Published 1 year ago.
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The rules — which would require companies to include information about their GHG emissions and climate-related risks likely to have a material impact on their business, results of operations or financial condition — have garnered mixed reviews from stakeholders.
On Monday, the Securities and Exchange Commission proposed rule changes that
would require companies to include certain climate-related disclosures in their
registration statements and periodic reports — including information about
climate-related risks that are reasonably likely to have a material impact on
their business, results of operations, or financial condition; and certain
climate-related financial statement metrics. The required information about
climate-related risks also would include disclosure of a company’s greenhouse
which have become a commonly used metric to assess its exposure to such risks.
"I am pleased to support today’s proposal because, if adopted, it would provide
investors with consistent, comparable, and decision-useful information for
making their investment decisions, and it would provide consistent and clear
reporting obligations for issuers," said SEC Chair Gary Gensler. "Our core
bargain from the 1930s is that investors get to decide which risks to take, as
long as public companies provide full and fair disclosure and are truthful in
those disclosures. Today, investors representing literally tens of trillions of
support climate-related disclosures because they recognize that climate risks
can pose significant financial risks to companies; and investors need reliable
information about climate risks to make informed investment decisions. Today’s
proposal would help issuers more efficiently and effectively disclose these
risks and meet investor demand, as many issuers already seek to do.”
The proposed rule changes would require a company to disclose information about:
its governance of climate-related risks and relevant risk management
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how any climate-related risks identified by the company have had or are
likely to have a material impact on its business and consolidated financial
statements, which may manifest over the short, medium or long term;
how any identified climate-related risks have affected or are likely to
affect the company’s strategy, business model, and outlook; and
the impact of climate-related events (severe weather events and other
natural conditions) and transition activities on the line items of a
company’s consolidated financial statements, as well as on the financial
estimates and assumptions used in the financial statements.
For companies that already conduct scenario analysis, have developed transition
plans or publicly set climate-related
the proposed amendments would require certain disclosures to enable investors to
understand those aspects of the companies’ climate risk management.
The proposed rules also would require a company to disclose information about
its Scope 1 and 2 emissions — as well as Scope 3, if material or if the company
has set a GHG emissions target that includes Scope 3 emissions. The proposed
disclosures are similar to those that many companies already provide, based on
broadly accepted disclosure frameworks such as the Task Force on
Climate-Related Financial Disclosures and the Greenhouse Gas Protocol. The
proposed rules would include a phase-in period for all companies, with the
compliance date dependent on the company’s filer status and an additional
phase-in period for Scope 3 emissions disclosure.
While the proposed rules are naturally garnering mixed reactions from
stakeholders — including from within the SEC
Ceres is one of many organizations that commend the proposed rules.
"The SEC is finally heeding the calls from institutional investors, companies,
regulators and the public," said Mindy S. Lubber, Ceres CEO and President
and a former regional administrator for the Environmental Protection Agency.
"The thoughtful climate disclosure proposal would allow investors and companies
to better tackle climate-related financial risks across investment portfolios
and global supply chains and seize the opportunities that come with acting on
Karen Alonardo, VP of ESG Solutions at NAVEX, says the industry has been
waiting with bated breath for a proposed set of rules from the SEC on climate
“[The proposed rules] address the growing need for decision-useful climate-risk
metrics that address key areas of
that companies have been addressing in disparate fashion with a patchwork of
frameworks,” Alonardo said via email. “This is a giant step forward toward
concrete rules [that] will motivate businesses and investors toward specific
environmental and societal goals, and give much needed transparency and
comparability into ESG metrics that matter. This will also address issues that
with enforced greenhouse gas emissions reporting standards.”
The comment period will remain open for 30 days after publication in the Federal
Register — or 60 days after the date of issuance and publication on sec.gov,
whichever period is longer.
Published Mar 22, 2022 2pm EDT / 11am PDT / 6pm GMT / 7pm CET