Environmental Disclosure: Briefing on GAO's Findings and	 
Recommendations (04-AUG-04, GAO-04-1019R).			 
                                                                 
The Securities and Exchange Commission's (SEC) primary mission is
to protect investors and the integrity of securities markets.	 
Among other things, SEC regulations require companies to file	 
reports with SEC disclosing information that would be considered 
"material" to a reasonable investor. A matter is material if	 
there is a substantial likelihood that a reasonable person would 
consider it important. Environmental risks and liabilities are	 
among the conditions that, if undisclosed, could impair the	 
public's ability to make sound investment decisions. For example,
the discovery of extensive hazardous waste contamination at	 
company-owned facilities could expose a company to hundreds of	 
millions of dollars in cleanup costs, while impending		 
environmental regulations could affect a company's future	 
financial position if the company were required to shut down	 
plants or invest in expensive new technology. To monitor	 
companies' disclosures, SEC reviews their filings and issues	 
comment letters requesting revisions or additional information,  
if needed. Although the Environmental Protection Agency (EPA)	 
does not have a direct role in monitoring environmental 	 
disclosures, the agency notifies companies of potential 	 
disclosure obligations and periodically shares relevant 	 
information with SEC.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-1019R					        
    ACCNO:   A11400						        
  TITLE:     Environmental Disclosure: Briefing on GAO's Findings and 
Recommendations 						 
     DATE:   08/04/2004 
  SUBJECT:   Environmental monitoring				 
	     Environmental policies				 
	     Environmental research				 
	     Financial disclosure				 
	     Hazardous substances				 
	     Information disclosure				 
	     Investment companies				 

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GAO-04-1019R

United States Government Accountability Office Washington, DC 20548

August 4, 2004

The Honorable Jon S. Corzine United States Senate

Subject: Environmental Disclosure: Briefing on GAO's Findings and
Recommendations

Dear Senator Corzine:

The Securities and Exchange Commission's (SEC) primary mission is to
protect investors and the integrity of securities markets. Among other
things, SEC regulations require companies to file reports with SEC
disclosing information that would be considered "material" to a reasonable
investor. A matter is material if there is a substantial likelihood that a
reasonable person would consider it important. Environmental risks and
liabilities are among the conditions that, if undisclosed, could impair
the public's ability to make sound investment decisions. For example, the
discovery of extensive hazardous waste contamination at company-owned
facilities could expose a company to hundreds of millions of dollars in
cleanup costs, while impending environmental regulations could affect a
company's future financial position if the company were required to shut
down plants or invest in expensive new technology. To monitor companies'
disclosures, SEC reviews their filings and issues comment letters
requesting revisions or additional information, if needed. Although the
Environmental Protection Agency (EPA) does not have a direct role in
monitoring environmental disclosures, the agency notifies companies of
potential disclosure obligations and periodically shares relevant
information with SEC.

This letter formally transmits to you the slides we used to provide a
briefing on issues related to the disclosure of environmental information
in SEC filings at a symposium on July 15, 2004, sponsored by you; Senators
Lautenberg, Lieberman, McCain, and Nelson; and Representatives Blumenauer,
Doggett, Markey, Michaud, Olver, Pallone, Payne, and Solis. (See enclosure
I.) The briefing was based on our recent report,

Environmental Disclosure: SEC Should Explore Ways to Improve Tracking and
Transparency of Information (GAO-04-808, July 14, 2004). The report
addresses (1) key stakeholders' views on how well SEC has defined the
requirements for environmental disclosure, (2) the extent to which
companies are disclosing such information in their SEC filings, (3) the
adequacy of SEC's efforts to monitor and enforce compliance with the
disclosure requirements, and (4) experts' suggestions for increasing and
improving environmental disclosure. Our review of these issues was
conducted in accordance with generally accepted government auditing
standards.

                 GAO-04-1019R Environmental Disclosure Briefing

We are sending copies of this letter to the Chairman of SEC; the
Administrator, EPA; and to other interested parties. The letter will also
be available at no charge on GAO's Web site at http://www.gao.gov.

Please call me at (202) 512-3841 if you or your staff have any questions.
Major contributors are listed in enclosure II.

Sincerely yours,

John B. Stephenson Director, Natural Resources and Environment

Enclosures - 2

Category of potential Number of companies      Number of companies with no 
                 impacts  making disclosures                      disclosures 
          Kyoto Protocol         14                         6                 
       Current policy on          9                         11                
    voluntary reductions                     
        Other current or         16                         4                 
       proposed controls                     

                                   1999      2000      2001     2002     2003 
               Annual filings    13,460    14,280    14,060   13,550   12,830 
       Number reviewed by SEC     2,345     1,160     2,305    2,695    2,170 
      Percent reviewed by SEC      17.4       8.1      16.4     19.9     16.9 

Enclosure II GAO Contacts and Staff Acknowledgments

GAO Contacts
Staff Acknowledgments

(360506) John B. Stephenson, (202) 512-3841 Ellen Crocker, (617) 788-0580

In addition to the individuals named above, Kate Bittinger, Mark Braza,
Stephen Cleary, Evan Gilman, Kevin Jackson, Rich Johnson, Les Mahagan, Tom
Melito, Lynn Musser, Cynthia Norris, and Judy Pagano made key
contributions to this report.

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