Climate Disclosure Guidance

Ahead of the imminent publication of updated climate disclosure rules, the SEC has published a sample comment letter providing companies with guidance as to the regulator’s current focus and expectations under the rules.  The last official SEC guidance on climate-related guidance was published in 2010; however, the SEC, and individual top brass, have been vocal about the need for updated regulations.  In that regard, in March 2021, the SEC published a statement requesting public input on climate change disclosures.  It is expected that either a rule proposal or temporary final rules are forthcoming.  For more information on differing views following the March 2021 request for public comment, including from regulators, industry groups and individual SEC Commissioners, see HERE.

In 2010 as today, companies were and are required to report material information that can impact financial conditions and operations (see most recent amendments to MD&A disclosuresHERE).   In addition to MD&A, climate-change-related disclosures, including risks and opportunities, may

Risk Factor Disclosures For Reporting Public Companies 

ABA Journal’s 10th Annual Blawg 100

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 A risk factor disclosure involves a discussion of circumstances, trends, or issues that may affect a company’s business, prospects, operating results, or financial condition.  Risk factors must be disclosed in registration statements under the Securities Act and registration statements and reports under the Exchange Act.  In addition, risk factors must be included in private offering documents where the exemption relied upon requires the delivery of a disclosure document, and is highly recommended even when such disclosure is not statutorily required.

The Importance of Risk Factors

Risk factors are one of the most often commented on sections of a registration statement.  The careful crafting of pertinent risk factors can provide leeway for more robust discussion on business plans and future operations, and can satisfy a wide arrange of SEC concerns regarding existing financial and non-financial matters (such as potential default provisions in debt, dilution matters, inadvertent rule violations, etc.).

Although smaller reporting companies are