As the number of climate change-related lawsuits against public companies grows, and climate change issues become the subject of increasing state, federal and international regulatory efforts, the risk that directors and officers may become the targets of governmental and private lawsuits based on their companies’ climate change-related disclosures is becoming more likely. Perhaps the clearest indication of this emerging risk is the SEC’s first-ever issuance of climate change-related financial disclosure guidelines.

These guidelines, issued on February 8, 2010, indicate that the SEC has recognized that climate change-related regulations and liabilities increasingly may trigger potential corporate reporting requirements under a variety of SEC rules and regulations. The guidance to public companies, entitled “Commission Guidance Regarding Disclosure Related to Climate Change” focuses on the SEC’s “existing disclosure requirements as they apply to climate change matters.” It identifies a variety of climate change-related issues that might trigger corporate disclosure requirements, including:

• Enacted or proposed state, federal or international legislation that may have a material effect on a public company
• Legal, technological, political and scientific developments regarding climate change that may create risks for companies, such as decreases in demand for existing products or services, or adverse effects on a company’s reputation
• The potential physical effects of climate change on weather sensitive business operations, such as the financial effects on companies with operations on coastlines or effects from disruptions to the operations of major customers or suppliers from severe weather.

Although we have yet to see any significant number of governmental actions or shareholder suits against corporations or their directors and officers in relation to climate change-related disclosure failures, the seeds for the future growth of such actions are being sown.