The SEC’s new climate risk regulation is a significant step towards increasing both transparency and accountability when it comes to the environmental impact of businesses. Here’s an overview of what organizations can expect to prepare for:
- Disclosure of Greenhouse Gas Emissions: Companies will be required to disclose their greenhouse gas emissions, including both direct emissions (Scope 1) from their operations and indirect emissions (Scope 2) from purchased electricity, heat, or steam.
- Climate Risk Exposure: The regulation will also mandate companies to disclose their exposure to climate-related risks, such as physical risks (e.g., extreme weather events) and transition risks (e.g., policy changes, shifts in consumer preferences).
- Financial Impact Assessment: Companies will need to assess and disclose the potential financial impact of climate-related risks on their operations, financial position, and future prospects. This includes evaluating how climate risks may affect their assets, liabilities, revenue streams, and overall business strategy.
- Consistency and Comparability: The SEC aims to promote consistency and comparability in climate-related disclosures across companies, facilitating investors’ ability to assess and compare the climate-related risks and opportunities associated with different investments.
- Materiality Thresholds: The regulation will likely establish materiality thresholds to determine which climate-related information companies are required to disclose. This helps avoid unnecessary burdens on smaller companies while ensuring that material climate risks are adequately disclosed to investors.
The rules will provide investors with consistent, comparable, and decision-useful information, and issuers with clear reporting requirements. Further, they will provide specificity on what companies must disclose, which will produce more useful information than what investors see today.
– Chair Gensler
Find the Full SEC Fact Sheet Here: https://www.sec.gov/files/33-11275-fact-sheet.pdf