In 2007, the New York Attorney General served subpoenas on five companies (Peabody Energy, the world's largest private sector coal producer, and four coal-intensive power generating companies) requesting information on investigations those companies had conducted in the past and the conclusions those companies had made at the time regarding the effects of climate change on their businesses, in order to determine whether those companies' disclosures to investors about such effects were inadequate. The subpoenas were issued under state law at a time of increasing media and investor interest in climate change disclosure, but before the SEC published its climate change interpretive guidance in 2010. Since then, the SEC guidance has significantly increased climate change reporting by public energy companies in the United States.

In November 2015, Peabody Energy entered into a settlement agreement with the New York Attorney General, which focused on two allegations:

  • Statements in Peabody's public disclosures that it could not reasonably predict the future impact of any climate change regulation were inconsistent with the fact that Peabody and its consultants had looked into this issue at some length and had projected material and severe impacts from certain potential regulations;
  • The International Energy Agency ("IEA") projections included in Peabody's public disclosures showing the impact of climate change developments on the future of the coal market were "cherry picked." Peabody discussed demand under the IEA's "current policies scenario," which is the high case for coal usage, rather than its "new policies scenario," which assumes the implementation of announced government carbon commitments and policies and which the IEA considers its baseline scenario.

The New York Attorney General recently served a subpoena on Exxon Mobil, which similarly seeks information from as far back as 1977, in order to assess Exxon Mobil's climate change disclosures.

The Peabody settlement and the investigation of Exxon Mobil have recast a spotlight on the sufficiency of climate change disclosure by energy companies. In drafting, reviewing and updating their climate change disclosure, including risk factors, companies should take into consideration any investigations the company has made into the effects of climate change on the company's business, including on the markets for the company's products. To the extent a company's disclosure includes projections as to the market or demand for a product, companies should ensure that such disclosure is balanced and reflects a range of conventional scenarios on the impact of climate change regulation.

Our client publication surveying recent developments in corporate climate change reporting is available at: http://www.shearman.com/en/newsinsights/publications/2015/12/corporate-climate-change-reporting

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.