SEC
The Securities and Exchange Commission (SEC) has proposed new rules that would require the registrants to include disclosures related to climate related risks with material implications on their business, financial condition or results of operations, as well as greenhouse gas emissions, in their registration statements and other reports. The proposed rules are similar to those of the Task Force on Climate-Related Financial Disclosures (TCFD) or the Greenhouse Gas Protocol. The SEC aims to provide investors with comparable and consistent information in order for them to make more informed decisions.
What information needs to be disclosed:
Climate related risks as well as their material impacts on the company’s business
Strategy and business model in relation to climate change related risks
Metrics and targets for managing climate-related risks and opportunities
Scope 1, 2, and 3 greenhouse gas emissions
Any relevant information about climate-related targets and if applicable, a transition plan
The proposed rules would also require companies to disclose their climate-related financial impacts, such as the potential costs of climate change and the benefits of climate action. Nonetheless, the proposed rules have not yet been finalised: they were published in March 2021 and were opened for public comments. Due to the number of public comments, the SEC let go of its original timeline, and has not yet announced a new one for when the final rules will be released or when they will become effective.
Who is it for?
The SEC Rules will be applicable to all registrants. They are estimated to apply to around 12,000 companies in the United States. Some key benefits of the SEC’s proposed climate related disclosures, are that they will help investors make more climate informed decisions, companies will better manage their climate related risks and identify opportunities for climate action.
Overall, the SEC disclosure rules help promote transparency and accountability in the financial markets and help align the financial system with the goals of the Paris Agreement. The SEC's proposed rules are a significant step towards a more sustainable financial system.