Does the SEC Care if You’re Green?

The regulator has made few comments in the past year about companies' disclosures of climate-change risk.

One year after issuing controversial guidance for following environmental-risk disclosure rules, the Securities and Exchange Commission appears to have given the matter little attention.

In a review of comments to regulatory filings made in 2010, law firm Davis Polk found only six instances of SEC staffers wanting more information about businesses’ disclosures related to risks tied to climate change (see chart below). “I would have expected more comments, given that they had gone out of their way to issue the release,” says Betty Moy Huber, counsel at the New York firm.

In January 2010, the SEC commissioners voted 3-to-2 in a public meeting to publish an interpretative release that advised companies on how they should explain the material effects of climate change on their business. While the guidance didn’t change any new rules, its issuance clearly highlighted the topic as an area of concern for the SEC, which had been by pressured by investor and environmental groups to clarify its related disclosure rules.

The Republican commissioners voted against the document, believing it was unnecessary and would lead companies to provide extraneous information in their filings. The vote sent a “curious signal to the investment community about what we view as the most pressing issues facing the commission,” SEC commissioner Kathleen Casey said at the time.

Davis Polk’s analysis could suggest that climate-change risks turned out not to be a top priority for the SEC. However, the firm did not compare last year’s SEC comments with those of previous years. It’s possible that companies were largely compliant with the SEC guidance and didn’t require criticism or questioning, acknowledges Huber.

Under the Sarbanes-Oxley Act, the SEC must look at one filing from each public company at least once every three years. The regulator does not comment on every filing it reviews: “The staff comments as appropriate during the course of normal reviews,” says SEC spokesman John Nester.

The SEC’s feedback did not apply just to companies that would most obviously have climate-change risk: one of the six companies that received a comment is a penny-stock company that runs beauty salons.

Climate-risk disclosures

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