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Speech by SEC Commissioner:
Opening Remarks Regarding Interpretive Guidance Regarding Climate Change


Commissioner Elisse B. Walter

U.S. Securities and Exchange Commission

Washington, D.C.
January 27, 2010

I, too, would like to thank our Division of Corporation Finance staff, particularly Meredith Cross, Jim Budge, and Mike McTiernan. And, my thanks also go to Lesli Sheppard, my counsel, whose disclosure experience and wisdom has guided me well through this process. With respect, I disagree strongly with my colleague; this action is driven by investors’ needs.

The Division of Corporation Finance has recommended that we issue important interpretive guidance about requirements that, to me, lie at the heart of the disclosures that publicly held companies provide to their investors and prospective investors. Your recommendation is balanced and thoughtful. I strongly believe that the interpretive guidance before us today will help companies to better comply with their disclosure obligations and will advance the interest of investors.

As a law enforcement agency, the Commission seeks to fulfill its investor protection mission by pursuing wrongdoers and returning as much money as possible to injured investors. But, we do more than pursue wrongdoers after they have violated the law. Among other things, we also require disclosure of material information from public companies and mutual funds to help investors research their investments and inform their investment decisions, both before they invest and throughout the life of those investments. I believe that it is my responsibility, as our Chairman has aptly stated, to further “the SEC’s commitment to transparency, accountability, and disclosure while always keeping the needs and concerns of investors front and center.”1

To me, the interpretive guidance before us today does precisely that, and I am happy to support it.

As our Chairman explained earlier this morning, I believe that it is important for all of us to understand exactly what the guidance we are considering this morning is and what it is not. Let me start by saying what it is not. It is not, and I cannot stress this enough, a new rule or legal obligation for publicly held companies. It does not change their disclosure obligations or our prior interpretations of the relevant disclosure provisions. Nor does it respond to all the requests, both formal and informal, that we have received from the public concerning climate change and environmental disclosure. For example, it does not require companies to disclose their carbon footprints or what they are doing to reduce greenhouse gas emissions; that would require a much more complex analysis and a rule-making process. Nor does it mandate a “one-size fits all” approach to the consideration and disclosure of environmental matters.

The proposed interpretive guidance before us is a Commission statement explaining how we interpret our existing disclosure regulations and how they apply in a particular context — climate change. It is designed to improve the quality of disclosures filed by public companies for the benefit of investors.

Our disclosure requirements will be the same tomorrow as they were last Tuesday. It is my expectation, though, that our issuance of interpretive guidance will encourage companies to redouble their efforts to better comply with our disclosure requirements. That will serve investors well.

I am concerned by the fact that today many public companies are in fact providing disclosure about significant climate change related matters through mechanisms outside of the disclosure documents they file with the Commission. While all of the information provided voluntarily by companies through these mechanisms undoubtedly is not required to be disclosed under our rules, I do not believe that public companies today are doing the best job they possibly can do with respect to their current mandated disclosures.

Of course, I understand that company analyses and determinations whether information is material and required to be disclosed involve judgment. And, I understand that there may be some degree of doubt that companies face in reaching their decisions about climate change disclosures. As the staff noted in the interpretive guidance, the Supreme Court has already provided guidance to publicly held companies in TSC Industries when it said that “it is appropriate that these doubts be resolved in favor of those the statute is designed to protect.”2

One final thought — the requirements discussed in this interpretive guidance go to the very core of a public company’s disclosure obligations — including its description of business, risk factors, and in particular, the management’s discussion and analysis. These requirements are instances where I believe that repeated Commission guidance has not only been appropriate but in fact, has been necessary. Although the staff’s recommendation before us today relates to climate change matters, prior Commission interpretive releases on the same disclosure requirements have covered others areas, such as analysis of long and short-term liquidity and capital resources, segment analysis, the effects of federal financial assistance on the operations of financial institutions, the disclosure of preliminary merger negotiations, Y2K issues, and others that I will not mention today. The principles articulated and statements made in the document before us today, as in past Commission interpretive releases, are applicable to all subject matters. I strongly request that, across the board, our filers step up their disclosure efforts immediately in light of our most recent guidance.

Once again, I am very pleased to support the staff's recommendation.

And, I have just a couple of questions relating to materiality.

1 Chairman Mary Schapiro, Address to Conference on “The Future of Global Finance” (September 18, 2009), available at http://www.sec.gov/news/speech/2009/spch091809mls.htm.

2 TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, at 448 (1976).



Modified: 01/27/2010