by Nina Hart, Columbia Law Student
In recent years, a major challenge facing companies and securities regulators has been when and how to disclose material risks related to climate change in federal securities filings. In 2010, in response to a petition, the SEC issued an interpretive release on disclosure of climate change risks to assist companies in assessing when such disclosures must be made.[1] A new working paper by Columbia Law Student Nina Hart, released by the Center for Climate Change Law (CCCL), focuses on the SEC’s release and assesses whether further federal guidance is needed, and how such guidance might be obtained. Additionally, the paper addresses how companies might be held accountable in the absence of federal action. Specifically, the paper argues that the New York Attorney General should use the Martin Act to investigate companies for nondisclosure and thereby help establish a disclosure framework that companies can use absent further federal guidance.
The working paper reviews SEC actions to date on the issue of climate change disclosure as well as other studies on disclosure rates to assess whether further guidance is warranted. Based on this review, the paper concludes that, both before and after the 2010 interpretive release, disclosure rates and quality amongst companies have been inconsistent. Additionally, although the SEC indicated in its 2010 interpretive release that it would take further actions to monitor disclosure practices and assess whether further guidance is necessary,[2] the paper argues that the agency has largely failed to do so.
Building on this perceived need for federal guidance and lack of federal attention to the issue, the paper reviews the events leading to the 2010 interpretive release, which was the only climate change-specific document released by the SEC in recent years. Specifically, the paper focuses on the steps taken by the New York Attorney General’s Office to obtain the interpretive release. In 2007, General Andrew Cuomo, with a number of other institutional investors, filed a petition with the SEC that requested guidance related to disclosure of climate change risks.[3] At the same time, his Office opened five investigations into nondisclosure using the authority granted by the Martin Act, New York’s securities law.[4] This paper argues that the combination of the petition and investigations pressured the SEC to issue its 2010 interpretive release. Additionally, the paper asserts that using the Martin Act to investigate companies can help eliminate the regulatory gap left by SEC underenforcement. The paper then concludes that General Schneiderman’s Office should resume General Cuomo’s efforts to hold companies accountable and also seek further federal guidance.
[1] Sec. & Exch. Comm’n, Commission Guidance Regarding Disclosure Related to Climate Change (Feb. 8, 2010), https://www.sec.gov/rules/interp/2010/33-9106.pdf.
[2] Id. at 27–28.
[3] Request for Interpretive Guidance on Climate Risk Disclosure, File No. 4-547, Sept. 18, 2007, available at https://www.sec.gov/rules/petitions.shtml.
[4] Press release, Energy Company Subpoenas, New York Attorney General (Sept. 17, 2007), https://www.ag.ny.gov/press-release/energy-companies-subpoenas.
