Environmental Liabilities and the Federal Securities Laws: A Proposal for Improved Disclosure of Climate Change-Related Risks

By Latham, Mark | Environmental Law, Summer 2009 | Go to article overview
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Environmental Liabilities and the Federal Securities Laws: A Proposal for Improved Disclosure of Climate Change-Related Risks


Latham, Mark, Environmental Law


  I. INTRODUCTION
 II. ENVIRONMENTAL LIABILITIES AND DISCLOSURE
     A. An Overview
     B. Climate Change Risks and Liabilities
        1. The Regulatory Risks of Climate Change
        2. The Direct Physical Risks to Businesses
        3. Litigation Risks
           a. Damages for the Harms Caused by Climate Change
           b. Inability to Construct New or Modified Emission Sources
III. THE IMPETUS FOR THE FEDERAL REGULATION OF SECURITIES: THE CRASH
     OF 1929
     A. Disclosure: The Essence of the Federal Securities Regulatory
        Regime
     B. Regulation S-K and Disclosure Under the 1933 and 1934 Acts
     C. Regulation S-X and the Disclosure of Financial Information
 IV. THE OBLIGATION TO DISCLOSE ENVIRONMENTAL LIABILITIES UNDER THE 1933
     AND 1934 ACTS
     A. Development of the SEC s Environmental Disclosure Requirements
        1. Further Impetus for Disclosure of Environmental Liabilities:
           The National Environmental Policy Act
        2. Natural Resources Defense Council v. SEC
        3. Regulation S-K and the Disclosure of Environmental
           Liabilities
     B. Accounting and the Disclosure of Environmental Liabilities
        1. FASB Statement No. 5
        2. Staff Accounting Bulletin No. 92
        3. SOP 96-1
        4. SFAS No. 143
        5. FIN 47
     C. EPA's Foray into Environmental Disclosure Obligations
  V. LIABILITY FOR INADEQUATE OR MISLEADING ENVIRONMENTAL DISCLOSURES
 VI. THE INTERPLAY BETWEEN THE CURRENT DISCLOSURE REGIME AND CLIMATE
     CHANGE RISK
     A. Disclosure of Regulatory Risks
     B. Disclosure of Climate Change Litigation Risks
     C. The Physical Risks of Climate Change
VII. A PRESCRIPTION FOR IMPROVED CLIMATE CHANGE LIABILITY DISCLOSURE
     A. The SEC Should Act.
     B. A New Role for the Emergency Planning and Community
        Right-to-Know Act in Improving Disclosure of Climate Change
        Risk
        1. Overview of EPCRA
        2. Addition of Carbon Dioxide to the List of Chemicals Subject
           to Section 313
        3. The Benefits Reaped by Imposing Section 313 Obligations on
           C[O.sub.2]

I. INTRODUCTION

      As society strives to maintain and to improve our environment,
   costs are imposed that may need to be disclosed to investors under
   our federal securities laws. These environmental costs have reached
   staggering proportions in recent years and are one of the critical
   issues facing businesses today....

      While the aggregate numbers concerning potential environmental
   costs are staggering, what is even more frightening is the massive
   amount of acknowledged environmental cost that has yet to be
   reflected in corporate financial statements. (1)

It is beyond doubt that businesses in the United States collectively incur billions of dollars in costs annually to comply with a myriad of local, state, federal, and international environmental ordinances, regulations, statutes, and treaties. (2) As the quotation above from a former commissioner of the Securities and Exchange Commission (SEC or Commission) recognizes, however, the extent to which publicly traded companies are providing investors with sufficient information about the costs and liabilities associated with the environmental regulatory regime remains the subject of debate. This debate is occurring at a time when the pressures upon businesses to disclose additional information, particularly information about the costs associated with the risks presented by climate change, are mounting. (3) This Article traces the evolution of the obligation of publicly traded companies to disclose environmental liabilities under the federal securities laws, discusses the climate change risks confronting businesses, and concludes with a proposal to better inform the public, investors, businesses, and regulators of the potential liabilities this evolving environmental threat presents.

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Environmental Liabilities and the Federal Securities Laws: A Proposal for Improved Disclosure of Climate Change-Related Risks
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