The Securities and
Exchange Commission in Washington voted by 3-2 last week to issue an
“interpretive release” aimed at public company disclosures of the impact of
climate change – ranging from new regulations and legislation, to changes in
economic trends or physical risks (here).

Yet another layer
of mandated environmental platitudes?

In her announcement
speech, Chairman Mary Schapiro disavowed any intent to “create new legal
requirements or modify existing ones,” and stated (her emphasis) that the
Commission is “not making any kind of
statement regarding the facts as they
relate to the topic of ‘climate change’ or global warming’.” 

Further pounding
down another nail of obvious banality, she noted that “it is neither surprising
nor especially remarkable for us to conclude that of course a company must consider” possible events which “under our
traditional framework” it must evaluate and disclose if material.

So the SEC’s
cheerleading on climate change will be right there with the influence of the
pom-pom girls on the outcome of the Super Bowl.

The SEC has been in
rehabilitation mode since the prior administration, for everything from being
caught out by Bernie Madoff’s spectacular Ponzi scheme to its virtual absence
during the credit crisis. (see Andrew
Ross Sorkin’s thoroughly engaging “Too Big To Fail” (Viking Penguin 2009), for
the shared view that the then-Chairman was a clueless and ineffectual
lightweight.)

The agency’s
October 8, 2009 strategic plan has been followed by an outpouring: creation of
a division for Risk, Strategy and Financial Innovation (November 5), borrowing
of “cooperation incentives” from the toolkit of serious criminal prosecutors
(January 13), and re-shuffling of bodies and titles within the Division of Enforcement
(also January 13). Here then, the appearance of another release du jour. 

Or so it seems –
because it can hardly be justified on the substance. Rather than real
regulation, it’s the Potemkin façade of illusion – animated by the same
optics-oriented spirit that inflicted on the user community the costs,
disruptions and distractions of the Sarbanes/Oxley law. 

With details still
to come, the SEC’s release offers four so-called “triggers’ whose impact could
lead to disclosure – legislation and regulation, international accords,
indirect consequences of regulation or business trends, and physical impacts of
climate change – each of which would already have been unexceptionally viewed
as an appropriate disclosure category under pre-existing guidance.

It offers a fair
question: where the carbon set-offs will be found, for the acres of forest and
tankers of jet fuel that will be consumed and emitted, to support all the round-tables,
seminars and symposia, expensive legal opinions and auditor box-ticking, that
will enable registrants to react to this latest burst of regulatory hot air.

What might be some
of the new language, on top of disclosures that are already vaporous enough?

•  “The
  company safeguards its portfolio of exotic derivatives in an eco-friendly black
  box, which is regularly re-valued by marking to a market that is completely
  organic.”
• “While
  the company’s internal control structure may not prevent our shopping-addicted
  CFO from stealing us blind, we are pleased that our corporate credit card
  accounts are now settled by paperless invoicing.”
  
• “Any
  facilitating payments made to public officials by our off-shore subsidiaries
  will be delivered in brown paper bags made of no less than 60% recycled
  material.”

Kidding aside, validation
of the importance of climate change is plain from its prominence in the
marketing of each of the Big Four (here, here, here and here) – so nearly
identical and undifferentiated as to be products of the same publicity shop.  

The accountants had
best be ready, because the financial and reporting issues around climate change
will become real – from the complexities sure to arise when the inventive wonks
in the derivatives markets develop exotic ways to re-package emissions permits
for speculative purposes, to the management and audit issues of identifying and
controlling pollution sources for purposes of permit measurement and
compliance.

But for now, with the
SEC already fully occupied with credibility-stretching issues, it is hard to
see its exercise in non-substantive flag-waving as anything more than a
needless contribution to the already-elevated level of Washington’s noxious
fumes.  

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