In February 2021, then acting SEC Chair (and current Commissioner) Allison Herren-Lee
announced that the Division of Corporate Finance would “enhance its focus on climate-related disclosure in public company filings.” That effort is now underway, as the
SEC sent letters to dozens of public companies late last week exclusively related to climate change disclosures. The letters comment on companies’ most recent 10-K filings going back as far as 6 months, and the
SEC has now published a sample letter with questions such as the following:
- Why was more disclosure furnished in [your company’s] CSR report compared to what was filed with the SEC?
- What are major risks associated with climate change, including litigation, to your business?
- There have been significant developments in federal and state legislation regarding climate change that you have not discussed in your filing. Please revise your disclosure.
- Were there material, physical impacts of climate change on operations and results such as severe weather, floods, fires, resource availability and quality, and pollution?
- Disclose the purchase or sale of carbon credits or offsets.
Subsequent reports from the
Wall Street Journal indicate the SEC sent the letter to a diverse range of industries, including agriculture, oil and gas, banking, real estate, and trucking.
The SEC letters do not ask companies to explain any links between climate change metrics and executive pay – though such metrics are rare (
used by approximately 2% of the S&P 500). The letters provide some insight into the level of specificity the SEC will expect in future, mandated disclosures. Such specificity may become the standard in any subsequent use of climate change metrics usage, including within the incentive structure.
