SEC climate-related disclosure rules for public companies

On
March
6,
2024,
the

US
Securities
and
Exchange
Commission
(SEC)
adopted
rules
to
enhance
and
standardize
climate-related
disclosures
by
public
companies
and
in
public
offerings.
The
commission’s
adoption
of
the
rules
is
two
years
in
the
making.
The
original
proposed
rules,
issued
in
March
2022,
aimed
to
ensure
consistency
in
how
publicly
traded
companies
provided
climate-related
information
to
investors.

These
new
rules
join
existing
regulations
in
both
the
US
and
around
the
world
requiring
companies
to
make
climate-related
disclosures
and
provide
other
ESG-related
metrics.
In
California,
for
example,
legislation
passed
in
late
2023
requires
Scope
3
emissions
disclosures,
while
the
European
Union’s

Corporate
Sustainability
Reporting
Directive—which
mandates
disclosures
on
a
range
of
sustainability
issues—was
adopted
earlier
in
the
year.

Per
the
new
SEC
rules,
companies
will
be
required
to
disclose:

Climate-related
risks
and
costs

• Climate-related
  risks
  that
  have
  had
  or
  are
  reasonably
  likely
  to
  have
  a
  material
  impact
  on
  the
  registrant’s
  business
  strategy,
  results
  of
  operations,
  or
  financial
  condition;
• The
  actual
  or
  potential
  material
  impacts
  of
  any
  identified
  climate-related
  risks
  on
  the
  registrant’s
  business
  model,
  outlook
  and
  strategy;
• The
  capitalized
  costs,
  expenditures
  expensed,
  charges
  and
  losses
  incurred
  as
  a
  result
  of
  severe
  weather
  events
  and
  other
  natural
  conditions,
  such
  as
  hurricanes,
  tornadoes,
  flooding,
  drought,
  wildfires,
  extreme
  temperatures
  and
  sea
  level
  rise,
  subject
  to
  applicable
  one
  percent
  and
  de
  minimis
  disclosure
  thresholds
  disclosed
  in
  a
  note
  to
  the
  financial
  statements;

Mitigation
and
oversight
efforts

• If
  a
  registrant
  has
  undertaken
  activities
  to
  mitigate
  or
  adapt
  to
  a
  material
  climate-related
  risk,
  a
  quantitative
  and
  qualitative
  description
  of
  material
  expenditures
  incurred
  and
  material
  impacts
  on
  financial
  estimates
  and
  assumptions
  that
  directly
  result
  from
  such
  mitigation
  or
  adaptation
  activities;
• Specified
  disclosures
  regarding
  a
  registrant’s
  activities,
  if
  any,
  to
  mitigate
  or
  adapt
  to
  a
  material
  climate-related
  risk
  including
  the
  use,
  if
  any,
  of
  transition
  plans,
  scenario
  analysis
  or
  internal
  carbon
  prices;
• Any
  oversight
  by
  the
  board
  of
  directors
  of
  climate-related
  risks
  and
  any
  role
  by
  management
  in
  assessing
  and
  managing
  the
  registrant’s
  material
  climate-related
  risks;
• Any
  processes
  the
  registrant
  has
  for
  identifying,
  assessing
  and
  managing
  material
  climate-related
  risks
  and,
  if
  the
  registrant
  is
  managing
  those
  risks,
  whether
  and
  how
  any
  such
  processes
  are
  integrated
  into
  the
  registrant’s
  overall
  risk
  management
  system
  or
  processes;
• Information
  about
  a
  registrant’s
  climate-related
  targets
  or
  goals,
  if
  any,
  that
  have
  materially
  affected
  or
  are
  reasonably
  likely
  to
  materially
  affect
  the
  registrant’s
  business,
  results
  of
  operations
  or
  financial
  condition.
  Disclosures
  would
  include
  material
  expenditures
  and
  material
  impacts
  on
  financial
  estimates
  and
  assumptions
  as
  a
  direct
  result
  of
  the
  target
  or
  goal
  or
  actions
  taken
  to
  make
  progress
  toward
  meeting
  such
  target
  or
  goal;

Emissions
information

• For
  large
  accelerated
  filers
  (LAFs)
  and
  accelerated
  filers
  (AFs)
  that
  are
  not
  otherwise
  exempted,
  information
  about
  material
  Scope
  1
  emissions
  and/or
  Scope
  2
  emissions;
• For
  those
  required
  to
  disclose
  Scope
  1
  and/or
  Scope
  2
  emissions,
  an
  assurance
  report
  at
  the
  limited
  assurance
  level,
  which,
  for
  a
  LAF,
  following
  an
  additional
  transition
  period,
  will
  be
  at
  the
  reasonable
  assurance
  level;

Where
will
the
disclosures
be
made?

The
SEC
is
requiring
that
required
climate-related
disclosures
be
included
in
companies’
filings
with
the
commission,
such
as
registration
statements
and
annual
reports.

When
will
companies
be
required
to
begin
disclosures?

The
new
rules
will
take
effect
60
days
after
they’re
published
in
the
federal
register.
However,
there
will
be
a
phase-in
period
for
compliance,
with
the
largest
companies
reporting,
as
required,
on
climate-related
risks
by
fiscal
year
2025
and
on
emissions
by
2026.
Compliance
dates
for
smaller
companies
range
between
2026
and
2028,
depending
on
their
registrant
type.

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client
is
responsible
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ensuring
compliance
with
all
applicable
laws
and
regulations.
IBM
does
not
provide
legal
advice
nor
represent
or
warrant
that
its
services
or
products
will
ensure
that
the
client
is
compliant
with
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law
or
regulation.