The Securities and Exchange Commission (SEC) has opened what can be considered a veritable hornet's nest with a reversal of a policy that allowed public companies to exclude investor proposals for disclosures related to environmental, financial, and health risks, including those related to climate change.

In SEC Staff Legal Bulletin No. 14E(CF), published on October 27, 2009, SEC said that in the past it has allowed companies to exclude proposals relating to a company's engaging in an evaluation of risk, which it had viewed as relating to the company's ordinary business operations. SEC would not allow companies to exclude proposals that focused on minimizing or eliminating operations that may adversely affect the environment or public health.

In the bulletin, SEC says that it has recently seen a marked increase in the number of requests from companies to exclude proposals related to an evaluation of risk because that would require them to engage in a risk assessment. Many investor groups in the late 1990s and since have called on companies to assess and disclose current and future risks associated with climate change.

Moving forward, SEC will not focus on whether an investor proposal relates to the evaluation of risk, but will focus on the subject matter to which the risk pertains. The fact that the proposal may require a company to evaluate risk will not be the defining reason that would allow it to be excluded.

Mindy Lubber, president of Ceres, a coalition of investors and public interest organizations, has hailed the SEC decision. "We applaud the SEC for its common sense decision to allow shareholder resolutions seeking information on companies' financial risks associated with critical environmental and social issues," said Lubber.

With the reversal of the SEC policy, it remains to be seen how many more companies will be targeted by investor groups seeking disclosure of global warming and other climate change risks. The prominence of climate change in the news and the stridency of some advocate groups indicate an upsurge. However, given the current economic climate there may be a reluctance to further poke the bear and possbily push some companies over the financial edge.