108 Iowa L. Rev. 1959 (2023)



The Securities and Exchange Act of 1934 requires public companies to disclose material information to investors. The definition of “material” has been construed by courts to mean information that a reasonable investor would find substantially important. The scope of materiality has traditionally been limited to information having a direct financial impact on a company. Today, climate change has become an increasingly important factor to investors. The U.S. Securities and Exchange Commission (“SEC”) came out with a new proposal in March of 2022 that would require public companies to disclose certain climate-related information. As investors are beginning to demand and rely on companies’ climate-related information, the definition of “material” has begun to evolve with the expectations of a “reasonable investor.” The evolving nature of materiality has created an uncertain environment for companies to disclose climate-related information. This uncertainty leaves companies susceptible to securities litigation, especially private actions. This Note argues that the evolving nature of materiality and the SEC’s disclosure regimes place the oil and gas industry in an untenable position when trying to disclose climate-related information. It proposes that the SEC update its guidance report on climate-related materiality rather than impose its new March 2022 climate disclosure proposal. It also proposes that the Private Securities Litigation Reform Act (“PSLRA”) be amended to include stronger safe-harbor provisions and a shorter statute of limitations period. These changes will create a more predictable environment for climate-related information disclosure in the oil and gas industry which will lead to greater transparency.

Monday, May 15, 2023