Bloomberg Tax
April 30, 2020, 6:54 PM

Warren Urges SEC to Require Climate Change Disclosures

Amanda Iacone
Amanda Iacone

Sen. Elizabeth Warren (D-Mass.) is urging the SEC to require public companies to discuss the impact and risk of climate change as the regulator considers overhauling its rules for management disclosures.

In an April 28 letter to Jay Clayton, the Securities and Exchange Commission chairman, Warren writes that the agency is missing an important opportunity to arm investors with details about climate risks, information that is key to investment decisions.

“As health professionals and public health officials work to combat the ongoing coronavirus disease 2019 (COVID-19) pandemic, and as governments throughout the world work to address the associated economic collapse, we cannot also afford to lose sight of climate-related threats to our health and economic well-being,” the letter reads.

Her comments, and others, come in response to a proposed overhaul of the commission’s rules for what information management should discuss and what analysis it should provide in financial reports. The proposal would eliminate some repetitive financial disclosures and bolster rules for reporting accounting estimates, among other changes. Comments were due April 28.

While Warren focused on sustainability reporting, investors seized on separate aspects of the proposal, questioning why the commission would strip away key disclosures that investors have relied on during the coronavirus shutdowns that have forced companies to lay off or furlough millions of workers as revenue disappeared. The SEC is missing an opportunity to improve how companies use the management discussion and analysis section to describe what’s driving changes in its performance, investors argue.

In a joint letter, the CFA Institute and the Council of Institutional Investors called the proposal a major step backward that, if approved, would make the job of investors harder, not easier.

Public companies, however, applauded the proposed relaxation of rules, saying the changes eliminate costly reporting and would give them more flexibility to decide which mix of information to provide investors.

The Institute of Management Accountants urged the SEC to proceed cautiously and said further rules weren’t needed to address sustainability reporting.

Large filers including FedEx Corp., Eli Lilly and Co., and UnitedHealth Group Inc. supported the proposed changes, saying the updated rules would eliminate duplicative reporting—as much of the information can found elsewhere in the financial report or on the SEC website, they said.

“A streamlined filing allows investors to focus on the most important information in order to understand current performance, as well as expected future performance, and not be distracted by outdated, duplicative or repetitive disclosures,” wrote Thomas Roos, chief accounting officer for UnitedHealth.

Pandemic Highlights Need for Disclosures

Investors, who decried the proposed changes, want the SEC to preserve a chart that details a company’s contractual obligations, according to letters from the CFA Institute, the Council of Institutional Investors, the North American Securities Administrators Association, and a subcommittee of the SEC’s own investor advisory group.

Similar information is scattered throughout the financial report, but investors have used those charts to project liquidity and quickly assess which companies might survive the pandemic disruptions that have clobbered airlines and the cruise industry, as well as hotels and retailers.

The pandemic underscores the importance of management disclosures to highlight areas like supply chain, market demand, and staffing needs, the California Public Employees’ Retirement System said in its letter, in which it urged the SEC to abandon the project.

“Many of these risks are now threatening entire companies, and few, if any, were meaningfully shared with investors. This is a problem that we would like addressed,” the public pension fund said.

Investors also urged the SEC to continue requiring that companies report fourth-quarter results separately from year-end results and to keep a chart that combines five years of basic financial data covering net sales or operating revenues, income from continuing operations, total assets, long-term obligations and cash dividends.

The proposed amendments to Regulation S-K cover Items 301, 302, and 303—known as management discussion and analysis—and represent the commission’s latest effort to modernize and simplify its non-financial reporting rules.

To contact the reporter on this story: Amanda Iacone in Washington at

To contact the editors responsible for this story: Jeff Harrington at; David Jolly at