One of the example comments in the SEC’s recent Sample Letter to Companies Regarding Climate Change Disclosures addresses information that companies may include in separate ESG related reports:

We note that you provided more expansive disclosure in your corporate social responsibility report (CSR report) than you provided in your SEC filings.  Please advise us what consideration you gave to providing the same type of climate-related disclosure in your SEC filings as you provided in your CSR report.

In a recent Workshop, one of our participants asked about the pros and cons of mentioning or linking to a separate ESG report in Form 10-K.  One of the risks in such a reference is that the ESG report could become part of the Form 10-K and become “filed” information.  This would potentially subject the information in the ESG Report to the liability provisions set forth in section 18 of the 1934 Act and, if the 10-K is incorporated by reference into a 1933 registration statement, the strict liability provisions of section 11 of the 1933 Act.

Neither of these outcomes would be advisable for all the information in an ESG report.

If a company does want to make such a reference, or if it wants to file this information with the SEC, one way to do this would be through the submission of the report as an exhibit to an Item 7.01 (Regulation FD) Form 8-K.  Information so submitted to the SEC is deemed “furnished” rather than “filed” – therefore, the liability sections above are not applicable.  Of course, Rule 10b-5 applies; however, that always applies in a “fraud on the market” case to all statements made by the company, whether in press releases, its website or other communications (hence, the importance of ensuring the ongoing accuracy of those materials).

If you do make references to website disclosures in your SEC filings, it is important to include language that makes it clear the report (or other items from the website) is not being incorporated into Form 10-K.  A Workshop participant found this example of qualifying language in NIKE, Inc.’s 2020 Form 10-K:

Additional information related to our human capital strategy can be found in our FY20 NIKE, Inc. Impact Report, which is available on the Purpose section of our website. Information contained on or accessible through our websites is not incorporated into, and does not form a part of, this Annual Report or any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

As you can see, NIKE did not include a hyperlink to their Impact Report in the Form 10-K, additional insurance in avoiding the Impact Report becoming included in the Form 10-K.

As always, your thoughts and comments are welcome!