify the affected segments. Item expressly requires disclosure regarding certain costs of complying with environmental laws. Appropriate disclosure also shall be made as to the material effects that compliance with Federal, State and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, may have upon the capital expenditures, earnings and competitive position of the registrant and its subsidiaries.

The registrant shall disclose any material estimated capital expenditures for environmental control facilities for the remainder of its current fiscal year and its succeeding fiscal year and for such further periods as the registrant may deem material.

A registrant also must describe material pending legal actions in which its property is the subject of the litigation. A registrant need not disclose ordinary routine litigation incidental to its business or other types of proceedings when the amount in controversy is below thresholds designated in this Item.


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Instruction 5 to Item provides some specific requirements that apply to disclosure of certain environmental litigation. A Such proceeding is material to the business or financial condition of the registrant; Start Printed Page B Such proceeding involves primarily a claim for damages, or involves potential monetary sanctions, capital expenditures, deferred charges or charges to income and the amount involved, exclusive of interest and costs, exceeds 10 percent of the current assets of the registrant and its subsidiaries on a consolidated basis; or.

Item c specifies that risk factor disclosure should clearly state the risk and specify how the particular risk affects the particular registrant; registrants should not present risks that could apply to any issuer or any offering. Nevertheless, we and our staff continue to have to remind registrants, through comments issued in the filing review process, public statements by staff and Commissioners and otherwise, that the disclosure provided in response to this requirement should be clear and communicate to shareholders management's view of the company's financial condition and prospects.

Item includes a broad range of disclosure items that address the registrant's liquidity, capital resources and results of operations. Some of these provisions, such as the requirement to provide tabular disclosure of contractual obligations, [ 53 ] clearly specify the disclosure required for compliance.

But others instead identify principles and require management to apply the principles in the context of the registrant's particular circumstances. This disclosure should highlight issues that are reasonably likely to cause reported financial information not to be necessarily indicative of future operating performance or of future financial condition.


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The Commission has not quantified, in Item or otherwise, a specific future time period that must be considered in assessing the impact of a known trend, event or uncertainty that is reasonably likely to occur. As with any other judgment required by Item , the necessary time period will depend on a registrant's particular circumstances and the particular trend, event or uncertainty under consideration. For example, a registrant considering its disclosure obligation with respect to its liquidity needs would have to consider the duration of its known capital requirements and the periods over which cash flows are managed in determining the time period of its disclosure regarding future capital sources.

Improvements in technology and communications in the last two decades have significantly increased the amount of financial and non-financial information that management has and should evaluate, as well as the speed with which management receives and is able to use information. In identifying, discussing and analyzing known material trends and uncertainties, registrants are expected to consider all relevant information even if that information is not required to be disclosed, [ 61 ] and, as with any other disclosure judgments, they should consider whether they have sufficient disclosure controls and procedures to process this information.

Identifying and assessing known material trends and uncertainties generally will require registrants to consider a substantial amount of financial and non-financial information available to them, including information that itself may not be required to be disclosed.

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Registrants should address, when material, the difficulties involved in assessing the effect of the amount and timing of uncertain events, and provide an indication of the time periods in which resolution of the uncertainties is anticipated. However, most of the disclosure requirements applicable to domestic issuers under Regulation S-K that are most likely to require disclosure related to climate change have parallels under Form F, although some of the requirements are not as prescriptive as the provisions applicable to domestic issuers.

pt.isowohogidyc.tk For example, the following provisions of Form F may require a foreign private issuer to provide disclosure concerning climate change matters that are material to its business:. In the previous section we summarized a number of Commission rules and regulations that may be the source of a disclosure obligation for registrants under the federal securities laws. Depending on the facts and circumstances of a particular registrant, each of the items discussed above may require disclosure regarding the impact of climate change.

The following topics are some of the ways climate change may trigger disclosure required by these rules and regulations. As discussed above, there have been significant developments in federal and state legislation and regulation regarding climate change.