Monday, February 8, 2010 Part III Securities and Exchange Commission 17 CFR Parts 211, 231 and 241 Commission Guidance Regarding Disclosure Related to Climate Change; Final Rule WReier-Aviles on DSKGBLS3C1PROD with RULES2 VerDate Nov<24>2008 12:57 Feb 05, 2010 Jkt 220001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\08FER2.SGM 08FER2 6290 Federal Register / Vol. 75, No. 25 / Monday, February 8, 2010 / Rules and Regulations SECURITIES AND EXCHANGE concerns on a global basis continue.2 change related legislation is currently COMMISSION The Environmental Protection Agency is pending in Congress. The House of taking action to address climate change Representatives has approved one 17 CFR Parts 211, 231 and 241 concerns,3 and Congress is considering version of a bill,8 and a similar bill was climate change legislation.4 Some introduced in the Senate in the fall of [Release Nos. 33–9106; 34–61469; FR–82] business leaders are increasingly 2009.9 This legislation, if enacted, recognizing the current and potential would limit and reduce greenhouse gas Commission Guidance Regarding effects on their companies’ performance emissions through a ‘‘cap and trade’’ Disclosure Related to Climate Change and operations, both positive and system of allowances and credits, AGENCY: Securities and Exchange negative, that are associated with among other provisions. Commission. climate change and with efforts to The Environmental Protection Agency reduce greenhouse gas emissions.5 has been taking steps to regulate ACTION: Interpretation. Many companies are providing greenhouse gas emissions. On January 1, SUMMARY: The Securities and Exchange information to their peers and to the 2010, the EPA began, for the first time, Commission (‘‘SEC’’ or ‘‘Commission’’) is public about their carbon footprints and to require large emitters of greenhouse publishing this interpretive release to their efforts to reduce them.6 gases to collect and report data with provide guidance to public companies This release outlines our views with respect to their greenhouse gas regarding the Commission’s existing respect to our existing disclosure emissions.10 This reporting requirement disclosure requirements as they apply to requirements as they apply to climate is expected to cover 85% of the nation’s climate change matters. change matters. This guidance is greenhouse gas emissions generated by intended to assist companies in roughly 10,000 facilities.11 In December DATES: Effective Date: February 8, 2010. satisfying their disclosure obligations 2009, the EPA issued an ‘‘endangerment FOR FURTHER INFORMATION CONTACT: under the federal securities laws and and cause or contribute finding’’ for Questions about specific filings should regulations. greenhouse gases under the Clean Air be directed to staff members responsible Act, which will allow the EPA to craft for reviewing the documents the B. Background rules that directly regulate greenhouse registrant files with the Commission. 1. Recent Regulatory, Legislative and gas emissions.12 For general questions about this release, Other Developments Some members of the international contact James R. Budge at (202) 551– community also have taken actions to In the last several years, a number of 3115 or Michael E. McTiernan, Office of address climate change issues on a state and local governments have Chief Counsel at (202) 551–3500, in the global basis, and those actions can have enacted legislation and regulations that Division of Corporation Finance, U.S. a material impact on companies that result in greater regulation of Securities and Exchange Commission, report with the Commission. One such greenhouse gas emissions.7 Climate 100 F Street, NE., Washington, DC effort in the 1990s resulted in the Kyoto 20549. 2 For example, in December 2009, Copenhagen, Protocol. Although the United States SUPPLEMENTARY INFORMATION: Denmark hosted the United Nations Climate Change has never ratified the Kyoto Protocol, Conference. many registrants have operations I. Background and Purpose of 3 See e.g., Current and Near-Term Greenhouse Gas outside of the United States that are Interpretive Guidance Reduction Initiatives, available at http:// subject to its standards.13 Another www.epa.gov/climatechange/policy/ A. Introduction neartermghgreduction.html, for a discussion of EPA important international regulatory initiatives as well as other federal initiatives. system is the European Union Climate change has become a topic of 4 See e.g., American Clean Energy and Security Emissions Trading System (EU ETS), intense public discussion in recent Act of 2009, H.R. 2454, 111th Cong., 1st Sess. which was launched as an international years. Scientists, government leaders, (2009), passed by the House of Representatives on June 26, 2009, and Clean Energy Jobs and American legislators, regulators, businesses, Power Act of 2009, S. 1733, 111th Cong., 1st a more detailed list of state action on climate including insurance companies, Session (2009), introduced in the Senate September change, see Pew Center on Global Climate Change, investors, analysts and the public at 30, 2009. States News (available at http:// www.pewclimate.org/states-regions/news?page=1). large have expressed heightened interest 5 See Appendix F to the Petition for Interpretive 8 See American Clean Energy and Security Act of in climate change. International accords, Guidance on Climate Risk Disclosure submitted September 18, 2007, File No. 4–547, for a sampling 2009. federal regulations, and state and local of comments by business leaders relating to climate 9 See Clean Energy Jobs and American Power Act laws and regulations in the U.S. address change regulation and disclosure, available at of 2009. 10 See Mandatory Reporting of Greenhouse Gases, concerns about the effects of greenhouse http://www.sec.gov/rules/petitions/2007/petn4- 547.pdf. Docket No. EPA–HQ–OAR–2008–0508, 74 FR gas emissions on our environment,1 and 6 Companies are assessing and reporting on their 56260 (October 30, 2009). international efforts to address the greenhouse gas emissions and other climate change 11 See EPA Press Release ‘‘EPA Finalizes the related matters using standards and guidelines Nation’s First Greenhouse Gas Reporting System/ 1 For a listing of state and local government laws promulgated by organizations with specific Monitoring to begin in 2010’’ dated September 22, and regulations in this field, see http:// expertise in the field. Three such organizations are 2009, available at http://yosemite.epa.gov/opa/ www.epa.gov/climatechange/wycd/ the Climate Registry, the Carbon Disclosure Project admpress.nsf/ stateandlocalgov/index.html. Two significant and the Global Reporting Initiative. We discuss this d0cf6618525a9efb85257359003fb69d/ international accords related to this topic are the in more detail below. 194e412153fcffea8525763900530d75 Kyoto Protocol, which was adopted in Kyoto, Japan, 7 For example, in California, the Global Warming !OpenDocument. 12 Endangerment and Cause or Contribute on December 11, 1997 and became effective on Solutions Act of 2006 and regulatory actions by the WReier-Aviles on DSKGBLS3C1PROD with RULES2 February 16, 2005, and the European Union California Air Resources Board have resulted in Findings for Greenhouse Gases Under Section Emissions Trading System (EU ETS), which was restrictions on greenhouse gas emissions. In 202(a) of the Clean Air Act, Docket ID No. EPA– launched as an international ‘‘cap and trade’’ system addition, state and regional programs, such as the HQ–OAR–2009–0171, 74 FR 66496 (December 15, of allowances for emitting carbon dioxide and other Regional Greenhouse Gas Initiative (including ten 2009). The Clean Air Act is found in 42 U.S.C. ch. greenhouse gases, built on the mechanisms set up Northeast and Mid-Atlantic states), the Western 85. under the Kyoto Protocol. See http://unfccc.int/ Climate Initiative (including seven Western states 13 One of the major features of the Kyoto Protocol kyoto_protocol/items/2830.php and http:// and four Canadian provinces) and the Midwestern is that it sets binding targets for industrialized ec.europa.eu/environment/climat/pdf/brochures/ Greenhouse Gas Reduction Accord (including six countries for reducing greenhouse gas emissions. ets_en.pdf for a more detailed discussion of the states and one Canadian province) have been These amount to an average of five per cent against Kyoto Protocol and EU ETS, respectively. developed to restrict greenhouse gas emissions. For 1990 levels over the five-year period 2008–2012. VerDate Nov<24>2008 12:57 Feb 05, 2010 Jkt 220001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\08FER2.SGM 08FER2 Federal Register / Vol. 75, No. 25 / Monday, February 8, 2010 / Rules and Regulations 6291 ‘‘cap and trade’’ system of allowances for noted above could have a significant Physical changes associated with emitting carbon dioxide and other effect on operating and financial climate change can decrease consumer greenhouse gases, based on mechanisms decisions, including those involving demand for products or services; for set up under the Kyoto Protocol.14 In capital expenditures to reduce example, warmer temperatures could addition, the United States government emissions and, for companies subject to reduce demand for residential and is participating in ongoing discussions ‘‘cap and trade’’ laws, expenses related commercial heating fuels, service and with other nations, including the recent to purchasing allowances where equipment. United Nations Climate Conference in reduction targets cannot be met. For some registrants, financial risks Copenhagen, which may lead to future Companies that may not be directly associated with climate change may international treaties focused on affected by such developments could arise from physical risks to entities remedying environmental damage nonetheless be indirectly affected by other than the registrant itself. For caused by greenhouse gas emissions. changing prices for goods or services example, climate change-related Those accords ultimately could have a provided by companies that are directly physical changes and hazards to coastal material impact on registrants that file affected and that seek to reflect some or property can pose credit risks for banks disclosure documents with the all of their changes in costs of goods in whose borrowers are located in at-risk Commission.15 the prices they charge. For example, if areas. Companies also may be The insurance industry is already a supplier’s costs increase, that could dependent on suppliers that are adjusting to these developments. A 2008 have a significant impact on its impacted by climate change, such as study listed climate change as the customers if those costs are passed companies that purchase agricultural number one risk facing the insurance through, resulting in higher prices for products from farms adversely affected industry.16 Reflecting this assessment, customers. New trading markets for by droughts or floods. the National Association of Insurance emission credits related to ‘‘cap and Commissioners recently promulgated a trade’’ programs that might be 3. Current Sources of Climate Change uniform standard for mandatory established under pending legislation, if Related Disclosures Regarding Public disclosure by insurance companies to adopted, could present new Companies state regulators of financial risks due to opportunities for investment. These There have been increasing calls for climate change and actions taken to markets also could allow companies climate-related disclosures by mitigate them.17 We understand that that have more allowances than they shareholders of public companies. This insurance companies are developing need, or that can earn offset credits is reflected in the several petitions for new actuarial models and designing through their businesses, to raise interpretive advice submitted by large new products to reshape coverage for revenue through selling these institutional investors and other green buildings, renewable energy, instruments into those markets. Some investor groups.20 The New York carbon risk management and directors’ companies might suffer financially if and officers’ liability, among other these or similar bills are enacted by the of climate change, such as changing rainfall data, actions.18 and hurricane patterns and intensities. See ‘‘Risk Congress while others could benefit by Mapping, Assessment, and Planning (Risk MAP): 2. Potential Impact of Climate Change taking advantage of new business Fiscal Year 2009 Flood Mapping Production Plan,’’ Related Matters on Public Companies opportunities. Version 1, May 2009, available at http:// In addition to legislative, regulatory, www.fema.gov/library/viewRecord.do?id=3680. For some companies, the regulatory, business and market impacts related to 20 See Petition for Interpretive Guidance on legislative and other developments Climate Risk Disclosures, dated September 19, climate change, there may be significant 2007, File No. 4-547, available at http:// physical effects of climate change that www.sec.gov/rules/petitions/2007/petn4-547.pdf; 14 See n. 1, supra. 15 The have the potential to have a material supplemental petition dated June 12, 2008, terms of the Kyoto Protocol are set to available at http://www.sec.gov/rules/petitions/ expire in 2012. Ongoing international discussions, effect on a registrant’s business and 2008/petn4-547-supp.pdf; second supplemental including the United Nations Climate Change operations. These effects can impact a petition dated November 23, 2009, available at Conference held in Copenhagen, Denmark in mid- registrant’s personnel, physical assets, http://www.sec.gov/rules/petitions/2009/petn4-547- December 2009, are intended to further develop a supply chain and distribution chain. supp.pdf. For other petitions on point, see also framework to carry on international greenhouse gas Petition for Interpretive Guidance on Business Risk emission reduction standards beyond 2012. They can include the impact of changes of Global Warming Regulation, submitted on behalf 16 Strategic business risk 2008—Insurance, a in weather patterns, such as increases in of the Free Enterprise Action Fund on October 22, report prepared by Ernst & Young and Oxford storm intensity, sea-level rise, melting of 2007, File Number 4–549, available at http:// Analytica. See Ernst & Young press release dated permafrost and temperature extremes on www.sec.gov/rules/petitions/2007/petn4-549.pdf. March 12, 2008, available at http://www.ey.com/GL/ facilities or operations. Changes in the One petition urges the Commission to issue en/Newsroom/News-releases/Media_Press-Release_ guidance warning companies not to include Strategic-Risk-to-Insurance-Industry. availability or quality of water, or other information on climate change that may be false 17 On March 17, 2009, the NAIC adopted a natural resources on which the and misleading; see Petition for Interpretive mandatory requirement that insurance companies registrant’s business depends, or Guidance on Public Statements Concerning Global disclose to regulators the financial risks they face damage to facilities or decreased Warming and Other Environmental Issues, from climate change, as well as actions the submitted on behalf of the Free Enterprise Action companies are taking to respond to those risks. All efficiency of equipment can have Fund on July 21, 2008, File No. 4-563, available at insurance companies with annual premiums of material effects on companies.19 http://www.sec.gov/rules/petitions/2008/petn4- $500 million or more will be required to complete 563.pdf. While not a formal petition, Ceres has an Insurer Climate Risk Disclosure Survey every 19 For one view of the anticipated business- provided the Commission with the results of a year, with an initial reporting deadline of May 1, related physical risks resulting from climate change, study it commissioned in conjunction with the 2010. The surveys must be submitted in the state see Industry Update: Global Warming & the Environmental Defense Fund regarding climate risk WReier-Aviles on DSKGBLS3C1PROD with RULES2 where the insurance company is domesticated. See Insurance Industry—Will Insurers Be Burned by the disclosure in SEC filings and suggests that the Insurance Regulators Adopt Climate Change Risk Climate Change Phenomenon?, available at http:// Commission issue guidance on this topic. See Disclosure, available at www.naic.org/Releases/ www.aon.com/about-aon/intellectual-capital/ Climate Risk Disclosure in SEC Filings: An Analysis 2009_docs/climate_change_risk_ attachments/risk-services/will_insurers_be_burned_ of 10–K Reporting by Oil and Gas, Insurance, Coal, disclosure_adopted.htm. by_the_climate_change_phenomenon.pdf. Another and Transportation and Electric Power Companies, 18 See Klein, Christopher, Climate Change, Part example of how physical risks attributable to June 2009, available at http://www.ceres.org/ IV: (Re)insurance Industry response, May 28, 2009, climate change are changing business and risk Document.Doc?id=473. available at www.gccapitalideas.com/2009/05/28/ assessments is the Federal Emergency Management The Subcommittee on Securities, Insurance, and climate-change-part-iv-reinsurance-industry- Agency’s plan to update its risk mapping, Investment of the Senate Committee on Banking, response. assessment and planning to better reflect the effects Continued VerDate Nov<24>2008 12:57 Feb 05, 2010 Jkt 220001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 E:\FR\FM\08FER2.SGM 08FER2 6292 Federal Register / Vol. 75, No. 25 / Monday, February 8, 2010 / Rules and Regulations Attorney General’s Office recently has disclosure that the EPA began requiring registrants should be aware that some of entered into settlement agreements with at the start of 2010, The Climate Registry the information they may be reporting three energy companies under its provides standards for and access to pursuant to these mechanisms also may investigation regarding their disclosures climate-related information. The be required to be disclosed in filings about their greenhouse gas emissions Registry is a non-profit collaboration made with the Commission pursuant to and potential liabilities to the among North American states, existing disclosure requirements. companies resulting from climate provinces, territories and native II. Historical Background of SEC change and related regulation. The sovereign nations that sets standards to Environmental Disclosure companies agreed in the settlement calculate, verify and publicly report agreements to enhance their disclosures greenhouse gas emissions into a single The Commission first addressed relating to climate change and public registry. The Registry supports disclosure of material environmental greenhouse gas emissions in their both voluntary and state-mandated issues in the early 1970s. The annual reports filed with the reporting programs and provides data Commission issued an interpretive Commission.21 regarding greenhouse gas emissions.24 release stating that registrants should Although some information relating to The Carbon Disclosure Project collects consider disclosing in their SEC filings greenhouse gas emissions and climate and distributes climate change the financial impact of compliance with change is disclosed in SEC filings,22 information, both quantitative environmental laws, based on the much more information is publicly (emissions amounts) and qualitative materiality of the information.28 available outside of public company (risks and opportunities), on behalf of Throughout the 1970s, the Commission disclosure documents filed with the 475 institutional investors.25 Over 2500 continued to explore the need for SEC as a result of voluntary disclosure companies globally reported to the specific rules mandating disclosure of initiatives or other regulatory Carbon Disclosure Project in 2009; over information relating to litigation and requirements. For example, in addition 500 of those companies were U.S. other business costs arising out of to the disclosure requirements companies. Sixty-eight percent of the compliance with federal, state and local mandated in several states 23 and the companies that responded to the Carbon laws that regulate the discharge of Disclosure Project’s investor requests for materials into the environment or Housing, and Urban Development held a hearing on information made their reports available otherwise relate to the protection of the corporate disclosure of climate-related issues on to the public.26 environment. These topics were the October 31, 2007; representatives of signatories to subject of several rulemaking efforts, the September 19, 2007 petition, among others, The Global Reporting Initiative has testified in that hearing. See ‘‘Climate Disclosure: developed a widely used sustainability extensive litigation, and public Measuring Financial Risks and Opportunities,’’ reporting framework.27 That framework hearings, all of which resulted in the available at http://banking.senate.gov/public/ is developed by GRI participants drawn rules that now specifically address index.cfm?FuseAction=Hearings.Hearing& disclosure of environmental issues.29 Hearing_ID=ed7a4968-1019-411d-9a22- from business, labor and professional c193c6b689ea. Following the hearing, Senators institutions worldwide. The GRI The Commission adopted these rules, Christopher Dodd and Jack Reed wrote to Chairman framework sets out principles and which we discuss below, in final and Christopher Cox urging the Commission to issue indicators that organizations can use to current form in 1982, after a decade of guidance regarding climate disclosure. See http:// dodd.senate.gov/multimedia/2007/ measure and report their economic, evaluation and experience with the 120607_CoxLetter.pdf. environmental, and social performance, subject matter.30 21 For information about the settlement including issues involving climate Earlier, beginning in 1968, we began agreements, see the New York Attorney General’s change. Sustainability reports based on to develop and fine-tune our Office press releases relating to: Xcel Energy, the GRI framework are used to requirements for management to discuss available at http://www.oag.state.ny.us/ media_center/2008/aug/aug27a_08.html; Dynegy benchmark performance with respect to and analyze their company’s financial Inc., available at http://www.oag.state.ny.us/ laws, norms, codes, performance condition and results of operations in media_center/2008/oct/oct23a_08.html; and AES standards and voluntary initiatives, disclosure documents filed with the Corporation, available at http:// demonstrate organizational commitment Commission.31 During the 1970s and www.oag.state.ny.us/media_center/2009/nov/ nov19a_09.html. to sustainable development, and 1980s, materiality standards for 22 For example, in the electric utility industry, we compare organizational performance disclosure under the federal securities have been informed by the Edison Electric Institute over time. laws also were more fully articulated.32 that 95% of the member companies it recently These and other reporting Those standards provide that surveyed reported that they included at least some mechanisms can provide important disclosure related to greenhouse gas emissions in their SEC filings, with 34% discussing quantities of information to investors outside of 28 Release No. 33–5170 (July 19, 1971) [36 FR greenhouse gases emitted and 23% discussing costs disclosure documents filed with the 13989]. 29 See Interpretive Release No. 33–6130 of climate-related compliance. Registrants include Commission. Although much of this this type of disclosure in the risk factors, business (September 27, 1979) [44 FR 56924] (the ‘‘1979 description, legal proceedings, executive reporting is provided voluntarily, Release’’), which includes a brief summary of the compensation, MD&A and financial statements legal and administrative actions taken with regard sections of their annual reports. The Edison Electric required reporting of greenhouse gas emissions. For to environmental disclosure during the 1970s. More Institute is an association of U.S. shareholder- a discussion of specific state requirements, see information relating to the Commission’s efforts in owned electric companies. Their members serve 95 http://epa.gov/climatechange/wycd/ this area is chronicled in Release No. 33–6315 (May percent of the customers in the shareholder-owned stateandlocalgov/state_reporting.html. 4, 1981) [46 FR 25638]. 24 The Climate Registry’s Web site is at 30 Release No. 33–6383 (March 3, 1982) [47 FR segment of the industry, and represent approximately 70 percent of the U.S. electric power www.theclimateregistry.org. Reports are publicly 11380]. industry. The EEI also has more than 80 available through their Web site at no charge. See 31 See Release No. 33–6835 (May 18, 1989) [54 FR WReier-Aviles on DSKGBLS3C1PROD with RULES2 international electric companies as affiliate http://www.theclimateregistry.org/resources/ 22427] (the ‘‘1989 Release’’) and Release No. 33– members, and nearly 200 industry suppliers and climate-registry-information-system-cris/public- 8350 (December 19, 2003) [68 FR 75055] (the ‘‘2003 related organizations as associate members. The EEI reports/. Release’’) for detailed histories of Commission described the results of its survey in a presentation 25 The Carbon Disclosure Project’s Web site is at releases that outline the background of, and to staff members of the Division of Corporation http://www.cdproject.net. interpret, our MD&A rules. Finance. 26 These figures were provided to the Commission 32 See TSC Industries, Inc. v. Northway, Inc., 426 23 State requirements include CO emissions 2 staff by representatives of the Carbon Disclosure U.S. 438 (1976) (adopting a standard for materiality disclosure requirements for electricity providers, Project. in connection with proxy statement disclosures greenhouse gas registries for reporting of entity 27 The GRI’s Web site is at http:// supported by the Commission, see id. at n. 10) and emissions levels and emissions changes, and www.globalreporting.org. Basic Inc. v. Levinson, 485 U.S. 224 (1988). VerDate Nov<24>2008 12:57 Feb 05, 2010 Jkt 220001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\08FER2.SGM 08FER2 Federal Register / Vol. 75, No. 25 / Monday, February 8, 2010 / Rules and Regulations 6293 information is material if there is a made, not misleading.’’ 39 In this section, with environmental laws (federal, state substantial likelihood that a reasonable we briefly describe the most pertinent and local).’’ 42 investor would consider it important in non-financial statement disclosure rules B. Legal Proceedings deciding how to vote or make an that may require disclosure related to investment decision, or, put another climate change; in the following section, Item 103 of Regulation S–K 43 requires way, if the information would alter the we discuss their application to a registrant to briefly describe any total mix of available information.33 In disclosure of certain specific climate material pending legal proceeding to the articulation of the materiality change related matters. which it or any of its subsidiaries is a standards, it was recognized that doubts party. A registrant also must describe A. Description of Business material pending legal actions in which as to materiality of information would be commonplace, but that, particularly its property is the subject of the Item 101 of Regulation S–K requires a in view of the prophylactic purpose of litigation.44 If a registrant is aware of registrant to describe its business and the securities laws and the fact that similar actions contemplated by that of its subsidiaries. The Item lists a disclosure is within management’s governmental authorities, Item 103 variety of topics that a registrant must control, ‘‘it is appropriate that these requires disclosure of those proceedings address in its disclosure documents, as well. A registrant need not disclose doubts be resolved in favor of those the including disclosure about its form of statute is designed to protect.’’ 34 With ordinary routine litigation incidental to organization, principal products and its business or other types of these developments, registrants had services, major customers, and clearer guidance about what they should proceedings when the amount in competitive conditions. The disclosure controversy is below thresholds disclose in their filings. requirements cover the registrant and, in More recently, the Commission designated in this Item. many cases, each reportable segment Instruction 5 to Item 103 provides reviewed its full disclosure program about which financial information is some specific requirements that apply to relating to environmental disclosures in presented in the financial statements. If disclosure of certain environmental SEC filings in connection with a the information is material to individual litigation.45 Instruction 5 states: Government Accountability Office segments of the business, a registrant review.35 The Commission also has had Notwithstanding the foregoing, an must identify the affected segments. administrative or judicial proceeding the opportunity to consider the thoughtful suggestions that many Item 101 expressly requires disclosure (including, for purposes of A and B of this regarding certain costs of complying Instruction, proceedings which present in organizations have provided us recently large degree the same issues) arising under about how the Commission could direct with environmental laws.40 In particular, Item 101(c)(1)(xii) states: any Federal, State or local provisions that registrants to enhance their disclosure have been enacted or adopted regulating the about climate change related matters.36 Appropriate disclosure also shall be made discharge of materials into the environment as to the material effects that compliance or primary for the purpose of protecting the III. Overview of Rules Requiring with Federal, State and local provisions environment shall not be deemed ‘‘ordinary Disclosure of Climate Change Issues which have been enacted or adopted routine litigation incidental to the business’’ regulating the discharge of materials into the and shall be described if: When a registrant is required to file a environment, or otherwise relating to the (A) Such proceeding is material to the disclosure document with the business or financial condition of the protection of the environment, may have Commission, the requisite form will upon the capital expenditures, earnings and registrant; largely refer to the disclosure competitive position of the registrant and its requirements of Regulation S–K 37 and subsidiaries. The registrant shall disclose any 42 17 CFR 229.101(h)(4)(xi). Regulation S–X.38 Securities Act Rule material estimated capital expenditures for 43 17 CFR 229.103. 408 and Exchange Act Rule 12b–20 environmental control facilities for the 44 Id. 45 Instruction 5 in its current form was the require a registrant to disclose, in remainder of its current fiscal year and its succeeding fiscal year and for such further product of the Commission’s experience with addition to the information expressly environmental litigation disclosure. In 1973, we required by Commission regulation, periods as the registrant may deem added provisions to the legal proceedings ‘‘such further material information, if material.41 requirements of various disclosure forms singling any, as may be necessary to make the A registrant meeting the definition of out legal actions involving environmental matters. See Release No. 33–5386 (Apr. 20, 1973) [38 FR required statements, in light of the ‘‘smaller reporting company’’ may satisfy 12100]. The new rules required disclosure of any circumstances under which they are its disclosure obligation by providing pending legal proceeding arising under information called for by Item 101(h). environmental laws if a governmental entity was 33 Basic at 231, quoting TSC Industries at 449. Item 101(h)(4)(xi) requires disclosure of involved in the proceeding, and any other legal proceeding arising under environmental laws 34 TSC Industries at 448. the ‘‘costs and effects of compliance unless it was not material, or if in a civil suit for 35 ‘‘Environmental Disclosure: SEC Should damages, unless it involved less than 10% of the Explore Ways to Improve Tracking and 39 17 current assets of the registrant on a consolidated Transparency of Information,’’ United States CFR 230.408 and 17 CFR 240.12b–20. 40 The Commission first addressed disclosure of basis. The Commission provided additional Government Accountability Office Report to interpretive guidance regarding environmental Congressional Requesters, GAO–04–808 (July 2004). material costs and other effects on business resulting from compliance with existing litigation in the 1979 Release. When the Eleven years before, at the request of the Chairman Commission, in connection with its development of of the House Committee on Energy and Commerce, environmental law in its first environmental disclosure interpretive release in 1971. See Release the integrated disclosure system, moved these rules the GAO had prepared a report relating to out of various forms and into Item 103 of Regulation environmental liability disclosure involving 33–5170 (July 19, 1971) [36 FR 13989]. The Commission codified that interpretive position in S–K, the Commission modified the requirements property and casualty insurers and Superfund related to actions involving governmental WReier-Aviles on DSKGBLS3C1PROD with RULES2 cleanup costs. See ‘‘Environmental Liability: the disclosure forms two years later. See Release 33–5386 (April 20, 1973) [38 FR 12100]. The authorities to allow registrants to omit disclosure of Property and Casualty Insurer Disclosure of a proceeding if they reasonably believed the action Environmental Liabilities,’’ GAO/RCED–93–108 Commission provided additional interpretive guidance in the 1979 Release. With some would result in a monetary sanction of less than (June 1993), available at http://74.125.93.132/ $100,000. See Release No. 33–6383 (Mar. 3, 1982) search?q=cache:tWeHLDHoIcUJ:www.gao.gov/cgi- adjustments to reflect experience with the subject matter, the requirements were moved to Item 101 [47 FR 11380]. At the time, the Commission noted bin/getrpt%3FGAO/RCED-93-108+GAO/RCED-93- that the reason for the revision was to address the 108&cd=1&hl=en&ct=clnk&gl=us. in 1982, and they have not changed since that time. See Release No. 33–6383 (March 3, 1982) [47 FR problem that disclosure documents were being 36 See n. 20, supra. 11380]. filled with descriptions of minor infractions that 37 17 CFR Part 229. distracted from the other material disclosures 38 17 CFR Part 210. 41 17 CFR 229.101(c)(1)(xii). included in the document. VerDate Nov<24>2008 12:57 Feb 05, 2010 Jkt 220001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 E:\FR\FM\08FER2.SGM 08FER2 6294 Federal Register / Vol. 75, No. 25 / Monday, February 8, 2010 / Rules and Regulations (B) Such proceeding involves primarily a financial in nature, but bears on • Identification, based on this claim for damages, or involves potential registrants’ financial condition and information, of known trends and monetary sanctions, capital expenditures, operating performance. uncertainties; and deferred charges or charges to income and The Commission has issued several • Assessment of whether these trends the amount involved, exclusive of interest and costs, exceeds 10 percent of the current releases providing guidance on MD&A and uncertainties will have, or are assets of the registrant and its subsidiaries on disclosure, including on the general reasonably likely to have, a material a consolidated basis; or requirements of the item and its impact on the registrant’s liquidity, (C) A governmental authority is a party to application to specific disclosure capital resources or results of such proceeding and such proceeding matters.51 Over the years, the flexible operations.56 involves potential monetary sanctions, unless nature of this requirement has resulted The Commission has not quantified, the registrant reasonably believes that such in disclosures that keep pace with the in Item 303 or otherwise, a specific proceeding will result in no monetary evolving nature of business trends future time period that must be sanctions, or in monetary sanctions, without the need to continuously considered in assessing the impact of a exclusive of interest and costs, of less than $100,000; provided, however, that such amend the text of the rule. Nevertheless, known trend, event or uncertainty that proceedings which are similar in nature may we and our staff continue to have to is reasonably likely to occur. As with be grouped and described generically. remind registrants, through comments any other judgment required by Item issued in the filing review process, 303, the necessary time period will C. Risk Factors public statements by staff and depend on a registrant’s particular Item 503(c) of Regulation S–K 46 Commissioners and otherwise, that the circumstances and the particular trend, requires a registrant to provide where disclosure provided in response to this event or uncertainty under appropriate, under the heading ‘‘Risk requirement should be clear and consideration. For example, a registrant Factors,’’ a discussion of the most communicate to shareholders considering its disclosure obligation significant factors that make an management’s view of the company’s with respect to its liquidity needs would investment in the registrant speculative financial condition and prospects.52 have to consider the duration of its or risky. Item 503(c) specifies that risk Item 303 includes a broad range of known capital requirements and the factor disclosure should clearly state the disclosure items that address the periods over which cash flows are risk and specify how the particular risk registrant’s liquidity, capital resources managed in determining the time period affects the particular registrant; and results of operations. Some of these of its disclosure regarding future capital registrants should not present risks that provisions, such as the requirement to sources.57 In addition, the time horizon could apply to any issuer or any provide tabular disclosure of contractual of a known trend, event or uncertainty offering.47 obligations,53 clearly specify the may be relevant to a registrant’s disclosure required for compliance. But assessment of the materiality of the D. Management’s Discussion and others instead identify principles and Analysis matter and whether or not the impact is require management to apply the reasonably likely. As with respect to Item 303 of Regulation S–K 48 requires principles in the context of the other subjects of disclosure, materiality disclosure known as the Management’s registrant’s particular circumstances. ‘‘with respect to contingent or Discussion and Analysis of Financial For example, registrants must identify speculative information or events * * * Condition and Results of Operations, or and disclose known trends, events, ‘will depend at any given time upon a MD&A. The MD&A requirements are demands, commitments and balancing of both the indicated intended to satisfy three principal uncertainties that are reasonably probability that the event will occur and objectives: likely 54 to have a material effect on the anticipated magnitude of the event • To provide a narrative explanation financial condition or operating in light of the totality of the company of a registrant’s financial statements that performance. This disclosure should activity.’ ’’ 58 enables investors to see the registrant highlight issues that are reasonably The nature of certain MD&A through the eyes of management; likely to cause reported financial disclosure requirements places • To enhance the overall financial information not to be necessarily particular importance on a registrant’s disclosure and provide the context indicative of future operating materiality determinations. The within which financial information performance or of future financial Commission has recognized that the should be analyzed; and condition.55 Disclosure decisions effectiveness of MD&A decreases with • To provide information about the concerning trends, demands, the accumulation of unnecessary detail quality of, and potential variability of, a commitments, events, and uncertainties or duplicative or uninformative registrant’s earnings and cash flow, so generally should involve the: • Consideration of financial, disclosure that obscures material that investors can ascertain the operational and other information information.59 Registrants drafting likelihood that past performance is known to the registrant; MD&A disclosure should focus on indicative of future performance.49 MD&A disclosure should provide material information and eliminate material historical and prospective 51 See, e.g., the 2003 Release; Release No. 33–8182 immaterial information that does not textual disclosure enabling investors to (Jan. 28, 2003) [68 FR 5982]; Release No. 33–8056 promote understanding of registrants’ (Jan. 22, 2002) [67 FR 3746]; Release. No. 33–7558 financial condition, liquidity and assess the financial condition and (Jul. 29, 1998) [63 FR 41394]; and 1989 Release. results of operations of the registrant, 52 See, e.g., speech by Commissioner Cynthia A. capital resources, changes in financial with particular emphasis on the Glassman to the Corporate Counsel Institute (Mar. condition and results of operations.60 WReier-Aviles on DSKGBLS3C1PROD with RULES2 registrant’s prospects for the future.50 9, 2006) available at www.sec.gov/news/speech/ While these materiality determinations spch030906cag.htm; and speech by Commissioner may limit what is actually disclosed, Some of this information is itself non- Elisse B. Walter to the Corporate Counsel Institute (Oct. 2, 2009) available at www.sec.gov/news/ 56 Id. 46 17 CFR 229.503(c). speech/2009/spch100209ebw.htm. 53 17 CFR 229.303(a)(5). 57 Id. at n.43. 47 Id. 54 ‘‘Reasonably likely’’ is a lower disclosure 58 Basic at 238, quoting Texas Gulf Sulfur Co., 401 48 17 CFR 229.303. standard than ‘‘more likely than not.’’ Release No. F. 2d 833 (2d Cir. 1968) at 849. 49 2003 Release. 59 2003 Release. 33–8056 (Jan. 22, 2002) [67 FR 3746]. 50 1989 Release. 55 2003 Release. 60 Id. VerDate Nov<24>2008 12:57 Feb 05, 2010 Jkt 220001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\08FER2.SGM 08FER2 Federal Register / Vol. 75, No. 25 / Monday, February 8, 2010 / Rules and Regulations 6295 they should not limit the information known trend, demand, commitment, financial condition and results of that management considers in making event or uncertainty, on the assumption operations for the historical periods its determinations. Improvements in that it will come to fruition. Disclosure covered by the financial statements, and technology and communications in the is then required unless management management’s assessment of factors and last two decades have significantly determines that a material effect on the trends that are anticipated to have a increased the amount of financial and registrant’s financial condition or results material effect on the company’s non-financial information that of operations is not reasonably likely to financial condition and results of management has and should evaluate, occur.’’ 63 operations in future periods; and as well as the speed with which Identifying and assessing known • Item 8.A.7, which requires a foreign management receives and is able to use material trends and uncertainties private issuer to provide information on information. While this should not generally will require registrants to any legal or arbitration proceedings, necessarily result in increased MD&A consider a substantial amount of including governmental proceedings, disclosure, it does provide more financial and non-financial information which may have, or have had in the information that may need to be available to them, including information recent past, significant effects on the considered in drafting MD&A that itself may not be required to be company’s financial position or disclosure. In identifying, discussing disclosed.64 profitability. and analyzing known material trends Registrants should address, when Forms F–1 67 and F–3,68 Securities and uncertainties, registrants are material, the difficulties involved in Act registration statement forms for expected to consider all relevant assessing the effect of the amount and foreign private issuers, also require a information even if that information is timing of uncertain events, and provide foreign private issuer to provide the not required to be disclosed,61 and, as an indication of the time periods in information, including risk factor with any other disclosure judgments, which resolution of the uncertainties is disclosure, required under Regulation they should consider whether they have anticipated.65 In accordance with Item S–K Item 503. sufficient disclosure controls and 303(a), registrants must also disclose IV. Climate Change Related Disclosures procedures to process this any other information a registrant In the previous section we information.62 believes is necessary to an summarized a number of Commission Analyzing the materiality of known understanding of its financial condition, rules and regulations that may be the trends, events or uncertainties may be changes in financial condition and source of a disclosure obligation for particularly challenging for registrants results of operations. registrants under the federal securities preparing MD&A disclosure. As the E. Foreign Private Issuers laws. Depending on the facts and Commission explained in the 1989 circumstances of a particular registrant, Release, when a trend, demand, The Securities Act and Exchange Act each of the items discussed above may commitment, event or uncertainty is disclosure obligations of foreign private require disclosure regarding the impact known, ‘‘management must make two issuers are governed principally by of climate change. The following topics assessments: Form 20–F’s 66 disclosure requirements are some of the ways climate change • Is the known trend, demand, and not those under Regulation S–K. may trigger disclosure required by these commitment, event or uncertainty likely However, most of the disclosure rules and regulations.69 These topics are to come to fruition? If management requirements applicable to domestic examples of climate change related determines that it is not reasonably issuers under Regulation S–K that are issues that a registrant may need to likely to occur, no disclosure is most likely to require disclosure related consider. required. to climate change have parallels under • If management cannot make that Form 20–F, although some of the A. Impact of Legislation and Regulation determination, it must evaluate requirements are not as prescriptive as As discussed above, there have been objectively the consequences of the the provisions applicable to domestic significant developments in federal and issuers. For example, the following state legislation and regulation 61 Id. provisions of Form 20–F may require a regarding climate change. These 62 Pursuant to Exchange Act Rules 13a–15 and foreign private issuer to provide developments may trigger disclosure 15d–15, a company’s principal executive officer and principal financial officer must make disclosure concerning climate change obligations under Commission rules and certifications regarding the maintenance and matters that are material to its business: regulations, such as pursuant to Items effectiveness of disclosure controls and procedures. • Item 3.D, which requires a foreign 101, 103, 503(c) and 303 of Regulation These rules define ‘‘disclosure controls and private issuer to disclose its material procedures’’ as those controls and procedures S–K. With respect to existing federal, designed to ensure that information required to be risks; state and local provisions which relate disclosed by the company in the reports that it files • Item 4.B.8, which requires a foreign to greenhouse gas emissions, Item 101 or submits under the Exchange Act is (1) ‘‘recorded, private issuer to describe the material requires disclosure of any material processed, summarized and reported, within the effects of government regulation on its estimated capital expenditures for time periods specified in the Commission’s rules business and to identify the particular and forms,’’ and (2) ‘‘accumulated and environmental control facilities for the communicated to the company’s management regulatory body; remainder of a registrant’s current fiscal * * * as appropriate to allow timely decisions • Item 4.D, which requires a foreign year and its succeeding fiscal year and regarding required disclosure.’’ As we have stated private issuer to describe any before, a company’s disclosure controls and environmental issues that may affect the 67 17 CFR 239.31. procedures should not be limited to disclosure WReier-Aviles on DSKGBLS3C1PROD with RULES2 specifically required, but should also ensure timely company’s utilization of its assets; 68 17 CFR 239.33. collection and evaluation of ‘‘information • Item 5, which requires 69 In addition to the Regulation S–K items potentially subject to [required] disclosure,’’ management’s explanation of factors discussed in this section, registrants must also ‘‘information that is relevant to an assessment of the that have affected the company’s consider any financial statement implications of need to disclose developments and risks that climate change issues in accordance with pertain to the [company’s] businesses,’’ and 63 1989 applicable accounting standards, including ‘‘information that must be evaluated in the context Release. Financial Accounting Standards Board (‘‘FASB’’) 64 2003 Release. of the disclosure requirement of Exchange Act Rule Accounting Standards Codification Topic 450, 65 Id. 12b–20.’’ Release No. 33–8124 (Aug. 28, 2002) [67 Contingencies, and FASB Accounting Standards FR 57276]. 66 17 CFR 249.220f. Codification Topic 275, Risks and Uncertainties. VerDate Nov<24>2008 12:57 Feb 05, 2010 Jkt 220001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 E:\FR\FM\08FER2.SGM 08FER2 6296 Federal Register / Vol. 75, No. 25 / Monday, February 8, 2010 / Rules and Regulations for such further periods as the registrant A registrant should not limit its These developments may create demand may deem material. Depending on a evaluation of disclosure of a proposed for new products or services, or registrant’s particular circumstances, law only to negative consequences. decrease demand for existing products Item 503(c) may require risk factor Changes in the law or in the business or services. For example, possible disclosure regarding existing or pending practices of some registrants in response indirect consequences or opportunities legislation or regulation that relates to to the law may provide new may include: climate change. Registrants should opportunities for registrants. For • Decreased demand for goods that consider specific risks they face as a example, if a ‘‘cap and trade’’ type produce significant greenhouse gas result of climate change legislation or system is put in place, registrants may emissions; regulation and avoid generic risk factor be able to profit from the sale of • Increased demand for goods that disclosure that could apply to any allowances if their emissions levels end result in lower emissions than company. For example, registrants that up being below their emissions competing products; 74 are particularly sensitive to greenhouse allotment. Likewise, those who are not • Increased competition to develop gas legislation or regulation, such as covered by statutory emissions caps innovative new products; registrants in the energy sector, may face may be able to profit by selling offset • Increased demand for generation significantly different risks from climate credits they may qualify for under new and transmission of energy from change legislation or regulation legislation. alternative energy sources; and compared to registrants that currently Examples of possible consequences of • Decreased demand for services are reliant on products that emit pending legislation and regulation related to carbon based energy sources, greenhouse gases, such as registrants in related to climate change include: such as drilling services or equipment the transportation sector. • Costs to purchase, or profits from maintenance services. Item 303 requires registrants to assess sales of, allowances or credits under a These business trends or risks may be whether any enacted climate change ‘‘cap and trade’’ system; required to be disclosed as risk factors legislation or regulation is reasonably • Costs required to improve facilities or in MD&A. In some cases, these likely to have a material effect on the and equipment to reduce emissions in developments could have a significant registrant’s financial condition or results order to comply with regulatory limits enough impact on a registrant’s business of operation.70 In the case of a known or to mitigate the financial that disclosure may be required in its uncertainty, such as pending legislation consequences of a ‘‘cap and trade’’ business description under Item 101. or regulation, the analysis of whether regime; and • Changes to profit or loss arising For example, a registrant that plans to disclosure is required in MD&A consists reposition itself to take advantage of of two steps. First, management must from increased or decreased demand for goods and services produced by the potential opportunities, such as through evaluate whether the pending material acquisitions of plants or legislation or regulation is reasonably registrant arising directly from legislation or regulation, and indirectly equipment, may be required by Item likely to be enacted. Unless 101(a)(1) to disclose this shift in plan of management determines that it is not from changes in costs of goods sold. We reiterate that climate change operation. Registrants should consider reasonably likely to be enacted, it must their own particular facts and proceed on the assumption that the regulation is a rapidly developing area. Registrants need to regularly assess their circumstances in evaluating the legislation or regulation will be enacted. materiality of these opportunities and Second, management must determine potential disclosure obligations given new developments. obligations. whether the legislation or regulation, if Another example of a potential enacted, is reasonably likely to have a B. International Accord indirect risk from climate change that material effect on the registrant, its Registrants also should consider, and would need to be considered for risk financial condition or results of disclose when material, the impact on factor disclosure is the impact on a operations. Unless management their business of treaties or international registrant’s reputation. Depending on determines that a material effect is not accords relating to climate change. We the nature of a registrant’s business and reasonably likely,71 MD&A disclosure is already have noted the Kyoto Protocol, its sensitivity to public opinion, a required.72 In addition to disclosing the the EU ETS and other international registrant may have to consider whether potential effect of pending legislation or activities in connection with climate the public’s perception of any publicly regulation, the registrant would also change remediation. The potential available data relating to its greenhouse have to consider disclosure, if material, sources of disclosure obligations related gas emissions could expose it to of the difficulties involved in assessing to international accords are the same as potential adverse consequences to its the timing and effect of the pending those discussed above for U.S. climate business operations or financial legislation or regulation.73 change regulation. Registrants whose condition resulting from reputational businesses are reasonably likely to be damage. 70 See 1989 Release. affected by such agreements should 71 Management should ensure that it has D. Physical Impacts of Climate Change sufficient information regarding the registrant’s monitor the progress of any potential greenhouse gas emissions and other operational agreements and consider the possible Significant physical effects of climate matters to evaluate the likelihood of a material impact in satisfying their disclosure change, such as effects on the severity effect arising from the subject legislation or obligations based on the MD&A and of weather (for example, floods or regulation. See n. 62, supra. hurricanes), sea levels, the arability of materiality principles previously WReier-Aviles on DSKGBLS3C1PROD with RULES2 72 In 2003 we issued additional guidance with respect to how registrants could improve MD&A outlined. farmland, and water availability and disclosure, including ideas about how to focus on material issues and how to present information in C. Indirect Consequences of Regulation 74 For example, recent legislation will ultimately a more effective manner to be of more value to or Business Trends phase out most traditional incandescent light bulbs. investors. See 2003 Release. Legal, technological, political and This has resulted in the acceleration of the 73 See 2003 Release for a discussion of how development and marketing of compact fluorescent companies should address, where material, the scientific developments regarding light bulbs. See Energy Independence and Security difficulties involved in assessing the effect of the climate change may create new Act of 2007, Public Law 110–140, 121 Stat. 1492 amount and timing of uncertain events. opportunities or risks for registrants. (2007). VerDate Nov<24>2008 12:57 Feb 05, 2010 Jkt 220001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 E:\FR\FM\08FER2.SGM 08FER2 Federal Register / Vol. 75, No. 25 / Monday, February 8, 2010 / Rules and Regulations 6297 quality,75 have the potential to affect a disclosing material risks of, or The Codification is a separate registrant’s operations and results. For consequences from, such events in their publication of the Commission. It will example, severe weather can cause publicly filed disclosure documents. not be published in the Federal catastrophic harm to physical plants Register/Code of Federal Regulations. V. Conclusion and facilities and can disrupt This interpretive release is intended List of Subjects manufacturing and distribution processes. A 2007 Government to remind companies of their obligations 17 CFR Part 211 Accountability Office report states that under existing federal securities laws and regulations to consider climate Reporting and recordkeeping 88% of all property losses paid by change and its consequences as they requirements, Securities. insurers between 1980 and 2005 were weather-related.76 As noted in the GAO prepare disclosure documents to be 17 CFR Parts 231 and 241 report, severe weather can have a filed with us and provided to investors. We will monitor the impact of this Securities. devastating effect on the financial condition of affected businesses. The interpretive release on company filings Amendments to the Code of Federal GAO report cites a number of sources to as part of our ongoing disclosure review Regulations support the view that severe weather program. In addition, the Commission’s scenarios will increase as a result of Investor Advisory Committee 78 is ■ For the reasons set forth above, the climate change brought on by an considering climate change disclosure Commission is amending Title 17, overabundance of greenhouse gases. issues as part of its overall mandate to Chapter II of the Code of Federal Possible consequences of severe provide advice and recommendations to Regulations as set forth below: weather could include: the Commission, and the Commission is • For registrants with operations planning to hold a public roundtable on PART 211—INTERPRETATIONS concentrated on coastlines, property disclosure regarding climate change RELATING TO FINANCIAL REPORTING damage and disruptions to operations, matters in the spring of 2010. We will MATTERS including manufacturing operations or consider our experience with the ■ 1. Part 211, Subpart A, is amended by the transport of manufactured products; disclosure review program together with adding Release No. FR–82 and the • Indirect financial and operational any advice or recommendations made to release date of February 2, 2010 to the impacts from disruptions to the us by the Investor Advisory Committee list of interpretive releases. operations of major customers or and information gained through the suppliers from severe weather, such as planned roundtable as we determine PART 231—INTERPRETATIVE hurricanes or floods; whether further guidance or rulemaking RELEASES RELATING TO THE • Increased insurance claims and relating to climate change disclosure is SECURITIES ACT OF 1933 AND liabilities for insurance and reinsurance necessary or appropriate in the public GENERAL RULES AND REGULATIONS companies ;77 interest or for the protection of THEREUNDER • Decreased agricultural production investors. capacity in areas affected by drought or ■ 2. Part 231 is amended by adding other weather-related changes; and VI. Codification Update Release No. 33–9106 and the release • Increased insurance premiums and The ‘‘Codification of Financial date of February 2, 2010 to the list of deductibles, or a decrease in the Reporting Policies’’ announced in interpretive releases. availability of coverage, for registrants Financial Reporting Release No. 1 (April with plants or operations in areas 15, 1982) [47 FR 21028] is updated by PART 241—INTERPRETATIVE subject to severe weather. adding new Section 501.15, captioned RELEASES RELATING TO THE Registrants whose businesses may be ‘‘Climate change related disclosures,’’ SECURITIES EXCHANGE ACT OF 1934 vulnerable to severe weather or climate and under that caption including the AND GENERAL RULES AND related events should consider text in Sections III and IV of this release. REGULATIONS THEREUNDER 75 See ‘‘Climate Change: Financial Risks to 78 The Investor Advisory Committee was formed ■ 3. Part 241 is amended by adding Federal and Private Insurers in Coming Decades Are on June 3, 2009 to advise the Commission on Release No. 34–61469 and the release Potentially Significant: U.S. Government matters of concern to investors in the securities Accountability Office Report to the Committee on date of February 2, 2010 to the list of markets, provide the Commission with investors’ Homeland Security and Governmental Affairs, U.S. perspectives on current, non-enforcement, interpretive releases. Senate,’’ GAO–07–285 (March 2007). regulatory issues and serve as a source of By the Commission. 76 Id. at p.17. information and recommendations to the 77 Many insurers already have plans in place to Commission regarding the Commission’s regulatory Dated: February 2, 2010. address the increased risks that may arise as a result programs from the point of view of investors. See Elizabeth M. Murphy, of climate change, with many reducing their near- Press Release No. 2009–126, ‘‘SEC Announces Secretary. term catastrophic exposure in both reinsurance and Creation of Investor Advisory Committee,’’ available primary insurance coverage along the Gulf Coast at http://www.sec.gov/news/press/2009/2009- [FR Doc. 2010–2602 Filed 2–5–10; 8:45 am] and the eastern seaboard. Id. at 32. 126.htm. BILLING CODE 8011–01–P WReier-Aviles on DSKGBLS3C1PROD with RULES2 VerDate Nov<24>2008 12:57 Feb 05, 2010 Jkt 220001 PO 00000 Frm 00009 Fmt 4701 Sfmt 9990 E:\FR\FM\08FER2.SGM 08FER2