September 27, 2021Client Alert

SEC Division of Corporation Finances Publishes Guidance on Climate Change Disclosures

The Securities and Exchange Commission (“SEC”) Division of Corporation Finance (“Division”) recently published guidance regarding its expectations for issuers’ climate change disclosures. The guidance includes a sample letter of comments that the Division may issue to companies regarding their disclosures in public securities filings. Although the guidance is not a rule, regulation, or statement of the SEC, it does reflect the views and expectations of the SEC staff who review filings for compliance with applicable disclosure requirements. As such, companies should familiarize themselves with these comments and ensure that their public filings anticipate the responses already identified by the Division.


In its 2010 Climate Change Guidance, the SEC indicated that companies may need to provide disclosures regarding direct and indirect impacts of climate change on a company’s description of business, legal proceedings, risk factors, and management’s discussion and analysis (“MD&A”) of financial condition and results of operations. In addition, companies are required by securities law to disclose “such further material information, if any, as may be necessary to make the required statements…not misleading.”

In February 2021, then-Acting SEC Chair Allison Herren Lee directed the Division to enhance its focus on climate-related disclosure in public company filings. The Division’s guidance responds to that directive.

Sample Comments

The comments, which largely seek additional risk factors and MD&A disclosure, refer to:

  • differences in the expansiveness of disclosure between corporate social responsibility (“CSR”) reports and SEC filings
  • the material effects of transition risks related to climate change that may affect an issuer’s business, finances, and results of operations. These include policy and regulatory changes impacting operational and compliance burdens, and market trends that may alter business opportunities, credit risks, or technological changes;
  • material litigation risks related to climate change and their potential impact on the company;
  • developments in state, federal, and international laws regarding climate change and their material effect on a company’s business, financial condition, and results of operations;
  • identification of past and/or future capital expenditures for climate-related projects;
  • indirect material consequences of business trends, such as changes in demand for goods/services based on their connection to greenhouse gas emissions or carbon-based energy sources, as well as impacts on a company’s reputation for providing such goods/services;
  • material physical effects of climate change on operations and results, including effects of severe weather and agricultural production capacity, and their impacts on insurance; and
  • material purchases or sales of carbon credits or offsets.

For many items in the sample letter, the Division also sought quantification of costs to the company.

The Division’s guidance is another warning to companies that their climate change disclosures must genuinely inform investors as to the direct and indirect impacts of climate change on their company. Companies risk enforcement actions by the SEC for submitting disclosures that are less detailed than their CSR Reports or that do not properly assess the impact of climate change on a company’s legal proceedings, materials risks, financial condition and results of operations. Michael Best & Friedrich has attorneys in its Securities & Capital Markets team who can advise issuers on complying with securities laws and regulations and on incorporating the Division’s guidance into their disclosures. Please do not hesitate to contact a member of our team for more information.

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