New Rules by SEC for Standardizing Climate-Related Disclosures

SEC Chair Gary Gensler said, “Our federal securities laws lay out a basic bargain. Investors get to decide which risks they want to take as long as companies raising money from the public make complete and truthful disclosures. Over the last 90 years, the SEC has updated, from time to time, disclosure requirements underlying that basic bargain and, when necessary, provided guidance with respect to those disclosure requirements.”

Understanding SEC’s Climate Disclosure

Owing to these requirements, the Securities and Exchange Commission, on March 6, 2024, implemented new regulations to enhance and standardize climate-related information reported by publicly traded corporations and during public offerings. These SEC climate disclosure rules are the result of the Commission’s efforts to meet investor demands for more uniform, comparable, and reliable data on how climate-related risks affect a company’s operations and risk management strategies. It also addresses concerns about the costs of complying with these regulations.

SEC Climate Disclosure Rule Requirements

Applicability: All companies that are SEC registrants (including foreign private issuers).

Disclosure requirements: According to the final SEC climate rules, a registrant must disclose the following:

1. Impact of climate-related hazards and risks on the company’s strategy and methods employed to identify, assess, and manage significant climate-related risks.
2. Information on transition plans, scenario analysis, or the implementation of internal carbon pricing methods to adapt to a material climate-related risk and the financial impact of climate-related risk mitigation measures.
3. Roles and responsibilities of the company’s board of directors and management in evaluating and dealing with major climate-related challenges.
4. Climate-related objectives or goals that have had or will have an impact on the company’s operations, results, or financial situation.
5. Information on material scope 1 emissions and/or scope 2 emissions.
6. An assurance report at the limited assurance level by Large Accelerated Filers (LAFs) and Accelerated Filers (AFs) not qualified for exemptions and at the reasonable assurance level by LAFs in subsequent phases.
7. Information as part of a note to the financial statements on capitalized costs, expenditures expensed, charges, and losses incurred because of severe weather disasters and other natural phenomena or incurred as a material component of a company’s plans to achieve its climate-related targets. This includes a qualitative report on the estimates and assumptions made by the company that were materially impacted by the associated risks and uncertainties of such disasters.

Also read – Coping with SEC’s New Climate Disclosure Requirements

Compliance dates for new SEC regulations:

The new regulations will take effect 60 days after the adoption release is published in the Federal Register. Compliance effectively starts for LAFs from the financial year beginning 2025 for disclosure and 2026 for inline XBRL tagging and phased in for all other registrants based on their registrant type and level of disclosure.

Bottom Line

The new climate disclosure rules adopted by the SEC require companies to stay abreast and improve the filing of their climate-related information. DataTracks can make your regulatory reporting easy. The professionals at the company keep updated with the latest regulations and ensure error-free reports. The team has prepared more than 400,000 reports for 28,000+ clients in 19 years. So what are you waiting for? Get in touch with us at +1 (646) 904-8324 or email enquiry@datatracks.com.