On March 21, 2022, the SEC released a proposal for rules on climate-related disclosures stating that all publicly traded companies will be required to disclose greenhouse gas (GHG) emissions. They will also be asked to disclose a qualitative write up of climate-related risks, governance and risk management climate goals, and note to the financial statements quantifying the impact of climate related events and transition activities. While the rule directly applies to public companies, it may also apply to many private companies that are in the supply chains of larger public companies.
Financial institutions should be on high alert because banking regulatory bodies will likely also enact mandates for environmental sustainability. Not long after the SEC proposed rule was released, the FDIC requested comment on a statement of principles for climate-related risk management for large financial institutions. Some organizations aren’t waiting for a regulatory mandate and have chosen to enact ESG policies and take action against climate change. Many have found that because of their new policies, they have attracted and retained customers.
With several recent high-profile enforcement actions and the creation of a new climate and ESG task force, the Securities and Exchange Commission (SEC) has made it clear that it intends to proactively pursue companies for ESG-related reporting misconduct. Read our article for ESG Today
Getting started with an ESG strategy in the banking space
For banks that are considering an ESG policy, it may be difficult to find a starting point. Measuring environmental impacts can be vague, and sustainability cannot be addressed by a few paragraphs in an annual report. Consider taking the following steps:
