While most businesses acknowledge the potential impact of climate on their operations, and many people see first-hand the potential for disruption due to climate change, there is a dispute as to the role of the SEC in disclosing climate factors in public company filings.

SEC Chair Gensler is gung-ho in favor of his staff establishing mandatory reporting standards for discussing climate risk, a position supported by 75% of comment letters to the SEC.  However, many major corporation are on record as being opposed to inclusion of such reporting in officially filed SEC documents.  What’s worrying Amazon, Alphabet, eBay, Facebook, Salesforce and other business giants?

These companies are on record of having disclosures sent by separate reports to the SEC, but not included in official filings such as annual reports on 10-Ks.  The practice of unofficial filings would avoid law suits against registrants based on climate disclosures, which is appropriate because “climate disclosures … involve inherent uncertainty” which would subject companies to private lawsuits.  And one Commissioner opposes formal disclosure requirements as the SEC is not “well-suited to make judgments about … climate metrics….”

Reporting on climate should be a priority for public companies, as investors are interested both in economic impact and in ESG compliance as a policy matter.  The fact that the SEC is not expert in climate issues should not be an argument — the SEC is not expert in a very wide range of issues upon which it requires formal disclosure from registrants.  The point is that the registrants need to be expert regarding climate, not the Commission.  Cushioning companies from untoward litigation based on climate is the ability of registrants to make clear the range of possible impacts so that registrant is not tied to a single analysis of future uncertain events.

With half the West on fire, portions of the East and of mainland Europe flooded, and record temperatures everywhere in the world, there is no reason to require registrants to take a pass on disclosing the planning that they must by definition be performing inside the board room, so that investors can evaluate corporate intentions.