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Do Brag About Going Green

According to a little-known SEC rule modification, your firm's relation to climate change can be material, meaning that you are supposed to report it. But that can be a good thing.

Lamont Wood

May 26, 2010

2 Min Read

According to a little-known SEC rule modification, your firm's relation to climate change can be material, meaning that you are supposed to report it. But that can be a good thing.If your enterprise is a public corporationand many SMBs arethe Securities and Exchange Commission has news: business or legal developments relating to the issue of climate change are covered by disclosure requirements. The SEC does not take a position for or against climate change being real, but does say that if global warming amounts to a material issue for your enterprise, if needs to be disclosed in financial filings.

The sections of financial reports that cover risk factors, business description, legal proceedings, and management discussion and analysis would all be appropriate places to discuss the possible impact of climate change. For instance, financial statements should cover the indirect consequences of regulation or business trends, including legal, technological, political and scientific developments regarding climate change that may create new opportunities.

That's where IT comes inwith opportunities. If you have modified your data center to cut greenhouse gas emissions, that puts you in a better position than your feckless competitors in the face of future regulations concerning such thingsnot to mention that fact that you probably also saved money on electrical power.

In other words, the information that you report can be positive. The real question, when it comes to disclosing, is whether the information is material. The old rule of thumb is that information is material if there is a substantial likelihood that a reasonable investor would consider it important when deciding whether to invest. Obviously, there's room for interpretation.

But with climate change getting more and more mindshare, green business practices are likely to be seen as more and more material. Who knowsmaybe that will make it easier to get green projects funded.

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