March 7, 2024
What happened?
On March 6, 2024, the Securities and Exchange Commission (SEC) adopted final climate disclosure rules for public companies and in public offerings, according to the SEC’s Press Release.
“The rules will provide investors with consistent, comparable, and decision-useful information, and issuers with clear reporting requirements,” SEC Chair Gary Gensler said, according to the Rule’s press release. “Further, they will provide specificity on what companies must disclose, which will produce more useful information than what investors see today. They will also require that climate risk disclosures be included in a company’s SEC filings, such as annual reports and registration statements rather than on company websites, which will help make them more reliable.”
The rule requires public companies to disclose material climate-related risks, processes for identifying those risks, and certain climate-related targets or goals, among other things. Large accelerated filers and accelerated filers will also need to disclose material Scope 1 and 2 emissions, unless they meet an exemption. However, the final rule dropped a requirement that would require companies to disclose Scope 3 greenhouse gas emissions, or those stemming from their supply chains and distribution networks.
Click here to access the SEC’s fact sheet on final rules.
What does this mean for me?
While this rule only applies to public companies, it does fit the trend of the SEC requiring more information and transparency on environmental factors. This rule was also watered down, abandoning scope 3 disclosures, and passed by a 3 to 2 vote. In May of 2022, the SEC proposed a rule to enhance disclosures by investment advisers and registered investment companies about their ESG practices. With a final rule for public companies, the ESG proposal could be next and could be similarly watered down in its final form. If you have any questions on regulations impacting your firm, please contact us and one of our regulatory experts will be in touch soon.
