February 7, 2022

Climate Disclosures: Changes in Response to Staff Comments

When we last checked in on Corp Fin’s review of filings for climate change disclosure, many of the reviews appeared to be ongoing. This Bloomberg Law article highlights a few companies’ amendments to registration statements in response to climate disclosure scrutiny last spring & fall. Here’s an excerpt (edited with links to the amended disclosures):

Morgan Stanley, for example, added to its risk factor disclosures (pg. 81) that laws requiring mortgaged commercial properties to comply with Energy Star, Leadership in Energy and Environmental Design (LEED), and other green building certification programs may hurt borrowers’ ability to pay their loans.

Verizon (pgs. 59 & 69), Nissan (pgs. 16 & 25), and Toyota (pgs. 39 & 43) updated their filings to say extreme weather conditions resulting from climate change could delay customers’ payments, lowering the value of the asset-backed securities they’re offering to investors. Ford (pg. 31) changed its filing to say investors could lose money if its reputation is harmed by public perception about greenhouse gas emissions from its gas-powered vehicles.

Morgan Stanley Capital I Inc., Verizon ABS II LLC, Ford Credit Auto Receivables Two LLC, Nissan Auto Leasing LLC II, and Toyota Auto Finance Receivables LLC filed the registration statements to help their parent companies sell securities backed by mortgages, auto lease contracts, and other assets.

While comment letters are always company-specific, the nature of amendments sheds some light on what the Staff could be looking for in its Exchange Act filing reviews – and it may also give clues as to what a climate disclosure proposal would touch on. The article notes that the original comment letters to these companies were generic and that the agency didn’t engage in multiple rounds of letters with the companies – so the amendments appeared to resolve the Staff’s questions.

Liz Dunshee