Continuing on the potential risks of 10-K climate disclosures… Levine’s logic about Wells Fargo’s fake diversity job interviews applies equally to climate disclosures in 10-Ks, and that should concern everyone involved in writing them. Yes, the SEC’s climate disclosure rules are stayed at the moment, but as John Jenkins pointed out in a recent Q&A here on PracticalESG:
“the SEC’s February 2010 interpretive release still applies. That guidance requires companies to provide disclosure of the material impact of climate change on their business, financial condition and results of operations.”
Sustainability leaders, staff and advisors: A nuance here is that the interpretive release is generally cast in terms of risk factor and impact of legal requirements disclosures which differs from the diversity language examples Levine pointed to from Wells Fargo. The expertise of securities counsel is essential when drafting 10-K disclosure language. There are important distinctions between required disclosure and aspirational statements, and the implications of making aspirational statements without adequate consideration of potential downsides can be significant. That was the prevalent concern when SEC’s conflict minerals disclosure rules were issued. I call it “sticking to the script of the rules rather than telling your story”; on my recent podcast with Christine Uri, she used the term “Minimum Viable Reporting.” These are concepts worth considering.
Our members can learn more about sustainability disclosures here.
If you aren’t already subscribed to our complimentary ESG blog, sign up here for daily updates delivered right to you.
