The SEC’s climate rule: Who’s complying?
Ask not just what your company is doing to slow climate change. Ask what climate change is doing to your company.
The latter is what public companies are supposed to disclose when they file their annual report to the Securities Exchange Commission, if that disclosure is “material” to the company’s financial well-being.
But do they?
Generally no, or not enough, say watchdog organizations that keep track of such things. And apparently companies based in New Hampshire, or with significant ties to the state, are no exception.
Nobody, however, is breaking the law, because the law is so vague. The SEC offered guidance on the matter a decade ago and hasn’t updated it since.
One thing you shouldn’t do is just copy and paste boilerplate disclosures.
“Registrants should consider specific risks they face as a result of climate change legislation or regulation and avoid generic risk factor disclosure that could apply to any company,” advises the SEC.
It is one thing to say that climate change could flood certain facilities, it is another to say which facilities, along with a rough idea of the potential cost to shareholders.
The disclosure should spell out “costs to purchase, or profits from sales of, allowances or credits under a ‘cap and trade’ system” and/or “costs required to improve facilities and equipment to reduce emissions” or they could discuss “decreased demand for goods that produce significant greenhouse gas emissions.”
However, all this is “just guidance,” said Paula DiPerna, a special adviser to the Climate Disclosure Project, or CDP. “There is no mandatory requirement to disclose anything.”
Nevertheless, the amount of disclosure has gone up by about 15% over the last three years, according to a 2019 status report on climate related financial disclosures by more than a 1,000 large companies around the world. The bad news is that only about a quarter of the companies disclose about half of what they should, and less than 4% disclosed nearly all of it.
And these are all publicly traded companies. That’s why CDP and groups like the Boston-based Ceres look for voluntary disclosure, not just on the SEC filings, but also on the companies’ websites. As the number of participating organizations grows — from 80 in 2003 to 8,000 today — CDP hopes companies see it as ”a club they can’t afford to be outside of.”
The New Hampshire response
NH Business Review took a quick look at some New Hampshire-based companies. Of those examined, Sprague, a Portsmouth-based supplier of mostly fossil fuel products such as oil and natural gas, was one of the few that devoted a whole section to climate change.
“Future efforts to limit emissions associated with transportation of fuels and heating fuels could reduce the market for, or pricing of, our products, and thus adversely impact our business,” says the company’s latest annual SEC filing.
In addition, it notes, climate change could “have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If any of those effects were to occur, they could have an adverse effect on our assets and operations.”
Later in the report, it adds that because of climate change legislation, “we could incur increased energy, environmental and other costs” and the company might “face increased costs related to defending and resolving legal claims and other litigation related to climate change.”
Hampton-based utility Unitil notes that the “legislative environment (including laws and regulations relating to climate change, greenhouse gas emissions and other environmental matters) could affect the rates the company is able to charge” and “long-term global climate change could adversely affect customer demand or cause extreme weather events that could disrupt the Company’s electric and natural gas distribution services.”
But many other companies just lump climate change in with various other potential catastrophes.
“Our business may be impacted by natural disasters, war, terrorism, political events, global climate change and other occurrences that could create large-scale medical emergencies or otherwise have a material adverse effect on our business,” reports Anthem.
Salem-based Standex International Corp.’s reference to climate change (the phrase is never used) is even more oblique.
“Natural disasters, such as hurricanes, tornadoes, floods, earthquakes and other adverse weather and climate conditions; political crises, such as terrorist attacks, war, labor unrest, and other political instability; or other catastrophic events, such as disasters occurring at our suppliers’ manufacturing facilities, whether occurring in the United States or internationally, could disrupt our operations,” the conglomerate notes in its annual statement.
The only climate that Portsmouth-based Bottomline Technologies and Albany International of Rochester mention is the business climate. Merrimack-based Connection, Planet Fitness of Hampton and Connecticut-based Sturm, Ruger — which has a significant manufacturing facility in Newport — don’t even use the word.
VF Corp.’s SEC filing, which includes Stratham-based Timberland, doesn’t mention climate change, but it does have an entire section in its filing on sustainability, going into great detail on what it is doing to lessen its carbon footprint.