Climate Change Disclosures Are Getting Hotter

Published date01 July 2016
Date01 July 2016
© 2016 Wiley Periodicals, Inc.
Published online in Wiley Online Library (
DOI 10.1002/jcaf.22175
Climate Change Disclosures
Are Getting Hotter
Steven Harrast and Lori Olsen
In response
to risks related to
weather, climate,
and emissions, the
U.S. Securities and
Exchange Commis-
sion (SEC) pub-
lished the release
titled Commission
Guidance Regarding
Disclosure Related
to Climate Change
in 2010 (SEC,2010).
Whether or not one
believes that climate
change or some other
issue is at fault, it
is true that humans
are inhabiting more
and more space
on this planet and
that weather events
will result in ever
increasing damages to life and
property. Recently, one of the
authors traveled to an event
only to have it canceled due
to a hurricane. While this was
only a small inconvenience for
some, for others it meant a loss
of life and property. The SEC
guidance suggests disclosing
climate change effects that are
“reasonably likely.” The guid-
ance has been published now
for several years, and climate
change disclosures are getting
As background, climate
change risks are generally
caused by increases in tem-
perature resulting in increases
in extreme weather and other
natural phenomena,
changes in agricul-
ture resulting in
more or less produc-
tion, polar cap melt-
ing and the resulting
increase in ocean
levels, and increases
in ambient tem-
peratures resulting
in the need for more
power to operate
cooling systems.
Another type of cli-
mate change risk is
the risk of litigation
due to emissions.
Clearly, not every-
one is on board
with this highly
politicized issue,
but most reasonable
individuals agree that
conserving natural
resources and main-
taining a healthy environment
are virtuous pursuits.
As climate change
disclosure is becoming more
mainstream, it is useful to
examine the types of disclo-
sures companies are mak-
ing. By examining current
disclosure practices, companies
may improve their practices
Since the publication of climate change disclo-
sure guidance by the Securities and Exchange
Commission (SEC) in 2010, the number of 10-K
disclosures has seen more than a twofold increase.
Climate change disclosures are disclosures of
risk from severe weather events and pollution,
although a company may also report opportunities
arising from climate change. In general, compa-
nies reporting weather risks disclose the potential
for property damage and/or temporary loss of
business. Companies with significant greenhouse
gas and other nuisance emissions disclose risks
due to litigation and the cost of compliance with
regulations imposed by governmental bodies.
A few companies have disclosed opportunities
arising from climate change including initiatives
to develop plant-based plastics and renewable
energy sources. The article provides a portrait of
compliance with an emerging area of corporate
risk disclosure. © 2016 Wiley Periodicals, Inc.
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