Last week, John blogged about Acting SEC Chair Allison Herren Lee’s statement directing Corp Fin to scrutinize climate change disclosures. Many companies had already been focused on their climate-related disclosures given the increased focus coming from investors and other stakeholders. But, with Corp Fin now directed to look closer, a recent Audit Analytics blog looked back at what happened with SEC comment letters following release of the Commission’s 2010 guidance.
Corp Fin could scrutinize more than they did a decade ago, after all company initiatives and disclosures relating to climate risk have changed in that time. Still looking back at comment letters is one way to help gauge potential focus areas. Here’s what Audit Analytics had to say about comment letters issued back around the time of the 2010 SEC guidance:
The most common area of focus for climate change comment letters was the risk factors section. This was followed by the business overview section, reserves reporting, and the liquidity section of the MD&A. And top five concluded with the accounting for contingencies. This was to be expected as these were the areas focused on in the 2010 guidance.
In terms of industries most likely to receive comment letters, the findings weren’t surprising – the Mining and Extraction sectors, including oil and gas companies, topped the list. They were followed by Power Generation and Manufacturers, respectively, with Insurance being the only other notable industry.
Looking at things today, Audit Analytics predicts we’ll see many of the same industries bear the brunt of potential SEC comment letters. But, the firm also says companies in industries that were largely spared the last time around will likely see more scrutiny this time. For those sharpening pencils for possible updates in their upcoming Q1 reports, check out our “Climate Change” Practice Area for the latest memos and other resources.
-Lynn Jokela, TheCorporateCounsel.net March 4, 2021
