Kral Ussery’s “SEC Comment Letters on Environmental Matters” conveniently summarizes MyLogIQ’s analysis of 620 climate change-related comments included in SEC Forms 10-K and 20-F comment letters to 76 public companies from July 2021 to January 2023, and provides associated disclosure guidance to companies to avert or reduce future comments from SEC staff. MyLogIQ identified 11 disclosure themes, which are illustrated by comment letter excerpts in Table 1 of its report.
As shown above, comments most commonly addressed physical effects/cost of insurance (18%); transition risks (16%); and compliance costs (15%). Consistency between SEC filing disclosures and other publicly accessible reports (e.g., CSR, sustainability, ESG reports) accounted for 6% of the comments. Comments are also broken out by theme and section (e.g., MD&A, Risk Factors), as well as industry.
The comment analysis is reduced to these three takeaways for companies:
- Be prepared to discuss the physical effects of climate change on the company’s operations and cost of insurance.
- Synchronize the content of publicly posted reports with that of 10-K and 20-F annual reports.
- MD&A and risk factor items of SEC filings had the most comments.
In addition to suggesting how companies can most effectively and proactively address the takeaways, Kral Ussery outlines a sound SEC comment letter response plan that companies should consider adopting for any SEC comment letter received regardless of theme.