The U.S. Securities and Exchange Commission (SEC) is requesting public input from investors, registrants, and other market participants on climate change disclosure.

The SEC has periodically evaluated its regulation of climate change disclosures within the context of its integrated disclosure system. In 2010, the SEC issued an interpretive release that guided issuers as to how existing disclosure requirements apply to climate change matters.

The 2010 Climate Change Guidance noted that, depending on the circumstances, information about climate change-related risks and opportunities might be required in a registrant’s disclosures related to its description of business, legal proceedings, risk factors, and management’s discussion and analysis of financial condition and results of operations. The release outlined certain ways in which climate change may trigger disclosure obligations under the SEC’s rules including legislation and regulations governing climate change, international accords, changes in market demand for goods or services, and physical risks associated with climate change.

Since 2010, the demand for the disclosure of information regarding climate change risks, impacts, and opportunities has grown dramatically. Subsequently, questions have arisen whether climate change disclosures adequately inform investors about known material risks, uncertainties, impacts, and opportunities, and whether greater consistency could be achieved. In May 2020, the SEC Investor Advisory Committee approved recommendations urging the Commission to begin an effort to update reporting requirements for issuers to include material, decision-useful environmental, social, and governance (ESG) factors. In December 2020, the ESG Subcommittee of the SEC Asset Management Advisory Committee issued a preliminary recommendation that the Commission require the adoption of standards by which corporate issuers disclose material ESG risks.

SEC staff are presently evaluating rules for climate change disclosure to ensure it provides consistent, comparable, and reliable information. As part of the process, the SEC is inviting public comment. To guide this process, the SEC is providing a series of questions, which have been published on its website.

To read the complete statement and the questions from the Securities and Exchange Commission, click here.

For more information on the potential impact on Canadian climate change disclosure requirements, please call Barbara Hendrickson at BAX Securities Law (416) 601-1004.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.