Incremental Changes in Soonto-Be-Released Disclosures Unlikely to Satisfy Advocates

Date01 December 2009
12-2009 NEWS & ANALYSIS 39 ELR 11145
Incremental Changes in Soon-
to-Be-Released Disclosures
Unlikely to Satisfy Advocates
by Tom Mounteer
Tom Mounteer is a partner in the Washington, D.C., oce of Paul Hastings, where he
co-chairs the law rm’s environmental practice. Since 1997, he has been an adjunct professor in
the Masters in Environmental Law program at the George Washington University Law School.
He is also author of the Climate Change Deskbook (ELI 2009). He thanks Washington oce
summer associate Derrick Lam (George Washington University Law School) for his assistance.
In the coming months, U.S. com-
panies that sell their shares on pub-
lic stock exchanges will be  ling
annual reports with the Securities and
Exchange Commission (SEC). In part,
those SEC lings aim to allow investors
to see the company’s prospects from
management’s perspective. In their l-
ings, ma nagement describes develop-
ments it sees on the horizon that have
the potential to a ect their companies’
operations—and prots.
Many will be intently reading the l-
ings to see what insights they shed on
managements’ perception of how cli-
mate change will aect their businesses.
e smart money is on margina lly
great er d isclosure th an in preced-
ing years. This will continue a trend
we have seen in eac h of the past few
year s’ di sclosures .
What more might we reasonably
expect to read in those disclosures? And
will those disclosures satisfy those that
have asked the SEC to provide guidance
on what those disclosures should reveal?
In §7.4 of our Climate Change Desk-
book, we describe two factors that drive
the trend toward more fulsome disclo-
sure: (1) greater clarity about the con-
tours of the legal regime t hat will apply
to greenhouse ga s (GHG) emissions;
and (2) the continuing tide of scientic
reports detailing the eects of climate
change. It is unlikely that developments
on either front in 2009 will bring about
a sea change in the upcoming SEC
annual reports.
As to certainty with respect to the
governing legal regime, enactment of
comprehensive federal legislation would
certainly result in more specic disclo-
sures. In the absence of federal legisla-
tion, however, it tends to be electric
power generators subject to the dictates
of the Regional Greenhouse Gas Initia-
tive (RGGI) (see §4.2 of our Deskbook)
that have had the most specic things to
say about the carbon constraints on their
operations. e disclosures of others in
the power-generation sector but operat-
ing outside the Northeast (and so not
subject to RGGI) have generally noted
the U.S. Supreme Court’s decision in
Massachusetts v. EPA, 549 U.S. 497, 37
ELR 20075 (2007), holding that car-
bon dioxide is a “pollutant” subject to
regulation under the Clean Air Act, and
the potential ramications of that deci-
sion in terms of cascading regulation of
stationary sources (see §§ and of our Deskbook).
What about the scientic front?
What advances in understanding have
come about in 2009 that might make
their impact felt in SEC disclosures? In
preparing their upcoming lings, com-
panies subject to disclosure obligations
likely need to reckon with t wo major
reports issued in 2009.
On May 27, the National Center for
Atmospheric Research released a study
indicating that temperature increases
brought about by climate change may
cause an even higher sea-level rise along
the Atlantic coast than previously
thought. e Center now predicts the
north Atlantic sea-level rise caused by
Greenland’s melting glaciers could be
one to two feet a long the northeastern
Atlantic coast by the end of the century.
On June 16, a collective of U.S.
government a gencies, operating as the
U.S. Global Change Research Project,
issued a report that found, among other
things, t hat parts of the Southeast t hat
currently experience about 60 days per
year of temperatures greater than 90
degrees could experience as many as
150 such days by the end of t he cen-
tury. e report also projects potential
drought concerns in Great Plains states
caused by temperature increases, as well
as increased insect outbreaks, wildres,
and changing species composition in
forests in the Northwest.
Will these new reports necessarily
translate into more specic SEC disclo-
sures? Candidly, it is hard to see how
they will. Would it be reasonable for
businesses aected by a sea-level change
in 90 years to identify it as a trend they
are preparing for? One could imagine
that electricity suppliers to the South-
east might project increased demand
to run air conditioners longer, but will
that be material to their nancial posi-
tions, even in a carbon-constrained
world? Will pesticide manufacturers
crow about the opportunity to sell more
product as a result of changed climatic
conditions? One doubts so, but we will
have to see.
Against this backdrop of evolving
legal standards and scientic under-
standing, interest groups continue to
push for more disclosure and for the
SEC to step into the breach and issue
guidance on just what companies should
be disclosing. In §7.4.2 of the Deskbook,
we describe the Global Framework for
Climate Risk Disclosure’s four-part
voluntary standa rd. Two reports issued
in June of this year appear to be aimed
Tom Mounteer
Copyright © 2009 Environmental Law Institute®, Washington, DC. reprinted with permission from ELR®,, 1-800-433-5120.

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