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SEC Proposes Climate-Change Disclosures

The Securities and Exchange Commission (SEC) proposed rule changes requiring registrants to include certain climate-related disclosures in their registration statements and periodic reports. Such disclosures would income climate-related risks that could have a material impact on their businesses, operations results or financial conditions. Also included would be climate-related financial statement metrics as part of audited financial statements. Additional information would include disclosure of registrants’ greenhouse gas emissions.

SEC Chair Gary Gensler noted that the goal of these disclosures is to “provide investors with consistent, comparable, and decision-useful information for making their investment decisions.” Such a move would also offer specific reporting obligations for issuers, he said.

The proposed rule changes, if accepted, would require registrants to disclose the following information:

  • Governance of climate-related risks and risk-management processes
  • Whether identified climate-related risks have had, or are likely to have, a material impact on operations and financial statements
  • How the identified risks have impacted or could impact the registrants’ strategies, business model and outlook
  • The impact of climate-related events (such as severe weather) on financial statement line-items and assumptions used in those statements

The proposed rules would also require registrants to disclose information about:

  • Direct greenhouse gas emissions (Scope 1)
  • Indirect emissions from purchased electricity or other forms of energy (Scope 2)
  • Greenhouse gas (GHG) emissions from value change upstream and downstream activities (Scope 3)

The proposed rules will include a phase-in period for all registrants.

The proposed rule, entitled “The Enhancement and Standardization of Climate-Related Disclosures for Investors” was added to on March 21. The comment period is open until May 20, 2022.


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