A new Forbes article concludes that 93 percent of public companies face risk from climate change, but only 12 percent are actually disclosing that risk to the public and their shareholders. The Securities and Exchange Commission (SEC) issued guidance on climate risk disclosure several years ago. Thus, there is at least a basis for arguing that all affected companies are on notice of the need to disclose climate risk in their public filings such as 10-Ks. Having advised clients on climate risk disclosure in SEC documents, this is an important aspect of financial disclosure that should review and determine the nature of disclosure that may be advisable. As the Paris Agreement has been negotiated, with many countries including China developing greenhouse gas regulations and cap and trade programs, the writing is on the wall that international, national, and in some instances sub-national state and provincial limits on greenhouse gas emissions are a reality that appears to only be growing. Reviewing the supply chain and potential impact of climate change on the business may be an issue that investors may find material, or a court may judge as material.
Companies should also consider developing approaches that reduce their carbon footprint, such as considering new energy efficiency investment, the installation of renewable generation on-site and purchase of renewable electricity from the grid. Supply chain review and de-carbonizing it are steps that should be considered as well. in other words, having a good story to tell in any disclosure may provide an edge on competitors. Key is finding carbon reducing steps that save money for the company. Energy efficiency is the low hanging fruit typically, but renewable energy in some locations can provide cost savings as well.