May 11, 2022

SEC Climate Change Proposal: Small Business Weighs In

The SEC’s climate change disclosure proposal was on the agenda at last Friday’s meeting of the SEC’s Small Business Capital Formation Advisory Committee.  As you might expect, the various small business representatives who spoke at the meeting had plenty to say about the proposal, and Cooley’s Cydney Posner recently provided a detailed summary of the meeting and the recommendations the committee will pass along to the SEC. This excerpt lists those recommendations, which Cydney points out are subject to further amplification:

– Affirm that the committee believes that climate disclosure is important, including disclosure that is consistent across companies and agencies;
– Ask the SEC to perform a more detailed cost/benefit analysis, especially with respect to smaller companies;
– Provide more scaling and phase-ins for EGCs and smaller reporting companies (such as the phase-in for EGCs in the JOBS Act);
– Expand safe harbors from liability;
– Create an incentive structure rather than a penalty structure (such as through reduced fees);
– Address considerations that could deter companies from conducting IPOs;
– Address the potential impact on very small companies;
– Consider the impact on private companies of public companies’ potential reluctance to include them in the value chain;
– Consider industry-specific requirements, similar to the SASB framework;
– Eliminate the costly and slow attestation requirement;
– Treat the disclosure as “furnished,” not “filed”;
– Delay the disclosure due date; and
– Delay the general phase-in dates to allow more time to organize and prepare.

This list of recommendations isn’t really surprising, but I think it confirms the widely held belief that, in their current form, the proposed climate change disclosure rules will present enormous compliance challenges to smaller companies. It also suggests that the cost of those compliance efforts may have been underestimated by the SEC when it put forward the proposal.

John Jenkins