Reed Seeks to Improve Disclosure About Climate Change Risks in SEC Filings

WASHINGTON, DC – In an effort to protect investors and improve corporate disclosure
of material risks from climate change, U.S. Senator Jack Reed (D-RI) today
introduced legislation to modernize the Securities and Exchange Commission’s (SEC)
industry guides for oil, gas, and mining companies. The legislation would enhance
climate-related disclosures to ensure publicly-traded companies are providing
investors with the information necessary to make informed investment decisions.

Senator Reed has been urging the SEC to set clear climate disclosure standards to
protect investors since 2007, when he co-authored a letter to the SEC.

In 2010, the SEC issued guidance on how companies should disclose material risks
related to climate change. Indeed, the guidance specifically states that the
«significant physical effects of climate change, such as effects on the severity of
weather (for example, floods or hurricanes), sea levels, the arability of farmland,
and water availability and quality, have the potential to affect a registrant’s
operations and results… Registrants whose businesses may be vulnerable to severe
weather or climate related events should consider disclosing material risks of, or
consequences from, such events in their publicly filed disclosure documents.»

«It is clear that the SEC needs to do more when it comes to critically reviewing the
disclosures being filed by publicly traded companies, but it is also clear that the
SEC’s industry guides for oil, gas, and mining companies should be updated to
reflect the growing risk of climate change to these companies,» said Reed. «This
legislation would ensure the investing public can access the material information
necessary to make informed decisions when investing in these companies.»

In 2015, after a two-year investigation, New York Attorney General Eric Schneiderman
secured an unprecedented agreement with Peabody Energy, a publicly-traded coal
company that «repeatedly denied in public financial filings to the Securities and
Exchange Commission (SEC) that it had the ability to predict the impact that
potential regulation of climate change pollution would have on its business, even
though Peabody and its consultants actually made projections that such regulation
would have severe impacts on the company.» Unfortunately, it appears that the SEC
had no role in this settlement, in which Peabody Energy agreed to amend its SEC
disclosures, admitting that: «concerns about the environmental impacts of coal
combustion … could significantly affect demand for our products or our
securities.»

«These disclosures are important to investors,» continued Reed. «In updating the
industry guides for oil, gas, and mining companies, my legislation would direct the
SEC to work with the SEC’s Investor Advisory Committee, which was established by the
Wall Street Reform and Consumer Protection Act to advise and consult with the SEC on
matters such as disclosure effectiveness and on initiatives to promote investor
confidence and the integrity of the securities marketplace. In this bill, the
Investor Advisory Committee is directed to solicit and consider public input on
appropriate disclosures to include in the industry guide updates and submit specific
recommendations to the Commission. »

Identical legislation is being introduced today in the U.S. House of Representative
by Matt Cartwright (D-PA).

«The SEC needs to do more when it comes to critically reviewing the disclosures
being filed by publicly traded companies,» Rep. Cartwright said. «To help do this,
the SEC should update its industry guides for mining companies and for oil, and gas
companies to reflect the growing risk climate change presents to these companies.»