February 25, 2021

ESG: Corp Fin to Scrutinize Climate Change Disclosures

In news that may throw an 11th hour monkey wrench into the finalization of a number of 10-K filings, Acting SEC Chair Allison Herren Lee issued a statement yesterday in which she directed Corp Fin to take a hard look at companies’ climate change disclosures.  Here’s an excerpt:

Today, I am directing the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings. The Commission in 2010 provided guidance to public companies regarding existing disclosure requirements as they apply to climate change matters.

As part of its enhanced focus in this area, the staff will review the extent to which public companies address the topics identified in the 2010 guidance, assess compliance with disclosure obligations under the federal securities laws, engage with public companies on these issues, and absorb critical lessons on how the market is currently managing climate-related risks. The staff will use insights from this work to begin updating the 2010 guidance to take into account developments in the last decade.

You may recall that a few years ago, the GAO took a look at the SEC’s actions since it issued climate change disclosure guidance. The GAO report expressed some concern with the Staff’s level of training on climate related disclosures, so that may present some challenges for everyone involved in the review process. Those training shortcomings may well have been addressed in the years following the GAO report, but there’s still the matter of the lack of uniformity in climate change disclosures that the GAO report also noted.

Finally, the SEC hasn’t exactly been cracking the disclosure whip on climate change in recent years, so the Staff’s likely to find a fairly target rich environment when it reviews existing climate disclosures.  Add all of that up, and, well, in the words of Bette Davis, “fasten your seat belts, it’s going to be a bumpy night.”

Now is probably a good time to refresh yourself on the SEC’s 2010 guidance, and to review the other resources in our “Climate Change” Practice Area.  If you want to get a sense for where the SEC may be heading in this area and the broader ESG disclosure category, check out this blog from Cooley’s Cydney Posner.

Disclosure: ESG Top Priority for Corp Fin’s Acting Director

Acting Chair Lee & Corp Fin’s Acting Director John Coates are clearly “singing from the same hymnal” when it comes to increasing the agency’s emphasis on climate change and other ESG disclosures. In fact, according to this Bloomberg Law article, ESG is Coates’ top disclosure priority. Here’s an excerpt:

A Harvard Law School professor who has pushed the SEC to update its corporate disclosure requirements on climate change and other ESG issues is now planning to turn his words into action as an agency insider. John Coates, who joined the Securities and Exchange Commission on Feb. 1 as acting director of its Division of Corporation Finance, is poised to play a leading role in any agency action to boost companies’ environmental, social, and governance disclosures, following his work on the issues at Harvard and on an SEC advisory panel.

Under his guidance, the SEC’s Division of Corporation Finance could enhance its focus on climate disclosures when it reviews companies’ filings. It also could start working on rules to mandate more corporate reporting on climate change and other ESG matters. He may even play a role in requiring disclosures on companies’ political spending, if Congress allows the SEC to act.

“If I were to pick a single new thing that I’m hoping the SEC can help on, it would be this area,” Coates said about ESG in an interview with Bloomberg Law.

A recent Reuters article also quotes Coates as saying that the SEC “agency ‘should help lead’ the creation of a disclosure system for environmental, social and governance (ESG) issues for corporations.”

Zoom Etiquette: No Jammies in Chancery Court!

It turns out that “Cat Lawyer” wasn’t the only member of the bar who fumbled a Zoom hearing in recent months.  Francis Pileggi recently provided some guidance on his blog about “protocols & professionalism” for remote hearings. He included a number of helpful links to information from the Delaware courts, but it was a link to a recent letter from Vice Chancellor Slights that caught my eye.  This excerpt from that letter suggests that one lawyer involved in a hearing would have been better off using a cat filter instead of taking a “come as you are” approach:

Mr. Weisbrot’s email states that I would not consider an application from him because he was “not wearing a tie.” That is true, as the record reflects.  What the record also reflects is that Mr. Weisbrot appeared in court for trial (via Zoom) on Tuesday in either a printed tee-shirt or pajamas (it was difficult to discern).

Egads! Look, we long ago established that I don’t know much about fashion, but even I would think twice about showing up for a Chancery Court hearing in my “Dragnet” tee-shirt.

John Jenkins