SEC Proposes Long-Awaited Climate Change Disclosure Rules

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On March 21, 2022, in a landmark proposal, the Securities and Exchange Commission ("SEC") proposed rules that would require public companies to disclose extensive climate-related information in their SEC filings.  Specifically, the proposed rules would add new Subpart 1500 to Regulation S-K and new Article 14 to Regulation S-X to require disclosure of: 

  • climate-related risks that are reasonably likely to have a material impact on a public company’s business, results of operations, or financial condition; 
  • greenhouse gas (“GHG”) emissions associated with a public company that includes, in many cases, an attestation report by a GHG emissions attestation provider; and
  • climate-related financial metrics to be included in a company’s audited financial statements.
     

The long-awaited proposal follows months of discussions at the SEC and represents a major victory for the Biden administration’s environmental agenda. While not directly regulating climate change impacts, many believe that improving transparency around climate risks and enhancing accountability for climate-related claims and goals would be a significant leap forward for the US government’s response to climate change.2 

The proposed rules are far more prescriptive in nature than the principles-based regulation the prior administration embraced, and would require integration with the company’s internal controls, audit and oversight functions. Critics of the proposal note that it could require immaterial or overly broad disclosures, and oblige companies to rely on imprecise assumptions. There has also been disagreement over the appropriate role of the SEC with respect to climate change disclosure and arguments over whether the agency is overstepping its authority. Given the scope and complexity of the proposed rules, comments are expected to be extensive, and there will likely be threats of litigation if the proposed rules are adopted.

The proposal points to increasing investor demand for disclosure on climate-related risks and the management of such risks. Many companies make these disclosures in their proxy statements, sustainability reports or on their websites, but the SEC has observed that these disclosures can vary widely in terms of completeness, granularity and format and argues that third-party data providers and voluntary climate reporting frameworks have not met the existing, and growing, need for climate-risk related disclosures. The proposing release posits that the rules would provide "consistent, comparable, and reliable—and therefore decision-useful—information to investors to enable them to make informed judgments about the impact of climate-related risks on current and potential investments." It further argues that since "[c]limate-related risks can affect a company’s business and its financial performance and position in a number of ways…[improved disclosures] on the material climate-related risks public companies face would serve both investors and capital markets" and that this rule proposal is firmly within the SEC’s remit.

The proposal is open for public comment through at least May 21, 2022. Significant comments and potential challenges to the proposal could delay adoption of final rules.

See Appendix A for definitions of the terms used in the rule. 

 

Content of the Proposed Disclosures 

The proposed disclosure framework is modeled in part on the voluntary framework and recommendations from the Task Force for Climate-Related Financial Disclosures ("TCFD") and draws upon the Greenhouse Gas Protocol.3 The disclosure framework would apply to both domestic registrants and foreign private issuers ("FPIs") and would require a registrant to disclose information about:

The Impact of Climate Risk on Business and Financials: How climate-related risks have had or are likely to have a material impact on its business and consolidated financial statements over the short-, medium-, or long-term;4

  • The proposing release defines "climate-related risks" as the actual or potential negative impacts of climate-related conditions and events on the registrant’s consolidated financial statements, business operations or value chains, as a whole, and includes both physical and transition risks. A registrant would be required to describe how it defines short-, medium-, and long-term time horizons, including how it takes into account or reassesses the expected useful life of assets and the time horizons for the registrant’s planning processes and goals.
    • For physical risks, the proposing release requires disclosure of both acute risks and chronic risks,  as well as specific information regarding the location and nature of properties, processes or operations subject to such risks;
    • For transition risks, the proposing release requires disclosure of the nature of the risk (e.g., regulatory, technological, reputational) and how those factors impact the registrant.
  • Key Point: The proposing release notes that the materiality determination for this would "be similar to what is required when preparing the MD&A section in a registration statement or annual report." The proposed rule emphasizes that, when assessing the materiality of a particular risk, management should consider its magnitude and probability over the short, medium, and long term.

The Effect of Climate Risks on Strategy, Business Model and Outlook: How climate-related risks have affected or are likely to affect the registrant’s strategy, business model, and outlook, including a time horizon for each impact;6

  • Specifically, a registrant would be required to disclose impacts on its: (i) business operations, including the types and locations of its operations; (ii) products or services; (iii) suppliers and other parties in its value chain; (iv) activities to mitigate or adapt to climate-related risks, including new technologies or processes; (v) expenditure for research and development; and (vi) any other significant changes or impacts.
  • Key Point: If, as part of a disclosed net emissions reduction strategy, a registrant uses carbon offsets or renewable energy credits or certificates ("RECs"), the proposed rules would require it to disclose the role that carbon offsets or RECs play in the registrant’s climate-related business strategy. If a registrant uses scenario-analysis, this would also have to be disclosed.

Governance Disclosure: The oversight and governance of climate-related risks by the registrant’s board and management; including: 

  • Board oversight disclosure: (i) board members or committees responsible for the oversight of climate-related risks; (ii) the processes and frequency by which the board or committee discusses climate-related risks; (iii) how the board or committee considers climate-related risks as part of its business strategy, risk management, and financial oversight; and (iv) how the board sets and oversees progress against climate-related targets or goals, including interim targets or goals.
  • Management oversight disclosure: (i) whether management positions or committees are responsible for assessing and managing climate-related risks and, if so, the relevant expertise of the position holders or members; (ii) the processes by which the responsible managers or committees are informed about and monitor climate-related risks; and (iii) whether, and with what frequency, the board receives reports from management on climate-related risks.
  • Key Point: While many companies already integrate climate-risk into their oversight functions, the level of detail required by the proposed rules with respect to climate change governance exceeds the degree of disclosure most companies voluntarily include in existing sustainability or climate reporting, as well as the scope and breadth of other SEC disclosure requirements related to risk oversight. In addition, requiring disclosure about management oversight in addition to board oversight is notable, as this goes further than previous SEC disclosure requirements related to oversight of key risks. 

Risk Management Disclosure: The registrant’s processes for identifying, assessing, and managing climate-related risks and whether any such processes are integrated into the registrant’s overall risk management system or processes;8

  • When describing the processes for identifying and assessing climate-related risks, the registrant would be required to disclose, as applicable: (i) how it determines the relative significance of climate-related risks compared to other risks; (ii) how it considers existing or likely regulatory requirements or policies, such as GHG emissions limits, when identifying climate-related risks; (iii) how it considers shifts in customer or counterparty preferences, technological changes, or changes in market prices in assessing potential transition risks; and (iv) how it determines the materiality of climate-related risks, including how it assesses the potential size and scope of any identified climate-related risk. 
  • When describing any processes for managing climate-related risks, a registrant would be required to disclose, as applicable: (i) how it decides whether to mitigate, accept, or adapt to a particular risk; (ii) how it prioritizes addressing climate-related risks; and (iii) how it determines how to mitigate a high priority risk.
  • Key Point: If a registrant has adopted a transition plan to mitigate or adapt to climate-related risks, it must describe its plan, including the relevant metrics and targets used to identify and manage physical and transition risks and how it plans to mitigate or adapt to any identified transition risks. This disclosure would need to be updated yearly to describe the actions taken during the previous year to achieve the plan’s targets or goals.

Financial Statement Metrics: The impact of climate-related events (severe weather events and other natural conditions as well as physical risks identified by the registrant) and transition activities (including transition risks identified by the registrant) on the line items of a registrant’s consolidated financial statements and related expenditures, and disclosure of financial estimates and assumptions impacted by such climate-related events and transition activities;9 

  • The proposed rules would require a registrant to specify whether an identified climate-related risk is a physical or transition risk so that investors can better understand the nature of the risk and the registrant’s actions or plan to mitigate or adapt to the risk. If a physical risk, the proposed rules would require a registrant to describe the nature of the risk, including whether it may be categorized as an acute or chronic risk.
  • The proposed rules would require registrants to include contextual information, assumptions and judgment-based estimations not typical for reporting of financial metrics under current rules.10
  • Disclosure would be required for the registrant’s most recently completed fiscal year and for the historical fiscal year(s) included in the registrant’s consolidated financial statements in the applicable filing.11
  • Key Points
    • The proposed financial statement metrics would be (i) included in the scope of any required audit of the financial statements in the relevant disclosure filing, (ii) subject to audit by an independent registered public accounting firm, and (iii) within the scope of the registrant’s internal control over financial reporting.
    • Requiring registrants to discuss potential financial and business impacts over the long term is not typical, and is inherently unreliable when addressing evolving climate-related risks.

GHG Emissions Metrics:12

  • Scopes 1 and 2 GHG emissions metrics. All registrants would be required to disclose their Scope 1 and 2 GHG emissions, expressed: (i) both by disaggregated constituent GHGs and in the aggregate, and (ii) in absolute and intensity terms. Scope 1 emissions typically include a company’s direct emissions associated with its onsite fossil fuel combustion to produce energy.  Scope 2 emissions typically include a company’s indirect emissions associated with energy produced offsite and consumed by the company.  
    • Key Point: Disclosure of interim targets and transition plans are an area of increasing focus by investors and environmental groups. Notably, the degree of specificity and breadth of disclosure that would be required by the SEC exceeds what most companies have voluntarily disclosed pursuant to TCFD or other voluntary disclosure frameworks.
  • Scope 3 GHG emissions. Registrants would be required to disclose Scope 3 GHG emissions, in both absolute and intensity terms, if: (i) those emissions are material, or (ii) if the registrant has set a GHG emissions reduction target or goal that includes its Scope 3 emissions. Scope 3 emissions typically include a company’s indirect emissions not accounted for in Scope 2, such as GHG emissions from the use of a company’s products by a customer.  For a registrant in the oil & gas sector, for example, Scope 3 emissions would be expected to represent the overwhelming majority of the GHG emissions associated with the registrant.  
    • Key Points:
    • As the proposal notes, Scope 3 emissions are indirect and may be difficult to calculate or even estimate. Such calculations or estimates rely on imprecise assumptions regarding the end use of products or services provided by a registrant’s business activities. Nonetheless, the SEC observes that registrants can and do take steps to limit Scope 3 emissions and the attendant risks. Although a registrant may not own or control the operational activities in its value chain that produce Scope 3 emissions, it nevertheless may influence those activities, for example, by working with its suppliers and downstream distributors to take steps to reduce those entities’ Scopes 1 and 2 emissions (and thus help reduce the registrant’s Scope 3 emissions) and any attendant risks.
    • Under the proposal, the materiality assessment for Scope 3 emissions includes significant complexity. Even when Scope 3 emissions do not quantitatively represent a relatively significant portion of overall GHG emissions, the proposed rule indicates that registrants must consider qualitatively whether Scope 3 emissions may still be material as a significant risk, whether such emissions are the subject to significant regulatory focus, or "if there is a substantial likelihood that a reasonable [investor] would consider it important."13
    • The requirement to gather and disclose third party information is a departure from typical SEC regulations and could require significant company resources.
    • Smaller reporting companies are exempt from this requirement.
  • Additional Requirements
    • The proposed rule would require this disclosure for the registrant’s most recently completed fiscal year and for the historical fiscal years included in the registrant’s consolidated financial statements in the applicable filing, to the extent such historical GHG emissions data is reasonably available.14
    • The disclosure would be required to include a description of the methodology, significant inputs, and significant assumptions used to calculate the GHG emissions metrics.

Targets/Goals:

  • The proposed rules would require registrants, where applicable, to make a specified disclosure with respect to the registrant’s climate-related targets or goals, and transition plan, if any, including a description of: (i) the scope of activities and emissions included in the target; (ii) the unit of measurement; (iii) the defined time horizon by which the target is intended to be achieved, and whether the time horizon is consistent with one or more goals established by a climate-related treaty, law, regulation, policy, or organization; (iv) the defined baseline time period and baseline emissions against which progress will be tracked; (v) any interim targets; and (vi) how the registrant intends to meet its climate-related targets or goals.
  • Key Point: Disclosure of interim targets and transition plans are an area of increasing focus by investors and environmental groups. Notably, the degree of specificity and breadth of disclosure that would be required by the SEC exceeds what most companies have voluntarily disclosed pursuant to TCFD or other voluntary disclosure frameworks.

When responding to any of the proposed rules’ provisions concerning governance, strategy, and risk management, a registrant may also disclose information concerning any identified climate-related opportunities, which are defined as "the actual or potential positive impacts of climate-related conditions and events on a registrant’s consolidated financial statements, business operations, or value chains, as a whole." See Appendix A for more information. 

Attestation for Scope 1 and Scope 2 Emissions Disclosure 

The GHG emissions attestation requirements in the proposed rule represent a new concept for the SEC when it comes to reporting of non-financial data and will likely be an area of focus for dissenting comments. The proposed rules would require accelerated filers or large accelerated filers, including FPIs, to include, in the relevant filing, an attestation report covering, at a minimum, the disclosure of its Scope 1 and Scope 2 emissions and to provide certain related disclosures about the service provider. 

Specifically, the proposed rules would require: (i) limited assurance for Scopes 1 and 2 emissions disclosure that scales up to reasonable assurance after a specified transition period; (ii) that the assurance be provided by a "GHG emissions attestations provider";15 and (iii) minimum requirements for the accompanying attestation report.16 The proposed rules would not require an attestation service provider to be a registered public accounting firm.

Key Points:

  • This is a noteworthy departure from standard SEC procedure, as SEC rules typically do not require registrants to obtain assurance over disclosure provided outside of the financial statements, including quantitative disclosure. 
  • The proposed rules do not include any requirement for a registrant to obtain an attestation report covering the effectiveness of internal controls over GHG emissions disclosure.

 

Presentation of the Proposed Disclosures 

The proposed rules would impact each of Form S-1, Form F-1, Form S-4, Form F-4, Form S-11, Form 10, Form 10-K, Form 10-Q and Form 6-K, by requiring a registrant (both domestic and FPI) to:

  • Provide the climate-related disclosure, including the proposed financial metrics, in its Securities Act or Exchange Act registration statements and Exchange Act annual reports; 
  • Provide the Regulation S-K mandated climate-related disclosure, including the attestation, if required, in a separate section of its registration statement or annual report captioned "Climate-Related Disclosure", or alternatively to incorporate that information in the separate, appropriately captioned section by reference from another section, such as Risk Factors, Description of Business, or Management’s Discussion and Analysis ("MD&A");
  • Provide the Regulation S-X mandated climate-related financial statement metrics and related disclosure in a note to the registrant’s audited financial statements; 
  • Electronically tag both narrative and quantitative climate-related disclosures in Inline XBRL; and
  • File rather than furnish the climate-related disclosure (with the exception of disclosures on Form 6-K, which are, by their terms, not “filed”).

 

Phase-In Periods and Accommodations

Phase-Ins

The proposed rules would include: 

  • A phase-in period for all registrants, with the compliance date dependent on the registrant’s filer status, and an additional phase-in period for Scope 3 emissions disclosure (see tables); and 
  • A phase-in period for the assurance requirement and the level of assurance required for accelerated filers and large accelerated filers (see assurance table).

For explanatory purposes, the following tables assume that the proposed rules will be adopted with an effective date in December 2022 and that the filer has a December 31st fiscal year-end: 

Registrant Type Disclosure Compliance Date17
  All proposed disclosures, including GHG emissions metrics: Scope 1, Scope 2, and associated intensity metric, but excluding Scope 3 GHG emissions metrics: Scope 3 and associated intensity metric
Large Accelerated Filer  Fiscal year 2023 (filed in 2024)  Fiscal year 2024 (filed in 2025)
Accelerated Filer and Non-Accelerated Filer Fiscal year 2024 (filed in 2025) Fiscal year 2025 (filed in 2026)
Smaller Reporting Company Fiscal year 2025 (filed in 2026) Exempted

 

Filer Type  Scopes 1 and 2 GHG Disclosure Compliance Date  Limited Assurance  Reasonable Assurance
Large Accelerated Filer  Fiscal year 2023 (filed in 2024)  Fiscal year 2024 (filed in 2025) Fiscal year 2026 (filed in 2027) 
Accelerated Filer  Fiscal year 2024 (filed in 2025) Fiscal year 2025 (filed in 2026)  Fiscal year 2027 (filed in 2028) 

 

Accommodations

The proposed rules would also include: 

  • A Scope 3 emissions disclosure safe harbor for certain forms of liability under the Federal securities laws. In order to alleviate concerns that registrants may have about liability for information that would be derived largely from third parties in a registrant’s value chain, the proposed rules include a safe harbor which provides that disclosure of Scope 3 emissions by or on behalf of the registrant would be deemed not to be a fraudulent statement unless it is shown that such statement was made or reaffirmed without a reasonable basis or was disclosed other than in good faith. The safe harbor would extend to any statement regarding Scope 3 emissions that is disclosed pursuant to proposed subpart 1500 of Regulation S-K and made in a document filed with the SEC.
  • An exemption from the Scope 3 emissions disclosure requirement for smaller reporting companies;  and 
  • Forward-looking statement safe harbors pursuant to the Private Securities Litigation Reform Act, to the extent that proposed disclosures would include forward-looking statements. 

 

Conclusion

The long-awaited proposal is expansive and complex, with more than 500 pages of detail to digest. It is also controversial, with some interested parties viewing it as costly, overly burdensome on company resources and overly prescriptive, as well as too divergent from the current, materiality-based disclosure regime (our “Key Points”, above, highlight some of these departures). Critics are also focused on the appropriateness of extensive SEC regulations in this area without authorizing legislation. Others view the proposal as a necessary next step in addressing climate change risk and impacts. Consequently, we anticipate an active public comment process, with opinions on both sides of the spectrum when it comes to perceived limits of the proposed rules versus the view that they represent a regulatory overreach by the SEC. 

Ultimately, legal counsel and other experts will be needed to help navigate the complexity of any final rules, and internal teams will need to be coordinated to facilitate the provision and validation of the required information. In the interim, companies should evaluate their existing governance and risk management around climate-risk and progress thinking about how their current climate-related disclosures may be transferrable to their SEC filings.

 

Appendix A

Definitions Used in the Proposed Rule

  • "Climate-Related Risks": the actual or potential negative impacts of climate-related conditions and events on a registrant’s consolidated financial statements, business operations, or value chains, as a whole. 
  • "Value chain" would mean the upstream and downstream activities related to a registrant’s operations. 
    • Upstream activities include activities by a party other than the registrant that relate to the initial stages of a registrant’s production of a good or service (e.g., materials sourcing, materials processing, and supplier activities). 
    • Downstream activities include activities by a party other than the registrant that relate to processing materials into a finished product and delivering it or providing a service to the end user (e.g., transportation and distribution, processing of sold products, use of sold products, end of life treatment of sold products, and investments).
  • "Physical Risks": includes both acute and chronic risks to a registrant’s business operations or the operations of those with whom it does business.
  • "Acute risks" is defined as event-driven risks related to shorter-term extreme weather events, such as hurricanes, floods, and tornadoes.
  • "Chronic risks" is defined as those risks that the business may face as a result of longer term weather patterns and related effects, such as sustained higher temperatures, sea level rise, drought, and increased wildfires, as well as related effects such as decreased arability of farmland, decreased habitability of land, and decreased availability of fresh water. 
    • The proposed rules would require a registrant to include in its description of an identified physical risk the location of the properties, processes, or operations subject to the physical risk. The proposed location disclosure would only be required for a physical risk that a registrant has determined has had or is likely to have a material impact on its business or consolidated financial statements. In such instances, a registrant would be required to provide the ZIP code for the location or similar subnational postal zone or geographic location. If flooding presents a material physical risk, the registrant would have to disclose the percentage of buildings, plants, or properties (square meters or acres) that are located in flood hazard areas in addition to their location. Additional disclosure would be required if a material risk concerns the location of assets in regions of high or extremely high water stress.
  • "Transition Risks": the actual or potential negative impacts on a registrant’s consolidated financial statements, business operations, or value chains attributable to regulatory, technological, and market changes to address the mitigation of, or adaptation to, climate-related risks. 
    • Including, but not limited to, increased costs attributable to climate-related changes in law or policy, reduced market demand for carbon-intensive products leading to decreased sales, prices, or profits for such products, the devaluation or abandonment of assets, risk of legal liability and litigation defense costs, competitive pressures associated with the adoption of new technologies, reputational impacts (including those stemming from a registrant’s customers or business counterparties) that might trigger changes to market behavior, changes in consumer preferences or behavior, or changes in a registrant’s behavior. A registrant that has significant operations in a jurisdiction that has made a GHG emissions reduction commitment would likely be exposed to transition risks related to the implementation of the commitment.
    • The proposed rules would require a registrant to describe the nature of transition risks, including whether they relate to regulatory, technological, market (including changing consumer, business counterparty, and investor preferences), liability, reputational, or other transition-related factors, and how those factors impact the registrant.
  • "Climate-Related Opportunities": the actual or potential positive impacts of climate-related conditions and events on a registrant’s consolidated financial statements, business operations, or value chains, as a whole. 
    • Efforts to mitigate or adapt to the effects of climate-related conditions and events can produce opportunities, such as cost savings associated with the increased use of renewable energy, increased resource efficiency, the development of new products, services, and methods, access to new markets caused by the transition to a lower carbon economy, and increased resilience along a registrant’s supply or distribution network related to potential climate-related regulatory or market constraints. 
  • "Greenhouse Gases": carbon dioxide ("CO2"), methane, nitrous oxide, nitrogen trifluoride, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride.
  • "GHG emissions": direct and indirect emissions of greenhouse gases. 
    • Direct emissions: GHG emissions from sources that are owned or controlled by a registrant.
    • Indirect emissions: GHG emissions that result from the activities of the registrant, but occur at sources not owned or controlled by the registrant. 
  • "GHG intensity" (or "carbon intensity"): a ratio that expresses the impact of GHG emissions per unit of economic value (e.g., metric tons of CO2equivalent per unit of total revenues, using the registrant’s reporting currency) or per unit of production (e.g., metric tons of CO2equivalent per unit of product produced).
  • "Scope 1 emissions": direct GHG emissions from operations that are owned or controlled by a registrant.
  • "Scope 2 emissions": indirect GHG emissions from the generation of purchased or acquired electricity, steam, heat, or cooling that is consumed by operations owned or controlled by a registrant.
  • "Scope 3 emissions": all indirect GHG emissions not otherwise included in a registrant’s Scope 2 emissions, which occur in the upstream and downstream activities of a registrant’s value chain.
    • Upstream emissions include emissions attributable to goods and services that the registrant acquires, the transportation of goods (for example, to the registrant), and employee business travel and commuting. 
    • Downstream emissions include the use of the registrant’s products, transportation of products (for example, to the registrant’s customers), end of life treatment of sold products, and investments made by the registrant.
  • "GHG emissions attestation provider": a person or a firm that has all of the following characteristics: 
    • Is an expert in GHG emissions by virtue of having significant experience in measuring, analyzing, reporting, or attesting to GHG emissions. Significant experience means having sufficient competence and capabilities necessary to: 
      • perform engagements in accordance with professional standards and applicable legal and regulatory requirements; and
      • enable the service provider to issue reports that are appropriate under the circumstances.
    • Is independent with respect to the registrant, and any of its affiliates, for whom it is providing the attestation report, during the attestation and professional engagement period. 

 

1 The proposed rules are available here and the fact sheet is available here. See also, SEC Chair Gary Gensler’s statement on the proposed rules.
2 It is worth noting that the SEC’s proposed rules are less onerous than the European Union approach, as embodied in the 
recent proposal for a Corporate Sustainability Due Diligence Directive.
3 A widely-used global greenhouse gas accounting standard, created through a partnership between the World Resources Institute and the World Business Council for Sustainable Development.
4 Proposed new Item 1502(a) of Regulation S-K.
5 “Acute risks” are defined as event-driven risks related to shorter-term extreme weather events and “chronic risks” are defined as those that a company may face as a result of longer term weather patterns and related effects.
6 Proposed new Item 1502(b) of Regulation S-K. The discussion must also include how any of the metrics referenced in proposed Rule 14-02 of Regulation S-X and Item 1504 of Regulation S-K or any of the targets referenced in proposed Item 1506 relate to the registrant’s business model or business strategy. 
7 Proposed new Item 1501 of Regulation S-K.
8 Proposed new Item 1503(a) of Regulation S-K.
9 Proposed new Item 1502(d) of Regulation S-K. 
10 Contextual information would include a description of significant inputs and assumptions used, and if applicable, policy decisions made by the registrant to calculate the specified metrics.
11 A registrant, however, would not need to provide a corresponding historical metric for a fiscal year preceding its current reporting fiscal year if it is eligible to take advantage of the accommodation in Rule 409 or Rule 12b-21. For example, if a registrant has not previously presented such metric for such fiscal year and the historical information necessary to calculate or estimate such metric is not reasonably available to the registrant without unreasonable effort or expense, the registrant may be able to rely on Rule 409 or Rule 12b-21 to exclude a corresponding historical metric.
12 For all scopes of GHG emissions, the proposed rules would require a registrant to disclose GHG emissions data in gross terms, excluding any use of purchased or generated offsets. See
Appendix A for definition of relevant terms.
13 Moreover, the proposal states that if a materiality analysis requires a determination of future impacts, i.e., a transition risk yet to be realized, then both the probability of an event occurring and its magnitude should be considered.
14 A registrant, however, would not need to provide a corresponding historical metric for a fiscal year preceding its current reporting fiscal year if it is eligible to take advantage of the accommodation in Rule 409 or Rule 12b-21.
15 See
Appendix A. Because the GHG emissions attestation provider would be a person whose profession gives authority to the statements made in the attestation report and who is named as having provided an attestation report that is part of the registration statement, the registrant would be required to obtain and include the written consent of the GHG emissions attestation provider. The GHG emissions attestation provider would also be subject to liability under the federal securities laws for the attestation conclusion or, when applicable, opinion provided.
16 In addition to the minimum attestation report requirements, the proposed rules would require disclosure by the registrant of certain additional matters related to the attestation provider. These disclosures would not be included in the GHG emissions attestation report, but instead, the registrant would be required to provide these disclosures in the separately captioned “Climate-Related Disclosure” section.
17 The proposed compliance dates in the table would apply to both annual reports and registration statements. For example, if a non-accelerated filer with a December 31st fiscal year-end filed a registration statement that was not required to include audited financial statements for fiscal year 2024 (e.g., the registration statement was filed in 2023 or 2024), it would not be required to comply with the proposed climate disclosure rules in that registration statement. A registrant with a different fiscal year-end date that results in its fiscal year 2023 commencing before the effective date of the rules would not be required to comply with subpart 1500 of Regulation S-K and Article 14 of Regulation S-X until the following fiscal year. For example, a large accelerated filer with a March 31st fiscal year-end date would not be required to comply with the proposed climate disclosure rules until its Form 10-K for fiscal year 2024, filed in June, 2024.

 

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