Green Industries Initiative

Kelly Doria, an associate at Ice Miller, wrote this blog.  I thought it was interesting.

Although the issue of climate change disclosure has generated much attention over the last few years, the SEC has yet to establish specific guidance on climate change related securities disclosures.  But, this inaction has not stopped the state of New York from taking the lead by demanding climate change disclosures in public securities filings.

The New York State Securities Law, commonly known as the Martin Act, principally focuses on investigation and enforcement powers in preventing the investing public from fraud (compared to other states' Blue Sky laws that focus on the registration of securities).  The Martin Act permits the New York attorney general to file civil or criminal charges of fraud in connection with the offer and sale of securities in and from the state of New York.  In September 2007, New York Attorney General Andrew Cuomo subpoenaed the executives of several public energy companies (AES Corporation, Dominion Resources, Inc., Xcel Energy, Dynegy Inc. and Peabody Energy) for information on whether public disclosures to investors in filings with the SEC adequately described the companies' financial risks related to the emissions of global warming pollution.

In an agreement announced October 23, 2008, Dynegy Inc., a Delaware corporation headquartered in Texas and traded on the NYSE, agreed to provide disclosure of material risks associated with climate change in its next annual report on Form 10-K.  Pursuant to the agreement, the required disclosure includes an analysis of material financial risks from climate change related to:

• Present and probable future climate change regulation and legislation;
• Climate-change related litigation; and
• Physical impacts of climate change.

Dynegy also committed to disclosing:

• Current carbon emissions;
• Projected increases in carbon emissions from planned coal-fired power plants;
• Company strategies for reducing, offsetting, limiting or otherwise managing its global warming pollution emissions and expected global warming emissions reductions from these actions; and
• Corporate governance actions related to climate change, including if environmental performance is incorporated into officer compensation.

A similar agreement was also reached with Xcel Energy in August 2008, while the investigations continue for AES Corporation, Dominion Resources, Inc. and Peabody Energy.

Voluntary climate change disclosures is a likely trend for oil and gas companies in 2009, but expect these disclosures to expand to other industries in the near future.