1. Rules/Regulations Environmental Disclosures
Kathleen Brennan de Jesus
Edison International

2. Sources Federal securities laws/rules
Generally Accepted Accounting Principles

3. General Goal of Federal Securities Laws
Disclosure of all material facts necessary for investors to make informed investment decisions
Reasonable investor
Materiality

4. Materiality Underlies most disclosure requirements
Information to which a “reasonable investor” would attach importance in deciding whether to buy/sell securities
Look at the potential effect on the company’s business, liquidity or financial condition

5. Federal Securities Laws Disclosure Sources
1933 and 1934 Acts
Regulation S-K
Guidance on Climate Change Disclosure (2010)
SEC Proposals
Regulation S-K Concept Release (April 2016)
Mining companies proposed rules (June 2016)
Disclosure Reform (July 2016 proposal) .

6. Regulation S-K
Sets out disclosure requirements for disclosure documents
Items that potentially relate to environment are:
Item 101
Item 103
Item 303
Item 503

7. Item 101 – Description of Business
Generally describe the development of the business.
Specific disclosure requirement on material effects of compliance environmental laws on financial position and forward-looking information on future financial impact of environmental compliance

8. Item 103 – Legal Proceedings
Requirement to disclose material legal proceedings that are NOT “ordinary, routine litigation incidental to the business”
Carve out for damages, cap ex or charges to income that are expected to be <10% of consolidated, current assets
Environmental legal proceedings are NOT considered ordinary, routine
$100,000 damages/sanctions disclosure threshold for govt. proceedings

9. Item 303 – Management’s Discussion and Analysis
Known trends and uncertainties that may have a material effect on the company’s financial condition
Contractual obligations
Critical accounting policies
Cost of compliance with environmental regs?

10. Item 503 – Risk Factors
Company-specific risks that make investment in the company speculative
Significant environmental risks could include climate change, contamination, non-compliance, litigation, or hazardous material exposure

11. GAAP and Liabilities Actual liabilities appear on balance sheet
Contingent liabilities may be accrued in the form of charges to income, aka: reserves or only disclosed
Reserve when a loss is both probable and estimable (if a range, use lowest end)
Disclose when a loss is probable but not estimable

12. Practical Tips Environmental Legal Proceedings
Consider explanatory intro:
The following proceeding was [previously] reported to comply with SEC regulations, which require disclosure of certain information about proceedings arising under federal, state or local environmental provisions if a company reasonably believes that such proceedings might result in monetary sanctions of $100,000 or more.
Maintain good communications with internal environmental compliance

13. Practical Tips contd.
Develop process for environmental team to communicate with management/SEC reporting team (law and accounting)
Regular review of disclosure
Regular request for new developments/regulations
Awareness of lower reporting threshold for governmental environmental actions