The 2010 Guidance was  published by the Commission to provide guidance to companies on how  existing disclosure requirements apply for climate-related matters. According to some SEC staff, as part of SEC’s filing reviews, SEC staff  focus on the company’s filing for the current year and can supplement the  review with information from the company’s prior years’ filings, filings of  other companies in the same industry, SEC’s prior filing review reports,  and other external data outside of the filings, including companies’  sustainability and earning reports and financial analyst reports. SEC management agreed with these  recommendations. SEC Issued the 2010 Guidance and Comment Letters to Specific Companies to Clarify Climate- Related Disclosure Requirements

SEC issued the 2010 Guidance, and comment letters to specific  companies, to clarify their existing disclosure requirements as they apply  to climate-related matters. Representatives  from the industry associations with whom we spoke, which represent the  five industries we selected, all agreed that the 2010 Guidance helped  clarify climate-related disclosure requirements and stated that they  consider the disclosure requirements for climate-related risks to be clear  and have no need for additional guidance. SEC  publishes comment letters in EDGAR, and other interested companies  can view these letters to understand SEC’s assessment of a particular  company’s disclosures. SEC Examined Climate-Related Disclosures for Reports to Congress and Issued a Concept Release Seeking Public Input on Disclosure Requirements

After the issuance of the 2010 Guidance, the Senate Committee on  Appropriations directed SEC to conduct two reviews of climate-related  disclosures in 2012 and 2014. According to SEC senior staff, in addition to its regular evaluation of  climate-related disclosures in individual filing reviews, SEC staff continues  to periodically assess climate-related disclosures within these industries. As of December 2017, SEC senior  staff said they are considering recommendations for the Commission’s  consideration based on comments received on the Concept Release. SEC senior staff  further noted that Corporation Finance staff assess companies’ filings for  compliance with the disclosure requirements under federal securities laws  but do not have the authority to subpoena companies’ information. Climate-Related Disclosures Vary in Format and Specificity

Climate-related disclosures vary in format because companies may report  similar climate-related disclosures in different sections of the annual  filings. When companies report climate- related disclosures in varying format, SEC reviewers and investors may  find it difficult to navigate through the filings to identify, compare, and  analyze the climate-related disclosures across filings, especially given the  size of each individual filing. SEC Has Mechanisms, Tools, and Resources to Help Its Staff Consistently Review Filing Disclosures

Although SEC relies primarily on information companies provide in their  filings when reviewing climate-related and other disclosures, it has  mechanisms, tools, and resources to help its staff consistently review  filing disclosures, according to SEC documents and SEC staff we  interviewed. Internal supervisory control testing. Two-level review process. Regulations and guidance. Internal and external data. Staff training. Some asset management firms and investor  groups have highlighted the need for companies to disclose more climate- related information to help investors make more informed investment  decisions. While some investor organizations we spoke with generally believe more  climate-related disclosures are needed, investors have not reached  agreement on the priority of advocating for climate-related disclosures or  the framework for companies to use to report these disclosures. Also, additional disclosure requirements or increased  scrutiny of companies’ climate-related information—which, if necessary,  SEC and Congress can consider—could have mission and resource  implications for SEC’s Division of Corporation Finance. Appendix I: Objectives, Scope, and Methodology

This report examines: (1) steps the Securities and Exchange Commission  (SEC) has taken to help companies understand disclosure requirements  for climate-related risks, (2) steps SEC has taken to examine changes in  climate-related disclosures since the release of its 2010 Commission  Guidance Regarding Disclosure Related to Climate Change (hereafter  referred to as the 2010 Guidance), and (3) constraints SEC faces when  reviewing climate-related disclosures and stakeholders’ views of those  disclosures. We selected  the first four industries because they were identified by SEC staff, in its  2012 and 2014 congressional reports, as more likely than other industries  to be affected by climate change-related matters due to the nature of their  operations. For all five industries, we searched companies’ annual filings  to determine whether the industries include companies that have  submitted climate-related disclosures in SEC filings or are represented by  associations that have submitted comments on SEC’s April 2016 Concept  Release related to business and financial disclosures in Regulation S-K.  Because we did not search companies’ filings of all industries, industries  we focused on in this report may not be a comprehensive list of industries  that are affected by climate-related risks and views on the selected  industries are not generalizable to other industries we did not include in  our review. To understand SEC’s efforts to clarify climate-related disclosure  requirements for companies and industry groups’ views on SEC’s efforts,  we interviewed SEC staff from Corporation Finance and representatives  from a nongeneralizable sample of industry groups representing  companies in the five industries we selected.
Why GAO Did This Study

Impacts from a changing climate can pose serious risks to the global economy and affect many economic sectors, according to reports. Public companies are generally required to disclose certain risks in their SEC filings. In 2010, SEC issued guidance to clarify how existing disclosure requirements apply for climate-related matters.
GAO was asked to review (1) steps SEC has taken to clarify to companies their disclosure requirements for climate-related risks, (2) steps SEC has taken to examine changes companies may have made to their climate-related disclosures since the release of its 2010 Guidance, and (3) constraints SEC faces when reviewing climate-related disclosures and stakeholders' views of those disclosures.
GAO reviewed SEC's disclosure requirements, guidance, and reports on changes in climate-related disclosures; queried SEC's filings system to identify comment letters with issues on climate-related disclosures; identified examples of climate-related disclosures in companies' filings; and interviewed SEC staff and representatives of stakeholder groups, such as industry associations from five industry groups, and nonprofit organizations that work with investors. We selected these stakeholders because they either were from industries likely to be affected by climate change-related matters due to the nature of their operations, or have a key interest in climate-related issues.
Senior staff from SEC's Division of Corporation Finance generally agreed with GAO's findings.

What GAO Found

To help clarify to companies their disclosure requirements for climate-related matters, the Securities and Exchange Commission (SEC) issued the Commission Guidance Regarding Disclosure Related to Climate Change in 2010 (2010 Guidance). The 2010 Guidance was SEC's primary form of communication to clarify companies' climate-related disclosure requirements. In addition, SEC issued individual comment letters to specific companies on their climate-related disclosures. These letters are publicly available and companies can view these letters to understand SEC's assessment of a particular company's disclosures. Representatives from industry associations with whom GAO spoke stated that they consider the disclosure requirements for climate-related risks to be clear and have no need for additional guidance.
SEC issued two reports to Congress in 2012 and 2014 that examined changes in climate-related disclosures in select industries. SEC found that most of these filings included some level of climate-related disclosures and reported that there were no notable year-to-year changes. SEC staff also continue to periodically assess climate-related disclosures in addition to its regular disclosure review process. Additionally, in April 2016, SEC requested public input on modernizing certain business and financial disclosure requirements, including potential changes on reporting climate-related risks in SEC's filings. As of December 2017, SEC staff said they are considering recommendations for the Commission's consideration based on comments received.
SEC faces constraints in reviewing climate-related and other disclosures because it primarily relies on information that companies provide. SEC senior staff explained that SEC's Division of Corporation Finance staff assess companies' filings for compliance with federal securities laws—which require companies to disclose material risks—but do not have the authority to subpoena additional information from companies. Additionally, companies may report similar climate-related disclosures in different sections of the filings, and climate-related disclosures in some filings contain disclosures using generic language, not tailored to the company, and do not include quantitative metrics. When companies report climate-related disclosures in varying formats and specificity, SEC reviewers and investors may find it difficult to compare and analyze related disclosures across companies' filings. SEC has tools, mechanisms, and resources—including internal supervisory controls, regulations and guidance, a two-level filing review process, internal and external data, and staff training and experience—that help SEC staff consistently review filing disclosures, according to SEC documents and staff. Representatives of industry associations told GAO that they consider the current climate-related disclosure requirements adequate and no additional climate-related disclosures are needed. However, some investor groups and asset management firms have highlighted the need for companies to disclose more climate-related information. But, members of SEC's Investor Advisory Committee told GAO that investors have not agreed on the priority of climate-related disclosures. Also, additional disclosure requirements or increased scrutiny of companies' climate-related information—which, if necessary, SEC and Congress can consider—could have mission and resource implications for SEC's Division of Corporation Finance.