SEC Adopts Climate-Related Disclosure Rules

SEC Adopts Climate-Related Disclosure Rules

On March 6, 2024, the SEC adopted final rules to enhance public company disclosures related to the risks and impacts of climate-related matters. The new rules require disclosure of certain climate-related information, including material climate-related risks and risk management, and certain financial metrics. Larger registrants are required to disclose material Scope 1 & 2 greenhouse gas (GHG) emissions, which will be subject to a phased-in assurance requirement. 

These final rules differ in several aspects from the SEC’s original March 2022 proposal, most notably including changes in footnote requirements, number of registrants subject to emissions disclosures, and the removal of the requirement to report on Scope 3 emissions.

The final rules leverage the climate-related disclosure framework of the IFRS Sustainability Disclosure Standards.


Disclosure Highlights:

General Disclosures

  • Actual and potential material impacts of climate-related risks on the company’s overall business strategy and outlook.
  • Description of the nature and extent of management’s role in assessing and managing climate-related risks and the board of directors’ oversight of such risks.
  • Processes for identifying, assessing, and managing climate risks and whether these risks are integrated into the company’s overall risk management processes.
  • Any climate-related target or goal that has or is reasonably likely to materially affect the company’s business, results of operations, or financial condition.


GHG Emissions

  • If material, disclosure of Scope 1 and Scope 2 GHG emissions is required for large accelerated and accelerated filers.
  • Description of the methodology, significant estimates, and assumptions used to calculate the GHG emissions.


Financial Statement Disclosures

  • Certain disclosures are required in a note to the financial statements related to capitalized costs and expenditures as a result of severe weather events and other natural conditions, as well as from carbon offsets or renewable energy credits or certificates.


Attestation

  • Scopes 1 and 2 GHG emissions disclosures will be subject to assurance for accelerated and large accelerated filers.
  • Assurance requirements will be subject to a phased-in period, beginning with limited assurance.


XBRL

  • Information must be tagged using inline XBRL beginning with fiscal years beginning 2026 for large accelerated and accelerated filers other than emerging growth companies (EGCs) and small reporting companies (SRCs), and fiscal years beginning 2027 for all others.



What’s Next?

Although the earliest reporting requirement starts in 2025, given the volume of information required, registrants should start to prepare now. Communication across functional teams, including sustainability and finance is key.


Timing

Timing is dependent upon the size of the registrant, with the earliest reporting requirements expected in fiscal year beginning (FYB) 2025:

Registrant Type

Disclosures, other than GHG emissions

Scope 1 and Scope 2 GHG emissions

Limited Assurance

Reasonable Assurance

Large accelerated filers

FYB 2025

FYB 2026

FY 2029

FY 2033

Accelerated filers (other than SRCs and EGCs)

FYB 2026

FYB 2028

FY 2031

Not applicable

SRCs and EGCs, and non-accelerated filers

FYB 2027

Not applicable

Not applicable

Not applicable