US SEC's Climate-Related Disclosures

The Securities and Exchange Commission (SEC) has adopted new rules requiring SEC registrants to include climate-related disclosures in their registration statements and periodic reports. The aim is to provide investors with consistent, comparable, and decision-useful information for making informed investment decisions.

The SEC's Climate-Related Disclosures Rule

On 6 March 2024, the SEC adopted final rules requiring companies in scope to include information about climate-related risks likely to have a material impact on their business, results of operations, or financial condition, and specific climate-related financial statement metrics.

These proposed disclosures are similar to those many companies already provide based on broadly accepted disclosure frameworks, such as the Task Force on Climate-Related Financial Disclosures (TCFD) and the Greenhouse Gas (GHG) Protocol.

What will have to be disclosed?

Companies will be required to disclose the following: 

• Climate-related risks and their actual or likely material impacts on the registrant's business and strategy 
• If a registrant has undertaken activities to mitigate and adapt, a qualitative and quantitative description of material expenditures resulting from these activities
• The registrant's governance of climate-related risks and relevant risk management processes, including any board oversight
• The registrant's greenhouse gas emissions, including Scope 1 and 2 for large registrants and only if material, alongside an assurance report
• Specific climate-related financial statement metrics and related disclosures in a note to the registrant's audited financial statements
• Information about climate-related targets and goals and transition plan, if any.

Who is subject to the SEC Climate-Related Disclosures?

The SEC Climate-Related Disclosure Rules will apply to all SEC registrants. In the United States, around 12,000 companies are registered with the SEC, all of whom are expected to comply.

Note: Registrant is a term for any company that files documents with the Securities and Exchange Commission (SEC). It applies to companies conducting initial public offerings (IPO) and companies that file periodic reports.

When will companies have to start reporting?

The final rules were published by the SEC on 6 March 2024. They will become effective 60 days after publication and will be phased over time for all registrants. For large accelerated filers, reporting on climate-related risks starts in 2026 for the financial year 2025, while reporting on Scope 1 and 2 emissions begins in 2027. 

The final rules were published after the SEC published its proposal on 15 March 2022, and a comment period ended on 24 June 2022. Due to the large number of public comments, the SEC abandoned the original implementation timeline that would have started in 2024 for the financial year 2023 for large accelerated filers. 

The SEC's climate-related disclosure rules aim to provide investors with vital information to make informed investment decisions. Companies should start preparing for these changes by familiarising themselves with the disclosures and assessing their current reporting practices to ensure they are ready when the final rules are implemented.

Further readings

For more information, refer to the official proposal by the SEC and the SEC's factsheet.

The SEC's climate-related disclosure rules will significantly impact the way companies report on climate-related risks and opportunities. Investors stand to benefit from more consistent, comparable, and decision-useful information, enabling them to make better-informed investment decisions.

As the final rules come into force, companies should start assessing their current climate-related disclosures and consider the potential implications of the new requirements.

Take action before the final rules. Contact our policy experts to start reporting on your impact.