Gaps in Climate Change Disclosures

The U.S. Securities and Exchange Commission (SEC) is getting more specific about what climate change–related information companies should include in their annual financial reports.

The SEC, which regularly scrutinizes corporate disclosures, identified gaps that staff have found in recent filings regarding the impact of climate change and related regulations. Under U.S. rules, companies are required to disclose issues deemed to be material to investors, including those related to climate change.

The SEC on Wednesday released a sampling of follow-up questions its staff might send to corporate executives who can be responsible for omissions. The regulator signaled that firms should pay particularly close attention to:

• Disclosing business risks related to regulatory and policy changes in response to climate change;
• Any differences in climate change disclosures in annual reports and those in the company’s environmental, social, and corporate governance (ESG) reports;
• Material litigation risks related to environmental issues;
• Past or future capital spending for climate-related projects;
• Indirect impacts of global warming, such as changes in demand for goods;
• Any impact of a changing environment on business operations; and
• Quantifying any increased compliance costs.

Copyright 2021 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.