The U.S. Securities and Exchange Commission (SEC) is expected to propose requirements on climate disclosures in the near future and the proposal is expected to be informed by an earlier request for public input. The comment period for this public input request ended in June 2021, with SEC receiving numerous responses. Three out of every four of these responses support mandatory climate disclosure rules. In this backdrop, the SEC Division of Corporation Finance recently published an “illustrative” letter indicating sample comments that the Division may issue to companies regarding their climate-related disclosure or the absence of such disclosure. The comments in the sample letter pertain to compliance with the topics addressed in the 2010 Climate Change Disclosure Guidance of SEC.
The sample letter outlines a non-exhaustive list of the issues that companies should consider. SEC specified that any comments it issues to a company would be appropriately tailored to the specific company and industry and would consider the disclosure that a company has provided in SEC filings. The disclosure related issues discussed in the 2010 Climate Change Guidance include the impact of pending or existing climate-change related legislation, regulations, and international accords; the indirect consequences of regulation or business trends; and the physical impact of climate change. The Division of Corporation Finance selectively reviews filings made under the Securities Act and the Exchange Act to monitor and enhance compliance with applicable disclosure requirements. The key comments in the sample letter relate to the:
- Disclosure of material effects of transition risks related to climate change that may affect business, financial condition, and results of operations
- Disclosure of any material litigation risks related to climate change and explain the potential impact to the company
- Revision of disclosure to identify material pending or existing climate change-related legislation, regulations, and international accords
- Revision of disclosure to identify any material past and/or future capital expenditures for climate-related projects.
- Indirect consequences of climate-related regulation or business trends
- Physical effects of climate change on operations and results
Keywords: Americas, US, Banking, Securities, Climate Change Risk, ESG, Disclosures, Transition Risk, TCFD, TCFD Recommendations, SEC
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Previous ArticleOCC Issues Booklets on Regulatory Reporting and Earnings
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
The Bank for International Settlements (BIS) published bulletins on lending in decentralized finance (DeFi) system, on blockchain scalability and fragmentation of crypto, and on extractable value and market manipulation in crypto and decentralized finance.
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.