Friday, January 29, 2010

SEC issues climate change disclosure guidelines

The U.S. Securities and Exchange Commission has voted in favour of providing public companies with interpretive guidance clarifying existing SEC disclosure requirements related to climate change.

The interpretive release provides guidance on disclosure rules that may require a company to disclose the impact that business or legal developments related to climate change may have on its business, the SEC said in a statement. “The relevant rules cover a company's risk factors, business description, legal proceedings, and management discussion and analysis.”

“The Commission is not making any kind of statement regarding the facts as they relate to the topic of climate change or global warming,” SEC chair Mary Schapiro said in a speech. “And, we are not opining on whether the world’s climate is changing; at what pace it might be changing; or due to what causes. Nothing that the Commission does today should be construed as weighing in on those topics. Today's guidance will help to ensure that our disclosure rules are consistently applied."

The guidance highlights four areas as examples of situations where climate change may trigger disclosure requirements: the impact of legislation and regulation; the impact of international accords; the indirect consequences of regulation or business trends; and the physical impact of climate change.

“Companies should evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business,” the SEC says.

Environmental coalition group Ceres, one of many groups which signed a climate disclosure petition, welcomed the SEC’s move.

“Today’s vote is a clarion call about the vast risks and opportunities climate change poses for U.S. companies and the urgency for integrating them into investment decision making,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk. “The business risks of climate change cannot be ignored. With this guidance investors can make more sound decisions based on better information – and businesses will have a level-playing field with clear standards and expectations for disclosure.”

The lack of specific guidance until now has resulted in weak and inconsistent climate-related disclosure by public companies, Ceres said in a statement.

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