SEC Climate Risk Is Real

SEC Climate Risk Is Real

Posted by Daniel Stouffer on February 26th, 2010

The recent SEC climate risk disclosure requirement has fueled many a debate at the corporate level and among pundits alike. Some argue that the finding has no real impact, as the key words “interpretive guidance” figure prominently within its body. Senior executives are not so sure as they pay more attention to the other, maybe more significant keyword — “materiality.”

The Securities and Exchange Commission pointed out quite rightly that it was not up to that body to deliberate on climate change issues. They reasoned that the SEC climate risk disclosure finding was initiated so that corporate executives could focus on their company’s position in the debate and reveal whatever information they had to a discerning public. Climate change is so important in the real world today, that companies must address any potential implications.

There’s little doubt that the SEC has great impact in the world of finance, even though debate has arisen on either side of the fence. Public confidence would be badly shaken without the existence of the SEC and with less oversight, confidence in the stock exchange would undoubtedly be impacted.

Climate risk must be considered by company chiefs as they prepare their annual filings for submission to the SEC. The notes and information included within these reports is of particular interest to investors. The rule of law may not be altered by the SEC climate risk disclosure, but big business interests should be the fully aware of potential implications.

We know that the issue of climate change can be very polarizing and there are strong emotions on every site. Many people point to big business and expect change from these directions. According to the SEC, climate risk must be an integral consideration and big business interests must be fully aware of the repercussions.

If a company does not disclose material elements that could significantly impact its organizations, whether interpretive guidance has been issued or not, they could be seen to be out of compliance with federal positions. While this could be a grey area, public opinion is more polarized and companies suspected of being slow to reveal could face damage in the marketplace.

Management discussion and analysis is an important part of the quarterly and annual reports fielded by publicly traded companies. These reports often provide the information necessary for investors to make a decision and as such, the reports must be well presented in order for the company to ensure that its lifeblood funding continues.

We are certain to see pressure groups and investor watchdogs casting a careful eye over the next batch of reports from public companies. SEC climate risk findings will be the subject of much analysis.

Daniel Stouffer has much more data about SEC climate risk and how a visit to www.verisae.com can benefit you.