CLIMATE-RELATED 

RISKS

SEC Has Taken Steps 

to Clarify Disclosure 

Requirements

Report to Congressional Requesters

February 2018

GAO-18-188

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-18-188, a report to 

congressional requesters

February 2018

CLIMATE-RELATED RISKS

SEC Has Taken Steps to Clarify Disclosure 

Requirements

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 climaterelated 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 climaterelated 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.

View GAO-18-188. For more information, 

contact Michael Clements, (202) 512-8678 or

clementsm@gao.gov, or J. Alfredo Gómez, 

(202) 512-3841 or gomezj@gao.gov.

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. 
Page i GAO-18-188 Securities and Exchange Commission

Letter 1

Background 6

SEC Issued the 2010 Guidance and Comment Letters to Specific 

Companies to Clarify Climate-Related Disclosure Requirements 14

SEC Examined Climate-Related Disclosures for Reports to 

Congress and Issued a Concept Release Seeking Public Input 

on Disclosure Requirements 15

SEC Faces Constraints in Reviewing Climate-Related Disclosures 

as It Primarily Relies on Information That Companies Determine 

Is Material 16

Agency Comments and Our Evaluation 27

Appendix I Objectives, Scope, and Methodology 29

Appendix II Examples of Climate-Related Disclosures in Securities and Exchange 

Commission (SEC) Form 10-K Filings 35

Appendix III GAO Contacts and Staff Acknowledgments 39

Tables

Table 1: Categories of Climate-Related Risks Identified by the 

Securities and Exchange Commission and Examples of 

How They Could Trigger Disclosure Rules 9

Table 2: Examples of Regulations, Formal Guidance, and Informal 

Guidance for Securities and Exchange Commission 

(SEC) Staff May Consult 22

Figure

Figure 1: Securities and Exchange Commission’s (SEC) Annual 

Filing Review Process 11

Contents
Page ii GAO-18-188 Securities and Exchange Commission

Abbreviations

2010 Guidance Commission Guidance Regarding Disclosure

Related to Climate Change

C2ES Center for Climate and Energy Solutions

CDP formerly known as the Carbon Disclosure Project

Corporation Finance Division of Corporation Finance 

Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer

Protection Act

DSO Disclosure Standards Office

EDGAR Electronic Data Gathering, Analysis, and Retrieval

FACTS Filing Activity Tracking System

FSB Task Force Financial Stability Board Task Force on 

Climate-related Financial Disclosures

OIG Office of Inspector General

SASB Sustainability Accounting Standards Board

SEC Securities and Exchange Commission

SICS Sustainable Industry Classification System

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-18-188 Securities and Exchange Commission

441 G St. N.W.

Washington, DC 20548

February 20, 2018

Congressional Requesters

Impacts from a changing climate can pose serious risks to the global 

economy and affect many economic sectors, according to reports. For 

example, as observed by the United States Global Change Research 

Program, U.S. energy facilities and systems, especially those located in 

coastal areas, are vulnerable to extreme weather events.1 Wind and 

storm surge damage by hurricanes already causes significant 

infrastructure losses on the Gulf Coast. The impacts and costs of floods, 

droughts, and other weather events will increase in significance as what 

are considered “rare” events become more common and intense. 2

Superstorm Sandy in 2012, for example, cost the United States an 

estimated $70 billion in direct damages and lost economic output. In the 

first 6 months of 2017, the United States had 10 weather and climate 

disasters with losses reaching or exceeding $1 billion each. More 

recently, in August and September 2017, Hurricanes Harvey, Irma, and 

Maria caused significant damage to parts of the United States, and, as of 

October 3, 2017, the Federal Emergency Management Agency has 

approved over $1 billion in assistance funds in response to these three 

hurricanes.

In February 2013, we recognized that climate change presents a 

significant financial risk to the federal government and added the area of 

limiting the federal government’s fiscal exposure by better managing 

climate change risks as a high-risk area.3 In the February 2015 and 2017 

updates to our high risk list, we recognized that climate change also 

poses risks to private-sector decision makers such as public companies, 

and these decision makers can also drive federal climate-related fiscal 

exposures because they are responsible for planning, constructing, and 

maintaining certain types of vulnerable infrastructure paid for with federal 

 1

U.S. Global Change Research Program. J. Dell, S. Tierney, G. Franco, R. G. Newell, R. 

Richels, J. Weyant, and T. J. Wilbanks, Ch. 4: Energy Supply and Use. Climate Change 

Impacts in the United States: The Third National Climate Assessment, J. M. Melillo, 

Terese (T.C.) Richmond, and G. W. Yohe, eds. (2014), 113-129.

2

While it may not be possible to link any individual weather event to climate change, these 

and other observed impacts of such events disrupt people’s lives and affect many sectors 

of our economy, including the budgets of federal, state, and local governments. 

3

GAO, High-Risk Series: An Update, GAO-13-283 (Washington, D.C.: February 2013).

Letter
Page 2 GAO-18-188 Securities and Exchange Commission

funds, insured by federal programs, or eligible for federal disaster 

assistance.4

Public companies are generally required to disclose, among other things, 

known trends, events, and uncertainties that are reasonably likely to have 

a material effect on the company’s financial condition or operating 

performance through annual and other periodic filings with the Securities 

and Exchange Commission (SEC).5 These disclosures may include 

information on climate-related risks.6 In February 2010, SEC issued 

Commission Guidance Regarding Disclosure Related to Climate Change

(hereafter referred to as the 2010 Guidance) to provide guidance to 

companies on how existing disclosure requirements apply for climaterelated matters.7 We reported in 2016 that SEC considers climate-related 

information as part of its routine filing review process.8 Furthermore, 

SEC’s Office of Inspector General (OIG) examined SEC’s process for 

comment letters issued to individual companies on issues identified 

through the filing review and reported in September 2017 that SEC’s 

 4

GAO, High-Risk Series: An Update, GAO-15-290 (Washington, D.C.: Feb. 11, 2015) and 

High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed 

on Others, GAO-17-317 (Washington, D.C.: Feb. 15, 2017).

5

Material means that there is a substantial likelihood that a reasonable investor would 

attach importance in determining whether to buy or sell the securities registered. See

Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988) (quoting TSC Industries, Inc. v. 

Northway, Inc., 426 U.S. 438, 449 (1976)) (“[T]o fulfill the materiality requirement ‘there 

must be a substantial likelihood that the omitted fact would have been viewed by the 

reasonable investor as having significantly altered the ‘total mix’ of information made 

available.’”); see also 17 C.F.R. § 240.12b-2. For the purposes of this report, when we use 

the word “companies,” we are referring to those public companies subject to the 

registration and reporting requirements of the Securities Act of 1933 and the Securities 

Exchange Act of 1934.

6

This report refers to “climate-related risks,” which we define as vulnerabilities of natural 

and human systems, such as environmental and economic systems, due to changes in 

the earth’s climate, including higher temperatures, changes in precipitation, rising sea 

levels, and increases in the severity and frequency of severe weather events.

7

Commission Guidance Regarding Disclosure Related to Climate Change, 75 Fed. Reg. 

6290 (Feb. 8, 2010). 

8

GAO, Supply Chain Risks: SEC’s Plans to Determine If Additional Action Is Needed on 

Climate-Related Disclosure Have Evolved, GAO-16-211 (Washington, D.C.: Jan. 6, 2016). 
Page 3 GAO-18-188 Securities and Exchange Commission

Division of Corporation Finance’s (Corporation Finance) controls over its 

comment letter process are generally effective.9

You asked us to review SEC’s efforts to implement its 2010 Guidance.10

This report examines: (1) steps SEC has taken to help companies 

understand 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.11

To address all three objectives, we reviewed SEC documents, including 

the 2010 Guidance and internal filing review guidance, related to 

companies’ annual filings. We also reviewed SEC’s 2012 and 2014 

congressional reports and additional information on SEC staff’s ongoing 

reviews of climate-related disclosures.12 In addition, we reviewed prior 

GAO and SEC OIG reports related to the 2010 Guidance and SEC’s filing 

review process, and reports from stakeholders, including the report on 

recommendations from the Financial Stability Board Task Force on 

 9

Securities and Exchange Commission, Office of Inspector General, Evaluation of the 

Division of Corporation Finance’s Disclosure Review and Comment Letter Process, 

Report No. 542 (Washington, D.C.: Sept. 13, 2017). The OIG review was conducted in 

response to a joint request from some congressional members to GAO and the OIG. As 

part of the filing review process, SEC staff may issue “comment letters” to companies to

obtain additional information, clarification on the companies’ disclosures, or to elicit better 

compliance with applicable requirements. The findings of the OIG review are described in 

this report’s Background section.

10This review was conducted in response to a 2016 request from Representative Matthew 

Cartwright—then Ranking Member, Subcommittee on Healthcare, Benefits and 

Administrative Rules.

11For this report, we focus on SEC’s review of climate-related disclosures in companies’

annual filings on Form 10-K. Some companies may file annual reports on other forms, 

such as Form 20-F and Form 40-F. We use filing review to broadly refer to review of 

annual 10-K filings unless otherwise noted.

12The 2012 and 2014 reports were titled Staff Report to the Senate Committee on 

Appropriations Regarding Climate Change Disclosure. Senate Committee on 

Appropriations reports accompanying Financial Services and General Government 

Appropriations bills for fiscal years 2012 and 2013 directed SEC to submit reports to the 

committee on public company disclosures about climate change-related matters. S. Rep. 

No. 112-79, at 111 (2011); S. Rep. No. 112-177, at 109 (2012).
Page 4 GAO-18-188 Securities and Exchange Commission

Climate-related Financial Disclosures (FSB Task Force).13 We selected 

five industries to focus on for this report: oil and gas, mining, insurance, 

electric and gas utilities, and food and beverage. We selected these 

industries because they were generally identified by SEC staff as more 

likely than other industries to be affected by climate change-related 

matters due to the nature of their operations or because we identified 

companies in the industry that have submitted climate-related disclosures 

and can provide perspectives on these disclosures. Views from the 

selected industries are not generalizable to other industries we did not 

include in our review.

To address the first objective, we determined the number of comment 

letters SEC issued to companies on climate-related disclosures from 

February 2, 2010, through August 11, 2017. We reviewed all these 

comment letters to understand the climate-related disclosure issues SEC 

staff has identified. We also interviewed SEC senior staff from the 

Division of Corporation Finance and representatives from a 

nongeneralizable sample of industry groups representing companies in 

the five industries we selected. Views from these industry representatives 

cannot be generalized to those we did not include in our review.

To address the second objective, we reviewed SEC’s April 2016 Concept 

Release related to business and financial disclosures in Regulation S-K.14

Further, we interviewed SEC senior staff to understand steps SEC has 

taken to examine changes in climate-related disclosures since the 2010 

Guidance and planned actions related to the April 2016 Concept Release.

To address the third objective, we reviewed information on the New York 

State Attorney General’s investigation of and agreement with Peabody 

 13See for example, GAO, Securities and Exchange Commission: Management Has 

Enhanced Supervisory Controls And Could Further Improve Efficiency, GAO-17-16 

(Washington, D.C.: Oct. 6, 2016); GAO-16-211; Federal Supply Chains: Opportunities To 

Improve The Management Of Climate-Related Risks, GAO-16-32 (Washington, D.C.: Oct. 

13, 2015); Securities and Exchange Commission, Office of Inspector General Report No. 

542; Task Force on Climate-Related Financial Disclosures, Final Report: 

Recommendations of the Task Force on Climate-Related Financial Disclosures (June 

2017), and Sustainability Accounting Standards Board, Climate Risk Technical Bulletin, 

Technical Bulletin #: TB001-10182016 (San Francisco, CA: October 2016). 

14Business and Financial Disclosure Required by Regulation S-K, 81 Fed. Reg. 23916 

(Apr. 22, 2016). The Commission at times issues a concept release to seek public input to 

help identify the appropriate regulatory approach, if any, prior to issuing a rule proposal.
Page 5 GAO-18-188 Securities and Exchange Commission

Energy on the company’s SEC climate-related disclosures.15 To identify 

illustrative examples of climate-related disclosures, we used Ceres’ SEC 

Sustainability Disclosure Search Tool to search annual filings of S&P 500 

Index companies, filed in 2016, in the five industries we selected.16

Additionally, we reviewed comments on SEC’s Concept Release 

submitted by organizations that represent investors, companies in the five 

industries we selected, or organizations that have a key interest in 

climate-related issues.17 We interviewed SEC senior staff to obtain 

information on SEC’s filing reviews and enforcement authority. We also 

interviewed representatives from the organizations representing investors 

or focusing on climate-related issues. Views from the representatives of 

these investor groups cannot be generalized to those we did not include 

in our review.

Throughout this report, we use certain qualifiers when describing results 

from interview participants, such as “few,” “some,” and “most.” We define 

few as two or three; some as four or more but less than most; and most 

as more than half or nearly all relative to the total number possible. The 

views of interviewees we selected cannot be generalized to all SEC staff 

or stakeholders on issues related to climate-related disclosures.18 See 

appendix I for more information on our scope and methodology.

We conducted this performance audit from November 2016 to February

2018 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

 15The New York State Attorney General launched an investigation under New York State 

law on Peabody Energy’s climate-related disclosures in its SEC filings. The Attorney 

General reached an agreement with Peabody Energy on November 8, 2015.

16Ceres is a nonprofit organization that works with investors, companies, and public 

interest groups on sustainable business practices. Ceres’ SEC Sustainability Disclosure 

Search Tool searches SEC annual filings and identifies climate-related disclosures. S&P 

500 Index is an index that includes 500 leading companies and captures approximately 80 

percent coverage of available market capitalization and is widely used as a gauge of 

large-cap U.S. equities. 

17Business and Financial Disclosure Required by Regulation S-K, 81 Fed. Reg. 23916 

(Apr. 22, 2016). 

18For the purpose of this report, we refer to organizations that represent companies in the 

five industries we selected for this review or investors focused on climate-related issues 

as stakeholders. 
Page 6 GAO-18-188 Securities and Exchange Commission

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

SEC’s mission is to protect investors; maintain fair, orderly, and efficient 

markets; and facilitate capital formation. As part of SEC’s strategic plan, 

SEC strives to promote a securities market that is worthy of the public’s 

trust and is characterized by, among other things, transparent disclosure 

to investors of the risks of particular investments.

SEC is headed by a five-member Commission composed of the Chair 

and four Commissioners. SEC’s responsibilities are divided among five 

divisions and 24 offices, including the following offices that are 

responsible for filing review or investor outreach:19

• Corporation Finance is responsible for reviewing documents that 

publicly-held companies are required to file with SEC, which may 

include climate-related disclosures. Corporation Finance reviews 

disclosure documents that companies are required to file, including 

annual reports. Corporation Finance performs its filing review 

responsibilities through accounting and legal staff in 11 offices, 

organized by industry. The division’s staff also provides companies 

with assistance interpreting the Commission’s rules and assists the 

Commission with rule making.

• The Investor Advisory Committee was established under the 2010 

Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act) to advise the Commission on regulatory priorities, the 

effectiveness of disclosure, and initiatives to protect investor interests 

and to promote investor confidence, among other things.20 The 

 19The five Commissioners are appointed by the President and confirmed by the Senate. 

The Commission is responsible for interpreting and enforcing federal securities laws; 

issuing new rules and amending existing rules; overseeing inspections of securities firms, 

brokers, investment advisers, and ratings agencies; overseeing private regulatory 

organizations in the securities, accounting, and auditing fields; and coordinating U.S. 

securities regulation with federal, state, and foreign authorities. 

20Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 

911, 124 Stat. 1822 (2010). 

Background

Overview of SEC
Page 7 GAO-18-188 Securities and Exchange Commission

committee has the authority to submit findings and recommendations 

for review and consideration by the Commission.

• The Office of the Investor Advocate was established in 2014 pursuant 

to the Dodd-Frank Act to provide a voice for investors, assist retail 

investors, study investor behavior, and support the Investor Advisory 

Committee. The Investor Advocate is required to submit reports 

directly to Congress, without any prior review or comment from the 

Commissioners or SEC staff.

SEC rules generally require public companies to disclose, among other 

things, known trends, events, and uncertainties that are reasonably likely 

to have a material effect on the company’s financial condition or operating 

performance through annual and other periodic filings. Information is 

material if there is a substantial likelihood that a reasonable investor 

would consider it important in making an investment decision.21

Regulation S-K, promulgated by SEC, contains disclosure requirements 

that are applicable to the nonfinancial statement portion of annual filings 

and other periodic reports filed with SEC.

The Commission occasionally provides guidance on topics of general 

interest to the business and investment communities by issuing 

interpretive releases, which publish the Commission’s views and interpret 

federal securities laws and SEC regulations. The 2010 Guidance was 

published by the Commission to provide guidance to companies on how 

existing disclosure requirements apply for climate-related matters.

The 2010 Guidance identifies four items in Regulation S-K that may be 

most likely to require climate-related disclosure in companies’ annual 

filings. The four items are as follows:22

• Description of business. This section of a company’s annual filing 

requires a description of the company’s business, including its main 

products and services, and what markets it operates in. This item 

expressly requires disclosure of certain material effects of complying 

with environmental laws.

• Legal proceedings. This section requires a company to include 

information about certain material pending legal proceedings, 

 21See n. 5, supra. 

22The annual filing on Form 10-K includes 4 parts and 21 total items.

SEC Disclosure 

Requirements, Rule

Making, and Guidance
Page 8 GAO-18-188 Securities and Exchange Commission

including, in certain circumstances, those arising under any federal, 

state, or local provisions that have been enacted or adopted 

regulating the discharge of materials into the environment or primarily 

for the purpose of protecting the environment.

• Risk factors. This section discusses the most significant factors that 

make investment in the company speculative or risky. Disclosure 

under this section should clearly state risks and specify how each risk 

affects the particular company and should not present risks that could 

apply to any company.

• Management’s discussion and analysis. This section presents 

management’s perspective on material past and anticipated future 

business results. The information provided in this section is intended 

to give the investor an opportunity to look at the company through the 

eyes of management by providing both a short- and long-term 

analysis of the company’s financial condition. Additionally, in this 

section companies must identify and disclose known trends, events, 

demands, commitments, and uncertainties that are reasonably likely 

to have a material effect on their financial condition or operating 

performance.

The 2010 Guidance also identifies four different topics under which 

climate-related risks can be categorized (see table 1). Regardless of 

whether a company’s identified risk falls under one of these categories, 

companies need to disclose the information required by the federal 

securities laws and regulations, and any additional material information 

necessary to make the required statements, in light of the circumstances 

under which they are made, not misleading.
Page 9 GAO-18-188 Securities and Exchange Commission

Table 1: Categories of Climate-Related Risks Identified by the Securities and Exchange Commission and Examples of How 

They Could Trigger Disclosure Rules

Category of climaterelated riskDefinition Examples

Legislation and regulation Pending or existing regulations or legislation 

related to climate change at all levels of 

government.

Companies could face costs to improve facilities and 

equipment to reduce emissions to comply with regulatory 

limits; or to purchase, or profit from the sale of, allowances 

or credits under a “cap and trade” system.a

International accords Treaties or international accords relating to 

climate change.

The European Union Emissions Trading System could have 

a material impact on a company’s business,b which could 

potentially be the same as the impact from U.S. climate 

change legislation and regulation.

Indirect consequences of 

regulation or business 

trends

New opportunities or risks created by legal, 

technological, political, or scientific 

developments related to climate change.

Companies may face decreased demand for goods that 

produce significant greenhouse gas emissions and may 

face potential adverse consequences to business 

operations or financial condition, from the public’s 

perception of publicly-available data about their greenhouse 

gas emissions.

Physical impacts Significant physical effects of climate 

change such as severity of storms, sea 

levels, and water availability.

Severe weather could cause property damage and 

disruptions to operations for companies with operations 

concentrated on coastlines. It could also cause indirect 

financial and operational impacts from disrupting the 

operations of major customers or suppliers.

Source: Securities and Exchange Commission. | GAO-18-188

a

Under a cap-and-trade system, an overall emissions cap is set, and entities covered by the system 

must hold tradable permits—or allowances—to cover their emissions.

b

The European Union Emissions Trading System was established by a directive, approved by the 

European Parliament and the Council of the European Union in 2003. Under the directive, as 

amended, the European Union established a cap on greenhouse gas emissions from covered 

entities, which receive or purchase emission allowances from member states that can be traded if not 

needed for compliance.

Additionally, SEC staff may issue guidance that includes a summary or 

explanation of rules adopted or amended by the Commission. For 

example, SEC staff issued a Staff Accounting Bulletin on materiality that 

provides guidance in applying quantitative materiality thresholds to the 

preparation of financial statements filed with SEC. According to SEC, staff 

guidance is not a substitute for any rule, and only the rule itself can 

provide complete and definitive information on its requirements.

The Commission can adopt new rules through the rule-making process. 

According to SEC, rule making can involve several steps: concept 

release, rule proposal, and rule adoption.
Page 10 GAO-18-188 Securities and Exchange Commission

• Concept release. The Commission at times issues a concept release 

to seek public input to help identify the appropriate regulatory 

approach, if any, prior to issuing a rule proposal. In a concept release, 

SEC describes the area of interest and the Commission’s concerns; 

identifies different approaches to address the problem; and includes a 

series of questions that seek the views of the public on the issue.

• Rule proposal. The Commission publishes a detailed formal rule 

proposal for public comment. A rule proposal advances specific 

objectives and methods for achieving them. The Commission typically 

provides between 30 and 90 days for public review and comment. 

Public comment is considered vital to the formulation of a final rule.

• Rule adoption. The Commissioners consider what they have learned 

from public input on the rule proposal and seek to agree on the 

specifics of a final rule. If a final rule is adopted by the Commission, it 

becomes part of the official rules that govern the securities industry.

According to SEC senior staff, SEC reviewers examine climate-related 

disclosures as part of their review of all disclosures included in the 

companies’ annual filings. Corporation Finance selects annual filings for 

review and determines the extent to which annual filings are reviewed 

based on the requirements of the Sarbanes-Oxley Act of 2002 and review 

goals established by senior leadership (see fig. 1).23 The Sarbanes-Oxley 

Act requires SEC to review the financial statements of each reporting 

company at least once every 3 years. According to SEC senior staff, SEC 

staff review the financial statements of a significant number of companies 

more frequently. SEC staff may also review companies’ nonfinancial 

disclosures, which may be reviewed as (a) a part of a full cover-to-cover 

review or (b) a targeted issue review. SEC reviewed the disclosures of 

approximately 4,400 companies each in fiscal years 2015 and 2016 and 

approximately 4,200 companies in fiscal year 2017. Of the reviews in 

fiscal years 2016 and 2017, over 1,400 and 1,250 resulted in comment 

letters, respectively.

 23Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, §408, 116 Stat. 745, 790-91 (2002) 

(codified at 15 U.S.C. § 7266).

SEC’s Annual Filing and 

Disclosure Review 

Process
Page 11 GAO-18-188 Securities and Exchange Commission

Figure 1: Securities and Exchange Commission’s (SEC) Annual Filing Review Process

a

SEC’s Division of Corporation Finance selects annual filings for review and determines the extent to 

which annual filings are reviewed based on the requirements of the Sarbanes-Oxley Act of 2002 and 

review goals established by senior leadership.

b

A targeted issue review is one in which the staff will examine the filing for one or more specific items 

of disclosure for compliance with the applicable accounting standards and/or the disclosure 

requirements of federal securities laws and regulations.

Corporation Finance generally conducts two levels of review at key steps 

in the filing review process. Once selected for review, a filing enters the 

review cycle, which generally includes evaluating the disclosure for 

material compliance with securities laws, preparation and review of 

comments, review of company responses to comments, and public 

posting of filing review correspondence on the SEC website. For most 

filings, a second-level review is required during each of these phases.24

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. 

Companies may voluntarily disclose climate-related risks through 

channels outside of SEC filings, including nongovernmental 

organizations, company websites, and in response to reporting 

requirements in foreign countries.

As part of the review process, SEC staff may issue “comment letters” to 

companies to obtain additional information, clarification on the companies’

disclosures, or elicit better compliance with applicable requirements. In a 

 24A second-level review examines the first reviewer’s work and may agree with, modify, 

waive, and/or add comments to the ones proposed by the examiner.
Page 12 GAO-18-188 Securities and Exchange Commission

review of Corporation Finance’s comment letter process, SEC’s OIG 

reported in September 2017 that Corporation Finance has established 

policies, procedures, and internal controls that provide overall guidance 

for how staff should conduct disclosure reviews and for how information, 

including comments, should be documented, tracked, and disseminated 

to companies and the public.25 However, the report also found, among 

other things, that SEC reviewers (1) did not always properly document 

comments before issuing comment letters to companies and (2) 

inconsistently documented oral comments to companies. The report 

recommended that Corporation Finance establish mechanisms or 

controls and provide detailed guidance to staff to improve documentation 

in the comment letter process. SEC management agreed with these 

recommendations.

Furthermore, if SEC reviewers find a material inadequacy in a company’s 

disclosures, the reviewers may refer the potential violations to the 

Division of Enforcement for investigation. If the Division of Enforcement 

finds sufficient evidence of a potential violation, SEC may file an action in 

federal district court or institute an administrative proceeding.26

Corporation Finance maintains four distinct electronic databases to track,

document, and report on different aspects of its filing review program. 

One of these is Electronic Data Gathering, Analysis, and Retrieval 

(EDGAR), which is Corporation Finance’s primary record-keeping system 

of documents related to filing reviews, including companies’ filings, SEC’s 

comment letters to companies and their responses to the letters, and 

SEC staff’s filing review reports.27

 25Securities and Exchange Commission, Office of Inspector General, Report No. 542. 

26We reported in January 2016 that the Division of Enforcement has not filed any actions 

concerning climate-related disclosure issues, according to SEC staff. See GAO-16-211.

27In addition to EDGAR, SEC maintains three other systems. The FACTS (the Filing 

Activity Tracking System) tracks SEC staff’s progress of filing reviews. The Comment 

Letter Dissemination system enables staff to schedule filing review correspondence for 

dissemination, review the correspondence before dissemination, confirm that the 

correspondence is associated with the correct review, and ensure that the 

correspondence to be disseminated does not contain confidential or personally identifiable 

information. The Confidential Treatment Request system is used to track the status and 

disposition of the division’s processing of confidential treatment requests.
Page 13 GAO-18-188 Securities and Exchange Commission

In April 2016, SEC published a Concept Release to seek public comment 

on modernizing certain business and financial disclosure requirements in 

Regulation S-K. The 2016 Concept Release specifically requested 

comments about “Disclosure of Information Relating to Public Policy and 

Sustainability Matters.” Sustainability disclosures—including topics on 

climate change, resource scarcity, corporate social responsibility, and 

good corporate citizenship—are often characterized broadly as 

environmental, social, or governance concerns. The public comment 

period for the Concept Release ended on July 21, 2016. According to 

SEC staff, the agency received approximately 370 unique comment 

letters on the Concept Release.

Since 2010, several voluntary reporting frameworks are available for 

companies to use to report climate-related information, including the 

following:

• In June 2017, the FSB Task Force issued final recommendations for 

four areas of voluntary climate-related disclosures that companies can 

choose to adopt, which are applicable to organizations across sectors 

and jurisdictions.28

• In October 2016, the Sustainability Accounting Standards Board 

(SASB) developed a Climate Risk Framework that enables, among 

other things, the identification of climate-related risks and the 

development of metrics that help companies disclose material 

sustainability information to investors.

• In May 2013, the Global Reporting Initiative and CDP (formerly known 

as the Carbon Disclosure Project) signed a Memorandum of 

Understanding for the two organizations to work together to align 

areas of their reporting frameworks.29 This will provide more 

 28The FSB Task Force has 32 members which were selected by the Financial Stability 

Board—an international body that monitors and makes recommendations about the global 

financial system—and come from various organizations, including large banks, insurance 

companies, asset managers, pension funds, large nonfinancial companies, accounting 

and consulting firms, and credit rating agencies. The FSB Task Force was asked to 

develop voluntary, consistent climate-related financial disclosures that would be useful to 

investors, lenders, and insurance underwriters in understanding material risks. 

29The Global Reporting Initiative is an international nonprofit organization that provides 

companies and other organizations with a framework for reporting environmental, 

economic, and social performance and impacts. CDP is an international nonprofit 

organization that provides a system for companies to share climate-related information. 

Developments Associated 

with Climate-Related 

Disclosures since the 

2010 Guidance
Page 14 GAO-18-188 Securities and Exchange Commission

consistency in companies’ voluntary climate-related disclosures and 

improve comparability of data for investors.

SEC issued the 2010 Guidance, and comment letters to specific 

companies, to clarify their existing disclosure requirements as they apply 

to climate-related matters. SEC staff said the issuance of the 2010 

Guidance was the primary form of communication it used to clarify to 

companies their climate-related disclosure requirements. However, SEC 

staff also noted that companies should consider the 2010 Guidance along 

with all other guidance and securities laws and regulations applicable to 

their filings. In addition to publishing the 2010 Guidance, SEC staff 

discussed it immediately following its release in webinars and other public 

events. For example, an SEC staff member presented information on the 

2010 Guidance at a panel discussion for an October 2010 webinar hosted 

by the National Asian Pacific American Bar Association. 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.

In addition, since the release of the 2010 Guidance, SEC staff has issued 

individual comment letters to specific companies on their climate-related 

disclosures. For example, on September 26, 2016, SEC staff issued a 

comment letter to an oil company requesting that the company expand on 

its disclosures in the risk factor section of the filing to provide a more indepth description of its climate-related compliance obligations. 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. Ceres, a nonprofit organization that advocates for 

climate-related disclosure, analyzed SEC’s comment letters from 

February 2, 2010—the release date of the 2010 Guidance—to December 

31, 2013, to determine how many were related to climate-related 

disclosures. Ceres reported that SEC staff sent 25 letters relating to 

climate-related disclosures to 23 companies (2 companies received two 

letters as a result of back-and-forth correspondence) out of the more than 

45,000 comment letters sent during this period. Using the same specific 

keyword search terms—such as “climate change” and “climate 

mitigation”—that were identified in the Ceres report, we found 14 

comment letters to 14 companies that SEC staff issued relating to 

climate-related disclosures out of the over 41,000 comment letters issued 

from January 1, 2014, through August 11, 2017. These comment letters 

SEC Issued the 2010 

Guidance and 

Comment Letters to 

Specific Companies 

to Clarify ClimateRelated Disclosure 

Requirements
Page 15 GAO-18-188 Securities and Exchange Commission

were found during our search but may not represent all climate-related 

comment letters SEC staff has issued during that time frame.

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 2014.30 In response, SEC staff examined climaterelated disclosures of a total of 60 companies in six industries each year 

in 2012 and 2014. In both reports, SEC staff focused on the business 

description, risk factors, and management’s discussion and analysis 

sections of companies’ filings and found that most of the filings included 

some level of climate-related disclosure in one or more of these areas. 

SEC staff also found that the disclosures they reviewed varied in the level 

of details provided. Additionally, in the 2012 report, SEC staff reported 

that they did not find any notable year-to-year changes in the disclosures 

reviewed from the year before the 2010 Guidance to the year after. 

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.

SEC senior staff said they did not expect changes in companies’ climaterelated disclosures as a result of the 2010 Guidance since SEC did not 

adopt any new disclosure requirements. As previously mentioned, SEC 

published the 2010 Guidance to provide guidance to companies on how 

existing disclosure requirements apply for climate-related matters. At the 

time the 2010 Guidance was issued, “cap and trade” legislation was 

pending in Congress; the Environmental Protection Agency was taking 

steps to regulate greenhouse gas emissions; and there were efforts to 

launch an international “cap and trade” system.31 The 2010 Guidance in 

part provided clarification on how such changes—if they took place—

could be incorporated into companies’ filings. However, some of these 

changes did not occur.

 30Corporation Finance prepared the 2012 review in response to the Consolidated 

Appropriations Act 2012 report language which specified that SEC include “a full 

description of its own initiatives to carry out the guidance, their efficacy, and the efforts it 

will implement in fiscal year 2012.”

31These examples of regulatory, legislative, and other developments, identified in the 

2010 Guidance, could have a material impact on companies that file disclosure 

documents with SEC. However, some of the specific proposed legislation was not 

enacted.

SEC Examined 

Climate-Related 

Disclosures for 

Reports to Congress 

and Issued a Concept 

Release Seeking 

Public Input on 

Disclosure 

Requirements
Page 16 GAO-18-188 Securities and Exchange Commission

Through the April 2016 Concept Release related to business and financial 

disclosures in Regulation S-K, SEC sought input from investors, 

companies, and other interested parties on the effectiveness of its 

disclosure requirements, including a request for comment on climaterelated disclosures in SEC’s filings. In the April 2016 Concept Release, 

SEC discussed comments previously received that both noted a growing 

interest in environmental, social, or governance disclosure among 

investors and recommended increased sustainability disclosure 

requirements.32 According to SEC staff, some comments criticized the 

primarily voluntary nature of current corporate sustainability reporting 

outside of companies’ SEC filings. 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.33

As SEC reviews climate-related and other disclosures in companies’

filings, SEC relies primarily on information that companies determine is 

material. SEC may not have details of the information companies used to 

support their determination of material climate-related risks. Also, this 

climate-related information varies in format and specificity among 

companies. SEC has tools, mechanisms, and resources to help ensure 

that its staff conducts reviews consistently across filings. Stakeholders, 

including investor and industry groups, have mixed views on the need for 

more climate-related disclosures with additional specificity and a 

consistent format for these disclosures to allow for comparison across 

filings. 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.

 32Business and Financial Disclosure Required by Regulation S-K, 81 Fed. Reg. 23916, 

23970 (Apr. 22, 2016). 

33The comment period for the April 2016 Concept Release closed on July 21, 2016. SEC 

issued a proposed rule in November 2017 on modernizing and simplifying certain 

disclosure requirements in Regulation S-K, among other things. See FAST Act 

Modernization and Simplification of Regulation S–K, 82 Fed. Reg. 50988 (Nov. 2, 2017). 

However, the proposed rule does not include topics that focus on climate-related 

disclosures. According to SEC, the proposed rule has incorporated some comments from 

SEC’s April 2016 Concept Release. The proposed rule was required by the Fixing 

America’s Surface Transportation Act (FAST Act). FAST Act, Pub. L. No. 114-94 § 72003, 

129 Stat. 1312, 1785 (2015) (codified at 15 U.S.C. § 77s note).

SEC Faces 

Constraints in 

Reviewing ClimateRelated Disclosures 

as It Primarily Relies 

on Information That 

Companies 

Determine Is Material
Page 17 GAO-18-188 Securities and Exchange Commission

SEC reviewers may not have access to the detailed information that 

companies use to arrive at their determination of whether risks, including 

climate-related risks, must be disclosed in their SEC filings. SEC’s scope 

of review of companies’ disclosures under federal securities laws differs 

from the scope of review that may be possible through the investigative 

authority of the state attorneys general under state laws. 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. As 

previously noted, if SEC reviewers find a material inadequacy in a 

company’s disclosures, the reviewers can refer potential violations to the 

Division of Enforcement for investigation. SEC senior staff stated that the 

Division of Enforcement can subpoena company information only after 

obtaining a formal order of investigation.

In an investigation of Peabody Energy under a New York State law, the 

Attorney General of New York State subpoenaed the company’s internal 

documents and found that although the company’s disclosures denied it 

had the ability to reasonably predict the impact of future climate change 

laws and regulations on its business, Peabody had made internal market 

projections showing severe negative impacts from certain potential laws 

and regulations and failed to disclose those projections to the public. As a 

result of this investigation, Peabody agreed to disclose, among other 

things, concerns that the environmental impacts of coal combustion are 

resulting in increased regulation, which could affect demand for 

Peabody’s products or services. SEC staff explained that when they 

become aware of an investigation of a company, they look for and assess 

disclosures related to any pending legal proceedings and the potential 

impacts. SEC senior staff told us SEC staff reviewed Peabody Energy’s 

filings and other publicly available information, including its climaterelated disclosures, and did not issue climate-related comments in its 

review of Peabody Energy’s filings; SEC has not taken any public actions 

against Peabody Energy following the New York Attorney General’s 

investigation.34 Also, SEC staff noted that the additional disclosures 

Peabody Energy is asked to provide by the New York Attorney General 

may not be applicable for other companies, but these disclosures may be 

 34As previously noted, SEC reviewers may send comment letters to companies to request 

additional information related to disclosures in their filings. 

SEC May Not Have the 

Details of the Information 

Companies Rely on in 

Determining Materiality
Page 18 GAO-18-188 Securities and Exchange Commission

required if the information is material and necessary to make the 

disclosures not misleading under the current federal disclosure rules.

If SEC reviewers are aware of publicly-available information outside of the 

filings that is contradictory to companies’ disclosures, they can request 

additional information or clarification from companies on their climaterelated and other disclosures through comment letters. However, a 

company possesses information necessary to determine whether 

environmental regulations will have a material effect on the company’s 

financial condition or results of operations and may claim that the effect of 

environmental regulations raised by SEC is not material and hence does 

not need further disclosure. For example, in a 2016 comment letter, SEC 

staff requested that an oil company expand and clarify its discussion of 

climate-related compliance with a California environmental law. The 

company responded that the current costs and impact of compliance with 

the state law have not been material to the company and it would seek to 

more clearly disclose such information in its annual filing for the coming 

year. SEC staff did not issue any further comment on this issue. SEC 

senior staff told us that they determine whether further comments are 

needed based on whether the company’s response is consistent with 

other information the companies reported in other publicly available 

documents, such as financial analyst reports or the company’s 

sustainability report.

Climate-related disclosures vary in format because companies may report 

similar climate-related disclosures in different sections of the annual

filings. We reviewed and identified illustrative examples of climate-related 

disclosures in the annual filings of 116 S&P 500 Index companies, filed 

with SEC in 2016, in the five industries in our review (see app. II for 

additional information).35 We found, for example, one beverage company 

reported its goal to reduce greenhouse gas emissions in the business 

description section of its filing while another beverage company reported 

a similar goal on carbon footprint reduction in the risk factors section of its 

filing. As previously noted, SEC reviewers may compare a company’s 

disclosures to other companies’ disclosures in the same industry to 

 35The annual filings we reviewed covered fiscal years that started and ended in 2015 or 

started in 2015 and ended in 2016. Appendix II provides additional information on our 

analysis and illustrative examples of climate-related disclosures using generic language, 

not tailored to the company, and unquantified information, or disclosures that contain 

some quantitative information or metrics. 

Climate-Related 

Disclosures Vary in Format 

and Specificity
Page 19 GAO-18-188 Securities and Exchange Commission

identify potential missing disclosures if other companies in the same 

industry have made similar disclosures. When companies report climaterelated 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. In addition, companies’ filings may include 

only a few mentions of climate-related disclosures. For instance, the 

annual filings we reviewed for an insurance company, an oil company, 

and a food company, respectively, were 389 pages, 117 pages, and 136 

pages long. Within these filings, the corresponding number of mentions of 

climate-related disclosures was 9, 13, and 6, respectively, based on our 

analysis using Ceres’ SEC Sustainability Disclosure Search Tool.36 Given 

that SEC reviewers primarily rely on information companies disclose in 

filings, it may be difficult to determine whether a low level of disclosure 

indicates that the company does not face any climate-related risks or 

does not consider the risks to be material.

Also, climate-related disclosures in some companies’ filings use 

boilerplate language, which is not specific to the company, and the 

information is unquantified. Our review of the annual filings of 116 S&P 

500 Index companies found that some companies’ climate-related 

disclosures provided some quantitative information, while some other 

companies’ disclosures listed existing environmental regulations without 

specifying the associated impacts on the companies. For example, one oil 

and gas company stated in its annual filing that the imposition and 

enforcement of stringent greenhouse gas emissions reduction targets 

could severely and adversely impact the oil and gas industry and 

significantly reduce the value of the company’s business. However, the 

company did not provide any quantitative information on such impacts on 

its business. Additionally, SASB reported in October 2016 that its analysis 

of almost 1,500 disclosures in annual filings of 637 companies in 72 

industries found that almost 30 percent of the disclosures SASB reviewed 

did not include any climate-related information, some contained 

 36Ceres’ SEC Sustainability Disclosure Search Tool searches for companies’ SEC annual 

filings by industry, identifies relevant climate-related disclosures and their locations within 

the filings, and reproduces the excerpts of these disclosures in a single report.
Page 20 GAO-18-188 Securities and Exchange Commission

boilerplate language or company-tailored narratives, and less than 20 

percent of these disclosures included quantitative metrics.37

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. As we reported in 2016, 

Corporation Finance’s Disclosure Standards Office (DSO) helps improve 

consistency in oversight of filing reviews by conducting testing of internal 

supervisory controls throughout the year.38 DSO is responsible for 

managing Corporation Finance’s internal supervisory control and 

contributes to Corporation Finance’s quality and process improvement 

efforts. DSO senior staff told us that the office examined filing reviews 

conducted by SEC staff on a random sample of filings in each year from 

2014 through 2016. In DSO’s reviews, DSO examined the documents 

that are part of the filing reviews conducted by SEC staff, including the 

underlying filings, filing review reports prepared by SEC staff, comment 

letters issued, and the associated responses, among other things. Also, 

DSO staff assessed whether SEC staff had followed the relevant 

Corporation Finance policies and procedures. For example, DSO 

 37See Sustainability Accounting Standards Board, Climate Risk Technical Bulletin, 

Technical Bulletin #: TB001-10182016. SASB’s analysis was performed between May and 

August 2015 using the latest annual SEC filings for the top companies, by revenue and by 

industry under the sustainable industry classification system (SICS), with a maximum of 

10 companies for each industry. SASB created SICS, which groups companies into 

industries and sectors based on their resource intensity and shared sustainability risks 

and opportunities. For more information on SICS, see http://www.sasb.org/sics/. In 

SASB’s analysis, SASB reviewed all sections of disclosures of companies they reviewed 

and categorized each section of the disclosures into one of four categories: no disclosure, 

boilerplate (disclosures using generic language, not tailored to the company), company 

tailored (disclosures using specific language in the context of the company), or metrics 

(disclosures using quantitative performance indicators in the context of the company). 

SASB ranked these categories with no disclosure at the bottom and a disclosure with 

metrics at the top. SASB reported the highest ranking category that it determined in each 

company’s disclosures overall, but the disclosures could also include disclosures under 

one or more lower-ranked disclosure categories in addition to the reported category. For 

example, a company’s disclosures reported as including metrics might also have 

disclosures that contained no disclosures, boilerplate language, or company-tailored 

language.

38GAO-17-16.

SEC Has Mechanisms, 

Tools, and Resources to 

Help Its Staff Consistently 

Review Filing Disclosures
Page 21 GAO-18-188 Securities and Exchange Commission

checked whether staff followed procedures for second-level reviews and 

issuing comment letters. However, DSO senior staff said they have not 

conducted any review specific to climate-related disclosures. Corporation 

Finance senior staff said DSO submits the results of its testing to its 

managing executive for use in the division’s management assurance

statements. We also reported in 2016 that DSO helped strengthen 

components of Corporation Finance’s internal control.39

Two-level review process. As discussed earlier, SEC generally 

conducts two levels of review at key steps in the filing review process. 

The two-level review process helps ensure that staff consistently review 

disclosures across filings, according to SEC staff we interviewed. For 

example, the second-level reviewers review the comment letters prepared 

by the first-level reviewers before sending the letters to companies, 

according to SEC’s internal policies and procedures.40 Also, assistant 

directors and senior assistant chief accountants of the 11 Corporation 

Finance offices generally meet monthly to discuss recent trends and 

issues identified in filing reviews in general, which helps ensure that staff 

assess materiality consistently across industries, according to some SEC 

staff.

Regulations and guidance. SEC staff can consult regulations and 

formal and informal SEC guidance for their filing reviews (see table 2 for 

examples), according to SEC documents and staff we interviewed. SEC 

posts relevant guidance and other information on its intranet site. Nearly 

all SEC staff we interviewed said current guidance was sufficient to guide 

their filing reviews, including the reviews of climate-related disclosures.

 39GAO-17-16.

40Second-level reviewers are sometimes supervisory staff but may not be depending on 

workload and an assistant director’s determination of the capabilities of other staff to 

undertake the reviews. 
Page 22 GAO-18-188 Securities and Exchange Commission

Table 2: Examples of Regulations, Formal Guidance, and Informal Guidance for Securities and Exchange Commission (SEC) 

Staff May Consult 

Laws and regulations Formal guidance Informal guidance

SEC staff can consult laws and 

regulations to help guide their 

disclosure reviews.

• Regulation S-K for disclosure 

requirementsa

• Other relevant federal and state 

environmental laws and 

regulations, such as Clean Air 

Act and California’s Global 

Warming Solutions Act of 200b

SEC staff can consult publicly available or 

internal written guidance to help guide their 

disclosure reviews.

• The 2010 Commission Guidance 

Regarding Disclosure Related to 

Climate Change

• Staff Accounting Bulletin: No. 99—

Materialityc

• General internal review guidance—

including guidance on assessing 

materiality—point to information 

sources and focus areas, among other 

things

• Technical guides on the Securities Act 

of 1933 and the Securities Exchange 

Act of 1934

Second-level reviewers and supervisory staff 

provide informal guidance on filing reviews 

according to SEC staff we interviewed. For 

example:

• The assistant directors of the Division of 

Corporation Finance’s 11 assistant director 

offices meet monthly to discuss trends and 

issues identified in filing reviews and 

communicate any resulting guidance to staff 

as necessary.

• Generally, SEC staff told us that they can 

consult the second-level reviewers, 

supervisory staff, and staff in other offices 

within Division of Corporation Finance or SEC 

if they have questions.d

Source: GAO analysis. | GAO-18-188

a

Regulation S-K, 17 C.F.R. § 229 (2017).

b

Clean Air Act, Pub. L. No. 88-206, 77 Stat. 392 (codified as amended at 42 U.S.C. § 7401 et seq. 

(2016)) and California Global Warming Solutions Act of 2006, CAL. HEALTH & SAFETY CODE § 

38500 et seq. (Deering 2017).

c

SEC Staff Accounting Bulletin No. 99, 64 Fed. Reg. 45150 (Aug. 19, 1999).

d

Supervisory staff can also serve as second-level reviewers.

Internal and external data. According to SEC’s internal review guidance, 

SEC staff are expected to consider internal and external data as part of 

the filing review. As previously noted, some SEC staff told us they 

consider information from prior filings, internal filing review reports, other 

filings of companies in the same industry, and external data outside of the 

filings to supplement their filing reviews. For example, SEC staff can 

generally use internal and external databases to search prior years’ filings 

and filing-review-related comments and correspondence with companies. 

Some SEC reviewers told us that they also compare disclosures with 

external information, such as companies’ voluntary sustainability reports 

and financial analyst reports on companies’ earnings and operations, to 

look for inconsistencies in the companies’ reporting. Although SEC 

Corporation Finance staff can review external information such as the 

company’s sustainability report, they do not have the underlying 

information the company used to determine whether a potential 

disclosure was material or prepare the sustainability report and cannot 

perform an independent assessment of the disclosure based on the 
Page 23 GAO-18-188 Securities and Exchange Commission

materiality of the underlying information. For example, SEC staff noted in 

a 2016 comment letter to an oil company that SEC has compared and 

identified potential inconsistency between the company’s disclosures on 

uncertainty about a new climate-related regulation and physical risks and 

information in the company’s sustainability report. The company stated 

the climate-related regulatory risks were not material and climate-related 

risks in their filing were consistent with information in its sustainability 

report. SEC did not issue any further comments.

Staff training. SEC staff have had some training on assessing materiality 

and industry-specific issues but fewer training that discussed climaterelated disclosures, according to SEC staff.

• Training on materiality. Most SEC staff we interviewed said training 

on materiality assessment was part of staff training or their ongoing 

on-the-job learning in their day-to-day work. Our review of some SEC 

training materials showed that training discussions covered federal 

securities laws and disclosure requirements, disclosure review, and 

materiality but did not focus specifically on climate-related issues. 

Also, some SEC staff said they consider materiality based on a given 

company’s specific facts and circumstances as they review filings in 

their day-to-day work. For example, two SEC staff we interviewed 

explained that second-level reviewers help first-level reviewers 

understand how to apply specific facts and circumstances as they 

consider materiality when they review filings.

• Training on industry-specific issues. All SEC staff we interviewed 

noted that industry-specific training is provided by individual assistant 

director offices. For example, some staff mentioned training on 

disclosures for the oil and gas industry. Other staff noted that they 

also share information on industry-specific issues as part of their 

communication or meetings with supervisory staff. However, SEC 

staff we interviewed did not recall any industry-specific training on 

climate-related disclosures offered by individual assistant director 

offices.

• Training on climate-related disclosures. Some SEC staff we 

interviewed identified training on the 2010 Guidance when the 

guidance was issued or a brownbag discussion on climate-related 

disclosure issues including the Peabody Energy investigation in 2016. 

According to SEC senior staff, the 2016 brownbag included a 

discussion of the 2010 Guidance and was offered to all Corporation 

Finance staff. In addition, our review of some meeting agendas 

showed that these meetings sometimes included discussion items on 

issues related to climate-related disclosures, such as the Peabody 
Page 24 GAO-18-188 Securities and Exchange Commission

Energy investigation and a proposed environmental regulation. 

Furthermore, new SEC staff receive training on how to conduct filing 

reviews in general but not specifically on climate-related disclosures, 

according to some SEC staff.

Most of the SEC staff we interviewed told us they consider the training 

they have received to be sufficient for conducting filing reviews. 

Additionally, an SEC OIG survey of SEC staff published in September 

2017 asked both first- and second-level reviewers if they felt they had 

received adequate training and guidance from SEC on how to conduct a 

disclosure review.41 Of the 159 who answered as first-level reviewers, 82 

percent said that they felt they received adequate training and guidance 

to conduct disclosure reviews; and of the 130 who answered as secondlevel reviewers, 83 percent said that they felt they received adequate 

training and guidance to conduct disclosure reviews.42 Other staff we 

interviewed also noted that they receive training through their day-to-day 

work on an ongoing basis or when new regulations are issued or the need 

arises.

Staff experience. All eight supervisory staff we interviewed indicated 

that, as of August 2017, they had at least 10 years of experience at SEC 

as filing reviewers, while the 12 nonsupervisory staff we interviewed 

noted that they had from 2 to 18 years of such experience. Also, most of 

the SEC staff we interviewed indicated that they had some prior 

accounting or legal experience related to annual filing preparation or 

review, but they did not have any direct prior experience on climaterelated disclosures. However, most SEC staff we interviewed said they 

generally do not need technical expertise to understand climate-related 

disclosures. Some staff said they can consult mining or petroleum 

engineers within Corporation Finance if the disclosures relate to other 

subjects, such as oil and gas reserves.

 41Securities and Exchange Commission, Office of Inspector General, Report No. 542. The 

OIG surveyed all 325 SEC staff in Corporation Finance who reviewed filing disclosures as 

first-level reviewers, second-level reviewers, or both in calendar years 2015 or 2016. Two 

hundred and two SEC staff completed the survey, for a 62 percent response rate. SEC 

and the SEC OIG refer to first-level reviewers as “examiners” and second-level reviewers 

as “reviewers.”

42Of the 159 who answered as first-level reviewers, 14 percent and 4 percent responded 

“sometimes” and “no,” respectively, to this survey question. Of the 130 who answered as 

second-level reviewers, 12 percent and 5 percent responded “sometimes” and “no,”

respectively, to this survey question. 
Page 25 GAO-18-188 Securities and Exchange Commission

Stakeholders, including investor and industry groups, have different views 

on whether additional climate-related disclosures, including the amount 

and specificity, are needed. Some asset management firms and investor 

groups have highlighted the need for companies to disclose more climaterelated information to help investors make more informed investment 

decisions. Three large asset management firms stated that they are 

committed to engaging with and encouraging companies to provide 

additional climate-related disclosures. For example, in 2017, one firm 

supported shareholder proposals for two companies to report the impacts 

of climate change on their operations.43 The proposals passed with 

majority shareholder support. The Council of Institutional Investors and 

Ceres stated in their letters commenting on SEC’s April 2016 Concept 

Release and also told us that the information on environmental risks, 

including climate risks, has become more significant for investors and 

companies.44 The two investor associations also noted that companies’

climate-related disclosures in the risk factors and management’s 

discussion and analysis sections of the filings generally do not provide 

investors with sufficient details. They further stated in their letters 

commenting on SEC’s April 2016 Concept Release that current climaterelated disclosures are generally not comparable across companies’

filings. Additionally, SASB reported that climate-related disclosures using 

quantitative metrics may not be comparable because they lack 

standardization.

In contrast, representatives from the five industry associations with whom 

we spoke all noted that they consider the current requirements for 

climate-related disclosures adequate. They also do not believe additional 

climate-related disclosures are needed in SEC filings as the filings should 

include only climate-related information if it is material. Additionally, some 

companies are providing climate-related information through channels 

outside of SEC filings. Three of these industry associations also stated in 

their letters commenting on SEC’s April 2016 Concept Release that they 

 43Qualified shareholders of publicly traded companies can submit a shareholder proposal 

for inclusion in the company’s proxy statement for shareholder vote. The proposals 

contain shareholders’ recommendation or requirements that the company and/or its board 

of directors take action and may have an effect on a company’s operations and value.

44Members of the Council of Institutional Investors include pension funds and asset 

management firms. Members of Ceres include institutional investors and companies. 

Ceres submitted this comment letter on behalf of 45 asset managers or owners. Ceres 

also separately submitted its own comment letter.

Stakeholders Have Mixed 

Views on the Amount and 

Specificity of the Current 

Climate-Related 

Disclosures
Page 26 GAO-18-188 Securities and Exchange Commission

would like to keep the existing requirements for climate-related 

disclosures.

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. For 

example, some members of a subcommittee of SEC’s Investor Advisory 

Committee have identified climate-related disclosures as a priority issue, 

but the subcommittee as a whole did not reach agreement that climaterelated disclosures should be among its highest priorities. In addition, as 

previously described, existing reporting frameworks include those 

developed by CDP, Global Reporting Initiative, SASB, and the June 2017 

FSB Task Force final recommendations. Given that these are voluntary 

frameworks, companies can report climate-related information using any 

of the frameworks or not use a framework at all. Further, stakeholders 

advocating for climate-related disclosures have not agreed on whether to 

adopt one of the existing reporting frameworks or develop a new 

framework for companies to use in reporting climate-related disclosures. 

For example, companies have not determined which of the existing 

reporting frameworks to use or are uncertain on which framework is 

preferred by investors for reporting climate-related disclosures, according 

to one investor association, representatives of SEC’s Investor Advisory 

Committee, and an SEC senior staff of the Office of Investor Advocate.

The SEC senior staff further stated that SEC may be hesitant to 

recommend a particular framework for companies to use given the 

uncertainties. Another organization focusing on climate-related 

disclosures in its letter commenting on SEC’s April 2016 Concept 

Release suggested that SEC review and consider elements of existing 

reporting frameworks. Furthermore, SEC’s Investor Advisory Committee, 

in its letter commenting on the Concept Release, recommended SEC 

develop an analytical framework on climate-related disclosures, among 

other things. Most recently in June 2017, the FSB Task Force reported 

that its recommendations aim to provide a framework to help companies 

more consistently disclose climate-related information and align their 

reporting frameworks over time. In particular, the Task Force 

recommends that companies include material climate-related disclosures 

in their public filings and encourages standard-setting bodies to support 

adoption of the recommendations. According to SEC senior staff, while 

the Task Force recommendations may be helpful if the Commission were 

to consider new rules on climate-related disclosures in the future, SEC 

staff is not aware of any specific SEC actions or plans based on the 
Page 27 GAO-18-188 Securities and Exchange Commission

recommendations. 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.

We provided a draft of this report to SEC for review and comment. In oral 

comments provided on January 10, 2018, senior staff in SEC’s Division of 

Corporation Finance generally agreed with our findings and provided 

technical comments, which we incorporated into the report, as 

appropriate.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to interested congressional 

committees, the Chair of SEC, and other interested parties. In addition, 

this report will be available at no charge on the GAO website at 

http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

Michael Clements at (202) 512-8678 or clementsm@gao.gov, or J. 

Alfredo Gómez at (202) 512-3841 or gomezj@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found 

on the last page of this report. GAO staff who made key contributions to 

this report are listed in appendix III.

Michael Clements

Director, Financial Markets and Community Investment

J. Alfredo Gómez

Director, Natural Resources and Environment

Agency Comments 

and Our Evaluation
Page 28 GAO-18-188 Securities and Exchange Commission

List of Requesters

The Honorable Dick Durbin

United States Senate

The Honorable Dianne Feinstein

United States Senate

The Honorable Ed Markey

United States Senate

The Honorable Jack Reed

United States Senate

The Honorable Sheldon Whitehouse

United States Senate

The Honorable Matthew Cartwright

House of Representatives 

The Honorable Lloyd Doggett

House of Representatives

The Honorable Ted Lieu

House of Representatives

The Honorable Alan Lowenthal

House of Representatives

The Honorable Mark Pocan

House of Representatives

The Honorable Paul Tonko

House of Representatives
Appendix I: Objectives, Scope, and 

Methodology

Page 29 GAO-18-188 Securities and Exchange Commission

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.1

To address all objectives, we reviewed SEC documents, including the 

2010 Guidance and internal filing review guidance, related to SEC’s 

review of climate-related and other disclosures in companies’ annual 

filings. We also reviewed SEC’s 2012 and 2014 congressional reports, 

titled Staff Report to the Senate Committee on Appropriations Regarding 

Climate Change Disclosure, and additional information on SEC staff’s 

ongoing reviews of climate-related disclosures.2 In addition, we reviewed 

prior GAO and SEC Office of Inspector General reports related to the 

2010 Guidance, climate-related risks, and SEC’s filing review process 

and reports from stakeholders, including the report on recommendations 

from the Financial Stability Board Task Force on Climate-related Financial 

Disclosures (FSB Task Force).3

 1

For this report, we focus on SEC’s review of climate-related disclosures in companies’

annual filings on Form 10-K. Some companies may file annual reports on other forms, 

such as Form 20-F and Form 40-F. We use filing review to broadly refer to review of 

annual 10-K filings unless otherwise noted.

2

Senate Committee on Appropriations reports accompanying Financial Services and 

General Government Appropriations bills for fiscal years 2012 and 2013 directed SEC to 

submit reports to the committee on public company disclosures about climate changerelated matters. S. Rep. No. 112-79, at 111 (2011); S. Rep. No. 112-177, at 109 (2012). 

3

See for example, GAO, Securities and Exchange Commission: Management Has 

Enhanced Supervisory Controls And Could Further Improve Efficiency, GAO-17-16 

(Washington, D.C.: Oct. 6, 2016); Supply Chain Risks: SEC’s Plans to Determine If 

Additional Action Is Needed on Climate-Related Disclosure Have Evolved, GAO-16-211 

(Washington, D.C.: Jan. 6, 2016); Federal Supply Chains: Opportunities To Improve The 

Management Of Climate-Related Risks, GAO-16-32 (Washington, D.C.: Oct. 13, 2015); 

Securities and Exchange Commission, Office of Inspector General, Evaluation of the 

Division of Corporation Finance’s Disclosure Review and Comment Letter Process, 

Report No. 542; Task Force on Climate-Related Financial Disclosures, Final Report: 

Recommendations of the Task Force on Climate-Related Financial Disclosures (June 

2017); and Sustainability Accounting Standards Board, Climate Risk Technical Bulletin, 

Technical Bulletin #: TB001-10182016 (San Francisco, CA.: October 2016). 

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 30 GAO-18-188 Securities and Exchange Commission

We selected five industries to focus on for this report: oil and gas, mining, 

insurance, electric and gas utilities, and food and beverage. 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. We also selected the food and beverage industry because we 

identified companies in this industry that have submitted climate-related 

disclosures and can provide perspectives on these disclosures, and SEC 

had not selected companies in this industry for review in its 2012 and 

2014 congressional reports or ongoing periodic reviews of climate-related 

disclosures. 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 address the first objective, we reviewed SEC’s 2010 Guidance and 

Division of Corporation Finance (Corporation Finance) policies and 

procedures on review of disclosures. We determined the number of 

comment letters SEC issued to individual companies on climate-related 

disclosures from February 2010 to August 2017. Specifically, we 

reviewed a 2014 report by Ceres, a nonprofit organization that works with 

investors, companies, and public interest groups on sustainable business 

practices, that analyzed and determined the number of SEC comment 

letters to companies from February 2, 2010 (the date the 2010 Guidance 

was released) to December 31, 2013.4 Additionally, using the same 

keyword search terms—such as “climate change” and “climate 

mitigation”—that were used in the Ceres report, we determined the 

number of SEC comment letters issued to individual companies on issues 

related to climate-related disclosures from January 1, 2014, through 

August 11, 2017. Specifically, we searched for SEC’s comment letters in 

its EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system—

which is SEC’s record-keeping system for comment letters to companies, 

 4

Ceres, Cool Response: The SEC & Corporate Climate Change Reporting—SEC Climate 

Guidance & S&P 500 Reporting—2010 to 2013 (Boston, Mass.: February 2014). 
Appendix I: Objectives, Scope, and 

Methodology

Page 31 GAO-18-188 Securities and Exchange Commission

among other things—using the keyword search functionality.5 The search 

terms we used were not intended to represent a comprehensive list of 

keywords that may relate to climate-related issues. Therefore, the 

nongeneralizable sample of comment letters we identified is not intended 

to be a comprehensive list or representative sample of comment letters 

on climate-related information in SEC filings. We reviewed the comment 

letters identified through our search to understand the climate-related 

disclosure issues SEC staff has identified.

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. Specifically, we interviewed 

representatives from the following industry groups: American Insurance 

Association, American Petroleum Institute, Edison Electric Institute, 

Grocery Manufacturers Association, and National Mining Association. We 

selected these groups because they represent companies in the five 

industries in our review and they or their members submitted letters 

commenting on SEC’s April 2016 Concept Release or their members 

submitted climate-related disclosures to SEC in 2016. Additionally, we 

reviewed the letters these groups submitted commenting on the Concept 

Release to understand their views on climate-related disclosures. Views 

from the industry representatives with whom we spoke cannot be 

generalized to those we did not include in our review.

To address the second objective, we reviewed SEC’s 2012 and 2014 

congressional reports and additional information on ongoing periodic 

reviews of climate-related disclosures. We also reviewed SEC’s April 

2016 Concept Release, particularly the section that focuses on climaterelated disclosures in SEC’s filings. Further, we interviewed Corporation 

Finance staff to understand steps SEC has taken to assess the effect of 

the 2010 Guidance and planned actions related to comments on climaterelated disclosures for the Concept Release.

To address the third objective, we reviewed SEC documents on the 

review of climate-related and other disclosures in companies’ filings, 

including the 2010 Guidance, filing review guidance, and examples of 

 5

Comment letters in EDGAR are publically available, and EDGAR’s key word search 

functionality allows users to search for filings and related comment letters 4 years back. 

As a result, the earliest comment letters we could search for were those from 2014.
Appendix I: Objectives, Scope, and 

Methodology

Page 32 GAO-18-188 Securities and Exchange Commission

staff training materials. We also reviewed information related to the New 

York State Attorney General’s investigation of and agreement with 

Peabody Energy on the company’s climate-related disclosures in SEC 

filings.6 To understand the specificity of companies’ climate-related 

disclosures in annual filings, we reviewed the Sustainability Accounting 

Standards Board’s (SASB) October 2016 report that analyzed and 

categorized selected companies’ climate-related disclosures according to 

their level of specificity.7 To identify illustrative examples of climaterelated disclosures, we used Ceres’ SEC Sustainability Disclosure Search 

Tool to search annual filings of S&P 500 Index companies, filed with SEC 

in 2016, in the five industries we selected.8 We used Ceres’ SEC 

Sustainability Disclosure Search Tool because it searches companies’

SEC annual filings by industry, identifies relevant climate-related 

disclosures and their locations within the filings, and reproduces the 

excerpts of these disclosures in a single report. In a search of Ceres’

database on September 20, 2017, we identified 116 S&P 500 Index 

companies that included climate-related disclosures in their annual filings 

filed in 2016. See appendix II for examples of disclosures with varying 

levels of specificity.

To obtain information on SEC staff’s review of climate-related 

disclosures—including information on the review process, tools and 

guidance used in the review, and staff training and experience—we 

interviewed 20 Corporation Finance staff. Specifically, we interviewed 8 

senior supervisory staff from the four Corporation Finance offices that 

cover reviews of filings of companies in the five industries we selected. 

We also randomly selected 12 nonsupervisory staff from these same four 

offices, with a mix of accountants and attorneys and years of experience 

at SEC. In addition, we interviewed senior staff from Corporation 

Finance’s Disclosure Standards Office to obtain information on the 

 6

The New York State Attorney General launched an investigation under New York State 

law on Peabody Energy’s climate-related disclosures in its SEC filings. The Attorney 

General reached an agreement with Peabody Energy on November 8, 2015. 

7

See Sustainability Accounting Standards Board, Climate Risk Technical Bulletin, 

Technical Bulletin #: TB001-10182016. SASB is a nonprofit organization with a mission to 

develop and disseminate sustainability accounting standards that help public corporations 

disclose material, decision-useful information to investors. 

8

The annual filings we reviewed covered fiscal years that started and ended in 2015 or 

started in 2015 and ended in 2016. S&P 500 Index is an index that includes 500 leading 

companies and captures approximately 80 percent coverage of available market 

capitalization and is widely used as a gauge of large-cap U.S. equities.
Appendix I: Objectives, Scope, and 

Methodology

Page 33 GAO-18-188 Securities and Exchange Commission

office’s examinations of the filing review process conducted in 2014 

through 2016. Furthermore, we interviewed Corporation Finance senior 

staff to obtain an understanding of SEC’s enforcement authority in its 

filing review program and how that differs from the investigation power of 

state attorney generals.

To understand stakeholders’ views on climate-related disclosures, we 

reviewed SEC’s April 2016 Concept Release and individual letters 

commenting on the Concept Release from organizations that represent 

investors, companies in the five industries we selected, or organizations 

that focus on climate-related issues.9 We also reviewed the websites and 

documents of three investment management firms—BlackRock Advisors 

LLC, State Street Global Advisors Limited, and Vanguard Group, Inc.—on 

their efforts to seek additional climate-related disclosures from 

companies. We reviewed reports by stakeholders, including SASB and 

the FSB Task Force, to provide perspectives on investors’ views on the 

current state of climate-related disclosures. We identified these 

stakeholders because they represent major investor interests or have 

submitted letters commenting on SEC’s April 2016 Concept Release.

Furthermore, we interviewed representatives from the five industry groups 

we selected and other nonprofit organizations representing investors or 

focusing on climate-related issues. Specifically, we interviewed 

representatives from the following organizations representing investors or 

focusing on climate-related issues: Center for Climate and Energy 

Solutions (C2ES)—an independent, nonpartisan, nonprofit organization 

that works to address climate and energy challenges; Ceres; and the 

Council of Institutional Investors—a nonprofit, nonpartisan association 

that represents corporate, public, and union employee benefit funds and 

endowments. We selected these organizations because they represent 

investors or focus on climate-related issues and have submitted letters 

commenting on SEC’s April 2016 Concept Release. Views from the 

representatives of investor groups with whom we spoke cannot be 

generalized to those we did not include in our review. Additionally, we 

interviewed SEC senior staff from the Investor Advisory Committee and 

the Office of Investor Advocate and an industry representative who is a 

member of the Investor Advisory Committee to obtain information on 

 9

Business and Financial Disclosure Required by Regulation S-K, 81 Fed. Reg. 23916 

(Apr. 22, 2016). For the purpose of this report, we refer to organizations that represent 

companies in the five industries we selected for this review or investors focused on 

climate-related issues as stakeholders.
Appendix I: Objectives, Scope, and 

Methodology

Page 34 GAO-18-188 Securities and Exchange Commission

investors’ views on climate-related disclosures. We also interviewed 

Corporation Finance senior staff to understand SEC’s planned efforts, if 

any, on climate-related disclosures.

Throughout this report, we use certain qualifiers when describing results 

from interview participants, such as “few,” “some,” and “most.” We define 

few as two or three; some as four or more but less than most; and most 

as more than half or nearly all relative to the total number possible. The 

views of interviewees we selected cannot be generalized to all SEC staff 

or stakeholders on issues related to climate-related disclosures.

We conducted this performance audit from November 2016 to February

2018 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: Examples of Climate-Related 

Disclosures in Securities and Exchange 

Commission (SEC) Form 10-K Filings

Page 35 GAO-18-188 Securities and Exchange Commission

This appendix provides illustrative examples of climate-related 

disclosures by two companies in the oil and gas industry. The first 

example contains boilerplate and unquantified information. The second 

example contains some quantitative information and metrics.1 Filings we 

identified are not intended to be a comprehensive list or representative 

sample of companies that disclose climate-related information in SEC 

filings. See appendix I for additional information on the analysis.

Example 1: Excerpt of Boilerplate Disclosures from Company A

Other Items

The amount of insurance covering physical damage to our property and liability related 

to negative environmental effects resulting from a sudden and accidental pollution 

event, excluding Atlantic Named Windstorm coverage for which we are self insured, 

varies by asset, based on the asset’s estimated replacement value or the estimated 

maximum loss.

Risk Factors

Climate change initiatives may result in significant operational changes and 

expenditures, reduced demand for our products and adversely affect our business. We 

recognize that climate change is a global environmental concern. Continuing political 

and social attention to the issue of climate change has resulted in both existing and 

pending international agreements and national, regional or local legislation and 

regulatory measures to limit greenhouse gas emissions. These agreements and 

measures may require significant equipment modifications, operational changes, taxes, 

or purchase of emission credits to reduce emission of greenhouse gases from our 

operations, which may result in substantial capital expenditures and compliance, 

operating, maintenance and remediation costs. In addition, our production is used to 

produce petroleum fuels, which through normal customer use may result in the 

emission of greenhouse gases. Regulatory initiatives to reduce the use of these fuels 

may reduce demand for crude oil and other hydrocarbons and have an adverse effect 

on our sales volumes, revenues and margins. The imposition and enforcement of 

stringent greenhouse gas emissions reduction targets could severely and adversely 

impact the oil and gas industry and significantly reduce the value of our business.

Management’s Discussion and Analysis of Financial Condition and Results of 

Operations

We recognize that climate change is a global environmental concern. We assess, 

monitor and take measures to reduce our carbon footprint at existing and planned 

operations. We are committed to complying with all Greenhouse Gas (GHG) emissions 

mandates and the responsible management of GHG emissions at our facilities.

Source: Securities and Exchange Commission. | GAO-18-188

 1

The disclosures examples in this appendix are direct quotes of the disclosures from the 

companies’ filings. 

Appendix II: Examples of Climate-Related 

Disclosures in Securities and Exchange 

Commission (SEC) Form 10-K Filings
Appendix II: Examples of Climate-Related 

Disclosures in Securities and Exchange 

Commission (SEC) Form 10-K Filings

Page 36 GAO-18-188 Securities and Exchange Commission

Example 2: Excerpts of More Detailed Climate-Related Disclosures, 

Including Metrics, from Company B – Page 1

Risk Factors

We expect to continue to incur substantial capital expenditures and operating costs as a 

result of our compliance with existing and future environmental laws and regulations. 

Likewise, future environmental laws and regulations, such as limitations on greenhouse 

gas emissions, may impact or limit our current business plans and reduce demand for our 

products.

Our businesses are subject to numerous laws and regulations relating to the protection of 

the environment. These laws and regulations continue to increase in both number and 

complexity and affect our operations with respect to, among other things:

• The discharge of pollutants into the environment.

• Emissions into the atmosphere, such as nitrogen oxides, sulfur dioxide, mercury and 

greenhouse gas emissions.

• Carbon taxes.

• The handling, use, storage, transportation, disposal and cleanup of hazardous 

materials and hazardous and nonhazardous wastes.

• The dismantlement, abandonment and restoration of our properties and facilities at 

the end of their useful lives.

• Exploration and production activities in certain areas, such as offshore environments, 

arctic fields, oil sands reservoirs and tight oil plays.

We have incurred and will continue to incur substantial capital, operating and 

maintenance, and remediation expenditures as a result of these laws and regulations. To 

the extent these expenditures, as with all costs, are not ultimately reflected in the prices 

of our products and services, our business, financial condition, results of operations and 

cash flows in future periods could be materially adversely affected.

Although our business operations are designed and operated to accommodate expected 

climatic conditions, to the extent there are significant changes in the Earth’s climate, such 

as more severe or frequent weather conditions in the markets we serve or the areas 

where our assets reside, we could incur increased expenses, our operations could be 

materially impacted, and demand for our products could fall. Demand for our products 

may also be adversely affected by conservation plans and efforts undertaken in response 

to global climate change, including plans developed in connection with the recent Paris 

climate conference in December 2015. Many governments also provide, or may in the 

future provide, tax advantages and other subsidies to support the use and development 

of alternative energy technologies.

Management’s Discussion and Analysis of Financial Condition and Results of 

Operations

Climate Change

There has been a broad range of proposed or promulgated state, national and 

international laws focusing on greenhouse gas (GHG) reduction. These proposed or 

promulgated laws apply or could apply in countries where we have interests or may have 

interests in the future. Laws in this field continue to evolve, and while it is not possible to 

accurately estimate either a timetable for implementation or our future compliance costs 

relating to implementation, such laws, if enacted, could have a material impact on our 

results of operations and financial condition. Examples of legislation or precursors for 

possible regulation that do or could affect our operations include:

Source: Securities and Exchange Commission. | GAO-18-188
Appendix II: Examples of Climate-Related 

Disclosures in Securities and Exchange 

Commission (SEC) Form 10-K Filings

Page 37 GAO-18-188 Securities and Exchange Commission

Continued Page 2

• European Emissions Trading Scheme (ETS), the program through which many of 

the European Union (EU) member states are implementing the Kyoto Protocol. Our 

cost of compliance with the EU ETS in 2015 was approximately $0.4 million (net 

share pre-tax).

• In Canada during 2015, the Alberta government amended the regulations of the 

Climate Change and Emissions Act. The regulations now require any existing facility 

with emissions equal to or greater than 100,000 metric tonnes of carbon dioxide or 

equivalent per year to reduce its net emissions intensity from its baseline. The 

reduction is increasing from the current 12 percent in 2015, to 15 percent in 2016 

and to 20 percent in 2017. We also incur a carbon tax for emissions from fossil fuel 

combustion in our British Columbia operations. The total cost of compliance with 

these regulations in 2015 was approximately $4.7 million.

• The U.S. Supreme Court decision in Massachusetts v. EPA, 549 U.S. 497, 127 S.Ct. 

1438 (2007), confirming that the EPA has the authority to regulate carbon dioxide as 

an “air pollutant” under the Federal Clean Air Act.

• The U.S. EPA’s announcement on March 29, 2010 (published as “Interpretation of 

Regulations that Determine Pollutants Covered by Clean Air Act Permitting 

Programs,” 75 Fed. Reg. 17004 (April 2, 2010)), and the EPA’s and U.S. Department 

of Transportation’s joint promulgation of a Final Rule on April 1, 2010, that triggers 

regulation of GHGs under the Clean Air Act, may trigger more climate based claims 

for damages, and may result in longer agency review time for development projects.

• The U.S. EPA’s announcement on January 14, 2015, outlining a series of steps it 

plans to take to address methane and smog-forming volatile organic compound 

emissions from the oil and gas industry. The current U.S. administration has 

established a goal of reducing the 2012 levels in methane emissions from the oil and 

gas industry by 40 to 45 percent by 2025.

• Carbon taxes in certain jurisdictions. Our cost of compliance with Norwegian carbon 

tax legislation in 2015 was approximately $31 million (net share pre-tax).

• The agreement reached in Paris in December 2015 at the 21st Conference of the 

Parties to the United Nations Framework on Climate Change, setting out a new 

process for achieving global emission reductions.

In the United States, some additional form of regulation may be forthcoming in the future 

at the federal and state levels with respect to GHG emissions. Such regulation could take 

any of several forms that may result in the creation of additional costs in the form of 

taxes, the restriction of output, investments of capital to maintain compliance with laws 

and regulations, or required acquisition or trading of emission allowances. We are 

working to continuously improve operational and energy efficiency through resource and 

energy conservation throughout our operations.

Compliance with changes in laws and regulations that create a GHG emission trading 

scheme or GHG reduction policies could significantly increase our costs, reduce demand 

for fossil energy derived products, impact the cost and availability of capital and increase 

our exposure to litigation. Such laws and regulations could also increase demand for less 

carbon intensive energy sources, including natural gas. The ultimate impact on our 

financial performance, either positive or negative, will depend on a number of factors, 

including but not limited to:

• Whether and to what extent legislation or regulation is enacted.

• The timing of the introduction of such legislation or regulation.

Source: Securities and Exchange Commission. | GAO-18-188
Appendix II: Examples of Climate-Related 

Disclosures in Securities and Exchange 

Commission (SEC) Form 10-K Filings

Page 38 GAO-18-188 Securities and Exchange Commission

Continued Page 3

• The nature of the legislation (such as a cap and trade system or a tax on emissions) 

or regulation.

• The price placed on GHG emissions (either by the market or through a tax).

• The GHG reductions required.

• The price and availability of offsets.

• The amount and allocation of allowances.

• Technological and scientific developments leading to new products or services.

• Any potential significant physical effects of climate change (such as increased 

severe weather events, changes in sea levels and changes in temperature).

• Whether, and the extent to which, increased compliance costs are ultimately 

reflected in the prices of our products and services.

The company has responded by putting in place a corporate Climate Change Action 

Plan, together with individual business unit climate change management plans in order to 

undertake actions in four major areas:

• Equipping the company for a low emission world, for example by integrating GHG 

forecasting and reporting into company procedures; utilizing GHG pricing in planning 

economics; developing systems to handle GHG market transactions.

• Reducing GHG emissions—In 2014, the company reduced or avoided GHG 

emissions by approximately 900,000 metric tonnes by carrying out a range of 

programs across a number of business units.

• Evaluating business opportunities such as the creation of offsets and allowances; 

carbon capture and storage; the use of low carbon energy and the development of 

low carbon technologies.

• Engaging externally—The company is a sponsor of MIT’s Joint Program on the 

Science and Policy of Global Change; constructively engages in the development of 

climate change legislation and regulation; and discloses our progress and 

performance through the Carbon Disclosure Project and the Dow Jones 

Sustainability Index.

The company uses an estimated market cost of GHG emissions in the range of $8 to $35 

per tonne depending on the timing and country or region to evaluate future opportunities.

Source: Securities and Exchange Commission. | GAO-18-188
Appendix III: GAO Contacts and Staff 

Acknowledgments

Page 39 GAO-18-188 Securities and Exchange Commission

Michael Clements, (202)-512-8678 or clementsm@gao.gov

J. Alfredo Gómez, (202)-512-3841 or gomezj@gao.gov

In addition to the contacts named above, Barbara L. Patterson (Assistant 

Director), Giselle Cubillos-Moraga (Analyst in Charge), Anna Chung, 

Cindy Gilbert, Jesse Lamarre-Vincent, Marc Molino, Tovah Rom, Grant 

Simmons, and Tyler Spunaugle made key contributions to this report.

Appendix III: GAO Contacts and Staff 

Acknowledgments

GAO Contacts

Staff 

Acknowledgments

(101244)
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