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SEC issues sample letter to companies regarding compliance with climate change disclosures

October 25, 2021
SEC issues sample letter to companies regarding compliance with climate change disclosures

By CSE Research Team


As US government recently acknowledged climate change as one of the highest priorities, the Securities and Exchange Commission has made it clear that many public companies have substantial current disclosure requirements. Instead of waiting for more extensive climate change disclosure rules, they should act now and ensure that they are addressing climate change in their SEC filings.


On September 22, 2021, the SEC’s Division of Corporation Finance published a “Sample Letter to Companies Regarding Climate Change Disclosures”, aiming to elicit information regarding issuer compliance with the SEC’s 2010 Guidance Regarding Disclosure Related to Climate Change. The sample letter comments are grouped into three topics: General, Risk Factors, and Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).


The General topic refers to discrepancies in the scope of climate-change disclosure in a registrant’s CSR report compared to its SEC filings. Companies should now be prepared to explain any difference in the depth of disclosures that may appear in annual filings and sustainability reports.


The Risk Factors topic includes two comments that require companies to disclose the material effects of climate-related transition risks (eg regulatory changes, market trends, credit risks or technological changes) and any material litigation risks.


The MD&A topic is related to the present implications of climate change and climate-related legislative and policy changes. A summary of the comments follows below:


  • Identify material pending or existing climate change-related legislation, regulations, international accords and their effect on your business.
  • Identify any material past and/or future capital expenditures for climate-related projects.
  • Discuss indirect consequences of climate-related regulation or business trends.
  • Discuss any material physical effects that climate change has on your company.
  • Disclose increased compliance costs due to climate change.
  • Disclose facts on any important purchase or sale of carbon credits or offsets and its effects.


The SEC also highlights the importance of the accuracy and adequacy of these disclosures, for which the company and management have the full responsibility.


A mandatory climate risk disclosure rule proposal is expected by the end of 2021 and it is very likely that the SEC will focus more on industries.


CSE was proudly a supporter of SEC’s consultation process that took place earlier this year and continues to include updates on the upcoming legislation and important sustainability (ESG) developments in its Sustainability ESG Practitioner Programs where almost 90% of ESG Managers of Fortune 500 firms has been already certified.


CSE’s Certified Sustainability (ESG) Practitioner Program on November 4-5 & 8, 2021 & on February 24-25 & 28, 2022 will focus on the most important issues of ESG and disclosures in USA. Take this opportunity to upscale your knowledge along with other Business leaders and C-suite executives in corporate responsibility, sustainability, ESG, marketing and investors’ relations.


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