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SEC proposes expansive climate-related disclosure rules
SEC Update
27 April 2022
On March 21, in one of its most significant rulemakings in recent years, the Securities and Exchange Commission proposed rules that would require public companies to provide investors with extensive, consistent, and comparable climate-related information in their Exchange Act and Securities Act filings.
Under the new rules, companies would be obligated to present sweeping and detailed climate-related disclosures in their annual reports and registration statements. The new disclosures would encompass climate-related risks and their actual or likely material impacts on the company’s business, strategy, and outlook; governance of climate-related risks and relevant risk management processes; greenhouse gas (GHG) emissions; specified climate-related financial metrics appearing in a note to the audited financial statements; and information about climate-related targets and goals, including any transition plans.
In developing its approach to standardized climate-related disclosure, the SEC drew on a number of disclosure frameworks used by many companies to prepare sustainability reports, including, most notably, the framework published by the Task Force on Climate-Related Financial Disclosures (TCFD) and the accounting and reporting standards for GHG emissions under the Greenhouse Gas Protocol.
The new rules would apply to all operating companies filing reports and registration statements with the SEC, including foreign private issuers as well as domestic registrants. Compliance with the rules would be subject to phase-in periods based on the company’s SEC filer status and fiscal year-end.
The SEC’s voluminous release describing the proposed rules (Release No. 33-11042) can be viewed here and the related fact sheet published by the SEC here. The comment period on the proposal will remain open until May 20, 2022.
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Authored by Alan Dye (co-editor), Richard Parrino (co-editor), Tiffany Posil, Michael McTiernan, Hilary Tompkins, Alex Bahn, John Beckman, Kevin Greenslade, Brian O'Fahey, and Laura Heller.
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