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STATEMENT




PUBLIC INPUT WELCOMED ON CLIMATE CHANGE DISCLOSURES

Acting Chair Allison Herren Lee

March 15, 2021

In light of demand for climate change information and questions about whether
current disclosures adequately inform investors, public input is requested from
investors, registrants, and other market participants on climate change
disclosure.

The Securities and Exchange Commission (SEC or Commission) has periodically
evaluated its regulation of climate change disclosures within the context of its
integrated disclosure system. In 2010, the Commission issued an interpretive
release that provided guidance to issuers as to how existing disclosure
requirements apply to climate change matters.[1] 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. It noted 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, investor demand for, and company disclosure of information about,
climate change risks, impacts, and opportunities has grown dramatically.[2]
Consequently, questions arise about 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, or ESG
factors.[3] 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.[4] 

I am asking the staff to evaluate our disclosure rules with an eye toward
facilitating the disclosure of consistent, comparable, and reliable information
on climate change. To facilitate the staff’s assessment, set forth below are
questions that would be useful to consider as part of this evaluation.[5] In
addition, a webform and email box are now available for the public to provide
input on these issues. Public input on the Commission’s disclosure rules and
guidance as they apply to climate change disclosures, and whether and how they
should be modified, can include comments on existing disclosure requirements in
Regulation S-K and Regulation S-X (or, for foreign private issuers, Form 20-F),
potential new Commission disclosure requirements, and potential new disclosure
frameworks that the Commission might adopt or incorporate in its disclosure
rules. In addition to the questions set forth below, comments generally as to
how the Commission can best regulate climate change disclosures are welcomed.[6]

I encourage commenters to submit empirical data and other information in support
of their comments. Original data from respondents, including academics, data
providers, and other organizations, may assist in assessing the materiality of
climate-related disclosures, and the costs and benefits of different regulatory
approaches to climate disclosure.


QUESTIONS FOR CONSIDERATION

 1.  How can the Commission best regulate, monitor, review, and guide climate
     change disclosures in order to provide more consistent, comparable, and
     reliable information for investors while also providing greater clarity to
     registrants as to what is expected of them? Where and how should such
     disclosures be provided? Should any such disclosures be included in annual
     reports, other periodic filings, or otherwise be furnished?
 2.  What information related to climate risks can be quantified and measured? 
     How are markets currently using quantified information? Are there specific
     metrics on which all registrants should report (such as, for example,
     scopes 1, 2, and 3 greenhouse gas emissions, and greenhouse gas reduction
     goals)? What quantified and measured information or metrics should be
     disclosed because it may be material to an investment or voting decision?
      Should disclosures be tiered or scaled based on the size and/or type of
     registrant)? If so, how? Should disclosures be phased in over time? If so,
     how? How are markets evaluating and pricing externalities of contributions
     to climate change? Do climate change related impacts affect the cost of
     capital, and if so, how and in what ways? How have registrants or investors
     analyzed risks and costs associated with climate change? What are
     registrants doing internally to evaluate or project climate scenarios, and
     what information from or about such internal evaluations should be
     disclosed to investors to inform investment and voting decisions? How does
     the absence or presence of robust carbon markets impact firms’ analysis of
     the risks and costs associated with climate change?
 3.  What are the advantages and disadvantages of permitting investors,
     registrants, and other industry participants to develop disclosure
     standards mutually agreed by them? Should those standards satisfy minimum
     disclosure requirements established by the Commission? How should such a
     system work? What minimum disclosure requirements should the Commission
     establish if it were to allow industry-led disclosure standards? What level
     of granularity should be used to define industries (e.g., two-digit SIC,
     four-digit SIC, etc.)?
 4.  What are the advantages and disadvantages of establishing different climate
     change reporting standards for different industries, such as the financial
     sector, oil and gas, transportation, etc.? How should any such
     industry-focused standards be developed and implemented?
 5.  What are the advantages and disadvantages of rules that incorporate or draw
     on existing frameworks, such as, for example, those developed by the Task
     Force on Climate-Related Financial Disclosures (TCFD), the Sustainability
     Accounting Standards Board (SASB), and the Climate Disclosure Standards
     Board (CDSB)?[7] Are there any specific frameworks that the Commission
     should consider? If so, which frameworks and why?
 6.  How should any disclosure requirements be updated, improved, augmented, or
     otherwise changed over time? Should the Commission itself carry out these
     tasks, or should it adopt or identify criteria for identifying other
     organization(s) to do so? If the latter, what organization(s) should be
     responsible for doing so, and what role should the Commission play in
     governance or funding? Should the Commission designate a climate or ESG
     disclosure standard setter? If so, what should the characteristics of such
     a standard setter be? Is there an existing climate disclosure standard
     setter that the Commission should consider?
 7.  What is the best approach for requiring climate-related disclosures? For
     example, should any such disclosures be incorporated into existing rules
     such as Regulation S-K or Regulation S-X, or should a new regulation
     devoted entirely to climate risks, opportunities, and impacts be
     promulgated? Should any such disclosures be filed with or furnished to the
     Commission?   
 8.  How, if at all, should registrants disclose their internal governance and
     oversight of climate-related issues? For example, what are the advantages
     and disadvantages of requiring disclosure concerning the connection between
     executive or employee compensation and climate change risks and impacts?
 9.  What are the advantages and disadvantages of developing a single set of
     global standards applicable to companies around the world, including
     registrants under the Commission’s rules, versus multiple standard setters
     and standards? If there were to be a single standard setter and set of
     standards, which one should it be? What are the advantages and
     disadvantages of establishing a minimum global set of standards as a
     baseline that individual jurisdictions could build on versus a
     comprehensive set of standards? If there are multiple standard setters, how
     can standards be aligned to enhance comparability and reliability? What
     should be the interaction between any global standard and Commission
     requirements? If the Commission were to endorse or incorporate a global
     standard, what are the advantages and disadvantages of having mandatory
     compliance?
 10. How should disclosures under any such standards be enforced or assessed? 
     For example, what are the advantages and disadvantages of making
     disclosures subject to audit or another form of assurance? If there is an
     audit or assurance process or requirement, what organization(s) should
     perform such tasks? What relationship should the Commission or other
     existing bodies have to such tasks? What assurance framework should the
     Commission consider requiring or permitting?
 11. Should the Commission consider other measures to ensure the reliability of
     climate-related disclosures? Should the Commission, for example, consider
     whether management’s annual report on internal control over financial
     reporting and related requirements should be updated to ensure sufficient
     analysis of controls around climate reporting? Should the Commission
     consider requiring a certification by the CEO, CFO, or other corporate
     officer relating to climate disclosures?
 12. What are the advantages and disadvantages of a “comply or explain”
     framework for climate change that would permit registrants to either comply
     with, or if they do not comply, explain why they have not complied with the
     disclosure rules? How should this work? Should “comply or explain” apply to
     all climate change disclosures or just select ones, and why?
 13. How should the Commission craft rules that elicit meaningful discussion of
     the registrant’s views on its climate-related risks and opportunities? What
     are the advantages and disadvantages of requiring disclosed metrics to be
     accompanied with a sustainability disclosure and analysis section similar
     to the current Management’s Discussion and Analysis of Financial Condition
     and Results of Operations?
 14. What climate-related information is available with respect to private
     companies, and how should the Commission’s rules address private companies’
     climate disclosures, such as through exempt offerings, or its oversight of
     certain investment advisers and funds?
 15. In addition to climate-related disclosure, the staff is evaluating a range
     of disclosure issues under the heading of environmental, social, and
     governance, or ESG, matters. Should climate-related requirements be one
     component of a broader ESG disclosure framework? How should the Commission
     craft climate-related disclosure requirements that would complement a
     broader ESG disclosure standard? How do climate-related disclosure issues
     relate to the broader spectrum of ESG disclosure issues?


HOW TO PROVIDE FEEDBACK

Members of the public interested in making their input known on these or other
related matters are invited to submit that input via the webform or e-mail
address linked below. To help the staff process and review your comments more
efficiently, please use only one of these methods. To the extent that you are
responding to a particular question(s) above, please identify such question(s)
in your submission. Please submit comments within 90 days of the date of this
statement.

Submissions will generally be posted on www.sec.gov. Submissions received will
be posted without change or redaction of personal identifying information. You
should only make submissions that you wish to make available publicly.

In addition to, or in lieu of, making a written submission, staff in the
Division of Corporation Finance would be happy to meet with members of the
public to discuss their feedback on these and other related matters. Please
contact Kristina Wyatt, Senior Special Counsel, at (202) 551-3181.

Submit Input: Webform | E-mail



 

--------------------------------------------------------------------------------

[1] Commission Guidance Regarding Disclosure Related to Climate Change, Release
No. 33-9106 (Feb. 2, 2010) [75 FR 6290 (Feb 8, 2010)] (2010 Climate Change
Guidance).

[2] See, e.g., Managing Climate Risk in the U.S. Financial System, Report of the
Climate-Related Market Risk Subcommittee, Market Risk Advisory Committee of the
U.S. Commodity Futures Trading Commission (Sept. 2020); Business Roundtable,
Addressing Climate Change, Principles and Policies (Sept. 2020); Network for
Greening the Financial System, The Macroeconomic and Financial Stability Impacts
of Climate Change (June 2020); SEC Rulemaking Petition (June 10, 2020);
BlackRock, Getting physical: Scenario analysis for assessing climate-related
risks (April 4, 2019).

[3] See Recommendation from the Investor-as-Owner Subcommittee of the SEC
Investor Advisory Committee Related to ESG Disclosure (May 14, 2020).

[4] See Potential Recommendations of the ESG Subcommittee of the SEC Asset
Management Advisory Committee (Dec. 1, 2020).

[5] Public input has previously been sought in this manner to inform potential
rule changes. See, e.g., Chairman Jay Clayton, Asset-Level Disclosure
Requirements for Residential Mortgage-Backed Securities, Public Statement (Oct.
30, 2019).

[6] Last month, I issued a Statement on the Review of Climate-Related Disclosure
directing the Division of Corporation Finance to review the extent to which
public companies address the topics identified in the 2010 Climate Change
Guidance and absorb lessons on how the market is currently managing
climate-related risks. The staff will use insights from that work in considering
updates to the 2010 Climate Change Guidance to take into account developments in
the last decade. The review announced today, and the opening of the comment
file, are meant to facilitate a broader evaluation of our disclosure rules as
they relate to climate change, but may also inform the update of the 2010
Climate Change Guidance.

[7] This list is not meant to be exhaustive, and should also be construed to
include potential successor organizations. See, e.g., IIRC and SASB announce
intent to merge in major step towards simplifying the corporate reporting system
(Nov. 25, 2020). 




RELATED MATERIALS

 * Comments Received
 * SEC Response to Climate and ESG Risks and Opportunities

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