Public Companies Will Likely Experience Renewed Focus
In 2010 when carbon cap-and-trade legislation and wide-sweeping greenhouse gas (GHG) regulation seemed inevitable, the Securities and Exchange Commission (SEC) released interpretive guidance for public companies to disclose their “climate risks” in an effort to quell concerns from investors. Six years later, the SEC faces increasing criticism over “lax” enforcement and “inconsistent” reporting and pressure for greater enforcement and standardization. AGC encourages public companies to review the 2010 SEC interpretive guidance and protect themselves from greater scrutiny.
The SEC interpretive guidance gives suggestions on some of the ways companies may be impacted by climate concerns and should disclose those vulnerabilities – such as potential disruptions to operations from extreme weather or reduced water availability, supply chain risks, the impacts of legislation and regulation related to climate change, and changing business trends. A January 2016 Government Accountability Office report found that SEC’s Division of Enforcement “has not filed any actions concerning climate-related disclosure issues.” The report acknowledges that SEC’s priorities in this area have evolved as cap-and-trade legislation was never enacted and other matters, such as 2010 Dodd-Frank Act, became priorities.
More recent activity shows that the Commission may step up their efforts. The SEC announced in April that it would look at modernizing its disclosure requirements in general. And in June, the SEC released a proposed rule to modernize reporting in the mining industry, which could result in the reporting of environmental impacts.
Calls from economists and top White House aides to push disclosure, high-profile investigations facing the oil and gas industry (for allegedly withholding information on climate risks), and an uptick in Federal agency activity related to climate resilience and GHG emissions such as the recently proposed amendment to the Federal Acquisition Regulation requiring disclosure from some Federal contractors (which AGC strongly discouraged) --- recent developments are keeping the pressure on the SEC and other agencies to keep GHGs in the forefront.
For more information on climate related issues, contact AGC’s Melinda Tomaino at tomainom@agc.org.