SEC's Increased Scrutiny of Climate Risk and ESG Disclosures Likely to Lead to Agency Rulemaking

Posted by Jeffrey Karp on January 31, 2022 at 1:20 PM
Find me on:

What public companies need to know about environmental disclosures, including recent climate risk and ESG disclosure initiatives.

By Jeffrey Karp, Senior Counsel; Vic Baltera, Partner; Howard Berkenblit, Partner; and Edward Mahaffey, Law Clerk

In fulfilling disclosure obligations under the Securities Act of 1933 and the Securities Exchange Act of 1934, public companies are required to disclose various potential environmental liabilities and potential risks in filings with the U.S. Securities and Exchange Commission (SEC or Commission). During the 1970s, SEC efforts in the area of environmental disclosure focused primarily on statutes such as the Clean Water Act and the Clean Air Act.

Subsequently, disclosure requirements were expanded to also encompass liabilities and cleanup costs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Over time, the SEC increasingly has emphasized broader disclosure of environmental matters, as the Commission further articulated the materiality standards for disclosure under the securities laws. These standards provide that information is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding how to vote or in making an investment decision—in other words, "that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available.'" See Basic, Inc. v. Levinson, 485 U.S. 224, 231 (1988) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)).

SEC disclosure requirements for environmental liabilities are contained primarily in the uniform disclosure rules of ...

Read full Client Alert here.

Sullivan 4c

About the Blog

The SEC Pulse provides updates and commentary from our Capital Markets Group on issues affecting publicly traded and privately owned businesses, investment banks and foreign companies who trade or raise capital in the United States, and boards of directors and company officers in securities transactions and corporate governance matters.

The material on this site is for general information only and is not legal advice. No liability is accepted for any loss or damage which may result from reliance on it. Always consult a qualified lawyer about a specific legal problem.

Subscribe to Blog

Recent Posts

Posts by Topic

see all