Will The SEC Back Off On Climate Change Disclosure?

No one at this point knows where a Trump administration will position itself in relation to the issue of climate change. The President-elect himself has called it a hoax and surrounded himself with deniers, but his choice for Secretary of State, former Exxon Mobil CEO Rex Tillerson, is not one of them. Neither, apparently, is Trump’s pick for chairman of the Securities and Exchange Commission, Jay Clayton. “At stake,” writes Dave Anderson in a post on the Energy and Policy Institute website, “is the interpretive guidance on climate change disclosure that the SEC provided to companies in 2010, and the SEC’s related investigation into ExxonMobil.” Clayton, as a partner at Sullivan & Cromwell, is part of a practice group that counseled companies to include risks resulting from climate change in their SEC disclosures, per the 2010 guidance, and according to firm client memos the kinds of risks that could trigger disclosure requirements included “international treaties,” “federal and state legislation” and “increased demand for goods that results in lower greenhouse gas emissions. All of those merely acknowledge there is a widespread belief in climate change, and it likely will trigger policies or market developments that could constitute a business risk and must be acknowledged to investors. However, the firm also noted the risk of actual physical impact from climate change, notably “the devastating results of severe weather conditions.” Does that suggest a likelihood that a future SEC headed by Clayton is likely to require companies to disclose climate change risk? Not necessarily, according to a research director at the Center for Science & Democracy at the Union of Concerned Scientists, quoted in a BuzzFeed article. “I can’t imagine it being a priority as far as things he wants to do at the SEC,” she said. “ It’s guidance, it’s not a formal rule, so some companies have chosen to ignore it.” But according to Anderson, companies are likely to feel pressure to disclose nonetheless. “What is clear,” he writes, “is that state attorneys general and shareholders will continue to push for proper disclosure of climate change risks by fossil fuel and utility companies, in order to protect investors and the broader public from being deceived.”