SEC Looks To Enhance Climate-Related Disclosures
March 23, 2022
The Securities and Exchange Commission proposed rule changes that would require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements. The required information about climate-related risks also would include disclosure of a registrantís greenhouse gas emissions, which have become a commonly used metric to assess a registrantís exposure to such risks.
"I am pleased to support todayís proposal because, if adopted, it would provide investors with consistent, comparable, and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers," said SEC Chair Gary Gensler. "Our core bargain from the 1930s is that investors get to decide which risks to take, as long as public companies provide full and fair disclosure and are truthful in those disclosures. Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions. Todayís proposal would help issuers more efficiently and effectively disclose these risks and meet investor demand, as many issuers already seek to do. Companies and investors alike would benefit from the clear rules of the road proposed in this release. I believe the SEC has a role to play when thereís this level of demand for consistent and comparable information that may affect financial performance. Todayís proposal thus is driven by the needs of investors and issuers."
The proposed rule changes would require a registrant to disclose information
about (1) the registrantís governance of climate-related risks and relevant risk
management processes; (2) how any climate-related risks identified by the
registrant have had or are likely to have a material impact on its business and
consolidated financial statements, which may manifest over the short-, medium-,
or long-term; (3) how any identified climate-related risks have affected or are
likely to affect the registrantís strategy, business model, and outlook; and (4)
the impact of climate-related events (severe weather events and other natural
conditions) and transition activities on the line items of a registrantís
consolidated financial statements, as well as on the financial estimates and
assumptions used in the financial statements.