Article

SEC announces final rules for climate-related disclosures 

March 7, 2024 · Authored by Sean Roundtree

On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) voted to approve final rules for the enhancement and standardization of climate-related disclosures. The final rules require disclosure in annual reports and registration statements, including initial public offerings, and are narrower in scope compared to the 2022 proposed rules, including the notable exclusion of scope 3 emissions reporting. However, they still require companies to meet significant new requirements of climate disclosure. Key takeaways include, among other things: 

Nonfinancial statement disclosures (Regulation S-K) 

• Disclosure of climate-related risks, strategy and processes: All registrants will be required to disclose 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. Further disclosure regarding the methods used to determine these risks, management's strategies to identify, assess and manage material risks and the extent to which these processes are included within enterprise risk management functions. Companies must also disclose material expenditures directly related to climate-related activities relative to their strategy and transition plans, targets and goals.  
• Governance disclosures: All registrants will be required to disclose oversight by the board of directors for climate-related risks as well as the role by management in assessing and managing material climate-related risks. This includes details regarding the process for assessing and managing climate-related risks and details around climate-related targets and goals, if such goals have a material effect on the business, operations or financials. 
• Greenhouse gas (GHG) emissions and assurance: Large accelerated filers (LAFs) and accelerated filers (AFs) will be required to disclose material direct emissions (i.e. scope 1 and 2) over a phased timeline. Smaller reporting companies (SRCs) and emerging growth companies (EGCs) are exempt from GHG emissions disclosures. Additionally, the final rule eliminated the proposed requirement to provide scope 3 emissions disclosure. These disclosures will require assurance from an independent GHG emissions attestation provider that has expertise with performing GHG emissions attest engagements and performs engagements aligned with professional standards. These disclosures can be filed in the second quarter on Form 10-Q in the following fiscal year or may be included as an amendment to the 10-K no later than the 10-Q due date, providing more time for registrants than initially proposed.