Addressing Climate Change in SEC Filings and Other Public Disclosures: What These Disclosures Mean for Businesses

Foley & Lardner LLP

Regulatory agencies are focusing on required climate change-related disclosures in securities filings and other public disclosures, seeking to ensure not only that such disclosures are made, but also that they are supported by adequate evidence, consistent with other public statements, and sufficiently specific with respect to the disclosing entity’s business. Companies making such disclosures should therefore ensure that they have adequately evaluated the impact of climate change on their business, as well as complied with applicable guidance and other requirements with respect to these disclosures. The recent enforcement actions by the New York Attorney General regarding climate change disclosures, against Exxon Mobil and others, underscore the importance of this effort.

The Martin Act

The New York Attorney General’s recent actions were brought under New York’s powerful Martin Act, which gives the New York Attorney General broad powers to initiate civil and criminal action against nearly any individual or company that has business that affects New York. The Martin Act is much broader than any other state’s blue sky laws and the relevant federal laws. Although the Martin Act is a New York law, the Act’s reach sweeps far beyond New York to most companies with stock traded on an exchange.

Recent Developments in Climate Change Disclosures

The actions by the New York Attorney General come amidst a growing call for more complete climate change disclosures by public companies and more rigorous enforcement by the Securities and Exchange Commission (“SEC”). In 2010, the SEC issued guidance directing companies to make climate change disclosures in their public filings. Recently, there has been increased pressure on the SEC, and this past October, 16 senators sent a letter to the SEC Chairman asking the Commission to provide an update on its actions with respect to this guidance.

Additionally, last year marked the passage of a record number of shareholder resolutions related to climate change. Attention to public climate change disclosures is not only receiving greater attention nationally, but both the United Nations and the World Federation of Exchanges issued guidance in recent months requesting that the world’s stock exchanges take a more uniform approach to environmental, social and governance disclosures.

What These Disclosures Mean for Businesses

As the focus on public disclosures regarding climate change increases, companies should understand what they are required to disclose and how to disclose climate-related impacts to their businesses. Companies should also be cognizant of the public statements they are making regarding climate change and ensure those statements align with the company’s SEC filings, other public statements that the company makes, and any internal reports or knowledge the company may have on the topic. The SEC, the Department of Justice, and the New York Attorney General may bring enforcement actions against businesses for inconsistent statements regarding climate change in their public filings or company reports. As evidenced by the actions under the Martin Act, companies are wise to carefully craft their climate change and other environmental disclosures, have backup justification for any statements that are made in any public filings or reports, and not rely on broad general statements regarding the impacts of climate change on their businesses.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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