SEC final rules on carbon accounting and climate-related disclosures approved
On March 6, 2024, the US Securities and Exchange Commission (SEC) adopted final rules to require registrants (US companies) to disclose certain climate-related information in registration statements and annual reports.
A significant shift in sustainability reporting
The final SEC Climate Disclosure Rule marks a significant shift in the sustainability reporting landscape, prompting companies to adapt while safeguarding their overall business strategies. Here’s a concise overview of the key takeaways and initial industry reactions.
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The key takeaways of SEC final rules on carbon accounting and climate-related disclosures
Key takeaways are:
- New Disclosure Requirements: Large and accelerated filers must disclose material Scope 1 and/or 2 greenhouse gas (GHG) emissions, with initial disclosures allowed in Q2 Form 10-Q or an amended Form 10-K.
- Scope 3 Excluded: While initially proposed, Scope 3 reporting is not mandated, but remains relevant for many companies due to other regulations.
- Offsets & RECs: Companies must disclose the material financial impact of using offsets or renewable energy certificates (RECs) to meet climate goals.
- Phased-in Assurance: Initial GHG disclosure assurance will be “limited” (3 years), transitioning to “reasonable” assurance within 7 years.
- Climate-related Risk Disclosure: Aligns with the Task Force on Climate-Related Financial Disclosures (TCFD) framework, requiring identification, management, and oversight of material climate risks.
- Financial Statement Disclosures: Companies must disclose financial information related to severe weather events and other natural conditions, including capital expenditures, operating expenses, and losses, exceeding a 1% threshold.
Companies already complying with the EU’s CSRD regulations may be largely prepared for the SEC rule due to significant overlap, potentially leading reduced burden across jurisdictions.
Sources
The SEC ruling can be accessed here –https://www.sec.gov/files/33-11275-fact-sheet.pdf
About NordESG
NordESG is an advisory firm helping corporates develop, articulate and execute their ESG and sustainability strategies. Our work includes sustainability performance reporting support under various ESG frameworks, strategy development or conducting materiality assessments. By doing so, we help businesses meet their disclosure compliance requirements like CSRD but also help them proactively communicate their strategy to other stakeholders like investors, customers and local communities in which they operate. Our work is focused mainly on Europe and North America.
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