SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors

Treliant Takeaway:

The U.S. Securities and Exchange Commission proposed rule amendments that would require a domestic or foreign registrant to include certain climate-related information in its registration statements and periodic reports. This includes information about climate-related risks that are likely to have a material impact on their business, results of operations, or financial condition, and specific climate-related financial statement metrics in a note to their audited financial statements. Treliant has a wealth of risk experience within their ranks, including SMEs and change management and analysis expertise to provide a basis for their clients to perform risk and technology assessment exercises.

Highlights:

The proposed rule changes would require a registrant to disclose information about:

  • the registrant’s governance of climate-related risks and relevant risk management processes;
  • how any climate-related risks identified by the registrant have had or are likely to have a material impact on its business and consolidated financial statements;
  • how any identified climate-related risks have affected or are likely to affect the registrant’s strategy, business model, and outlook;
  • the impact of climate-related events (severe weather events and other natural conditions) and transition activities on the line items of a registrant’s consolidated financial statements and the financial estimates and assumptions used in the financial statements.

Key Takeaways:

  • For companies that already conduct scenario analysis, have developed transition plans, or publicly set climate-related targets or goals, the proposed amendments would require certain disclosures to enable investors to understand those aspects of the registrants’ climate risk management.
  • Accelerated filers would be required to include an attestation report from an independent attestation service provider covering Scopes 1 and 2 emissions disclosures, with a phase-in over time, to promote the reliability of GHG emissions disclosures for investors.
  • The proposed rules would include a phase-in period for all registrants, with the compliance date dependent on the registrant’s filer status, and an additional phase-in period for Scope 3 emissions disclosure.
  • 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.

In a statement, Securities and Exchange Commission Chair, Gary Gensler said, “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.”

Author

Paul Walsh

Paul Walsh is Practice Lead, Digital Transformation, and Head of European Consulting for Capital Markets at Treliant. He is an accomplished change leader, with more than 25 years’ experience and a proven track record of delivering large-scale transformation programmes across business and technology in complex global banking environments. He has…