There is no escaping the global conversation about climate change. It was even referenced by Pope Francis in his recent address to the U.S. Congress. Increasingly, shareholders and regulators are trying to involve public companies in addressing the issue.

There has been a recent slew of shareholder letters to the SEC and to certain companies, pushing for additional disclosure on how climate change might affect their businesses and how their businesses might affect climate change.

So what are the current rules for disclosure? And, how are the companies meeting those requirements?

SEC Rules and Required Disclosures

In 2010, the SEC noted that “climate change has become a topic of intense public discussion,” and the SEC released guidance describing how companies were expected to meet their disclosure obligations for climate change. It detailed the parts of the financial statements which could possibly require climate change disclosures, and listed the things that would trigger the need for those disclosures. These triggers are grouped into 3 different categories:

1. Impact of Legislation and Climate Accords
These include the costs to improve facilities, costs of cap and trade programs, or change in demand for products as a direct result of rule changes.

2. Indirect Impacts
Situations where the company is not directly affected by climate change considerations, but the companies they do business with, or compete against, are affected. Possible indirect effects include changes in input or sales prices due to industry demand changes from climate change impacts.

3. Physical Impacts
Includes the direct effects of climate change itself. Possible material impacts, including those of weather patterns, sea level rises, resource availability and decreased demand from physical climate change.

In Practice

To determine how many companies are actually reporting these potential impacts, we used AlphaSense to find all the 10Ks filed since 2010 that contain a discussion of climate change or closely related concepts. We found that the percentage of companies who had climate change related disclosures has increased slowly:

% S&P 500 with Climate Change Disclosure

Not surprisingly, the prevalence of disclosure also varies from industry to industry. All of the energy and utility companies disclose a potential impact from climate change, while low commodity oriented sectors, such as healthcare (36%), have the lowest need for disclosure:

% Climate Change Disclosure by Industry

Energy and utilities also have the most lengthy and intensive disclosures of any industries:

Sentences about Climate Change

We also used AlphaSense to quickly find examples of how companies are specifically being impacted by climate change and by the disclosure of that impact. Here are a few notable examples:


  • American Electric Power ($AEP) – 10K, February 25, 2014
    The utility company mentioned climate change or emissions in 90 sentences of its February 25, 2014 10K. Disclosures occur in the risk factors and MD&A sections of the document and deal with all 3 categories of impact laid out by the SEC:
    • Regulation: “Future federal and state legislation or regulations that mandate limits on the emission of CO2 could result in significant increases in capital expenditures and operating costs.”
    • Physical: “Climate change and its resultant impact on weather patterns could modify our customers’ power usage.”
    • Indirect: “To the extent climate change affects a region’s economic health, it could also affect our revenues.”

Information Technology

  • Intel ($INTC) – 10K, February 14, 2014
    The chipmaker mentions climate change more than any other company in the technology space. Most of the impacts it discloses revolve around potential impediments to production:
    • Regulation: “Due to the dynamic nature of our operations, these [emissions] regulations will likely result in increased costs for our U.S. operations.”
    • Indirect: “The cost of perfluorocompounds (PFCs) — a gas that we use in manufacturing — could increase under some climate-change-focused emissions trading programs that may be imposed through regulation… If the use of PFCs is prohibited, we would need to obtain substitute materials that may cost more or be less available for our manufacturing operations.”

Consumer Discretionary

  • Carnival ($CCL) – 10K, January 29, 2014
    The cruise line operator is focused on reducing its emissions by 20% over a 2005 baseline. The potential impacts they see are largely a result of emissions regulations and fuel prices:
    • Indirect: “There are indications that additional climate-change-related mandates could be forthcoming, and they may significantly impact our costs, including, among other things, increasing fuel prices.”

Source: Using AlphaSense, a search for “climate change” and related concepts across all industries, global companies and document types, including SEC and global filings returned results in seconds.