The United States Securities and Exchange Commission (SEC) has passed a climate mandate will have implications on thousands of companies, The Enhancement and Standardization of Climate-Related Disclosures for Investors. The final rules were published in March 2024.
Who is affected?
All publicly listed companies in the United States. There are different requirements for Large Accelerated Filers (LAFs), which have public float greater than $700M; Accelerated Filers (AFs), which have public float between $7M and $700M; and other public companies that have public float up to $75M.
What is required?
- Disclosure of Material Scope 1 and 2 greenhouse emissions, as defined by the Greenhouse Gas Protocol standards. Emissions are considered “Material” if “there there is a substantial likelihood that a reasonable investor would consider it important when determining whether to buy or sell securities or how to vote or such a reasonable investor would view omission of the disclosure as having significantly altered the total mix of information made available.”
- Disclosure of climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, results of operations, or financial condition.
- Certain disclosures related to severe weather events and other natural conditions will be required in a registrant’s audited financial statements (based on the TCFD Framework)
- Disclosure of any climate-related target or goal if such target or goal has materially affected or is reasonably likely to materially affect the registrant’s business, results of operations, or financial condition.
When does it come into effect?
- Large Accelerated Filers (LAFs): $700M+ in Public Float
- Regular climate risk disclosure is due by 2025
- Scope 1 & 2 Emissions disclosures are due in 2026
- Limited Assurance is required by 2029
- Reasonable Assurance is required by 2033
- Accelerated Filers (AFs): $75M – $700M+ in Public Float
- Regular climate risk disclosure is due by 2026
- Scope 1 & 2 Emissions disclosures are due in 2028
- Limited Assurance is required by 2031
- Reasonable Assurance is not required
- Other Public Companies: Up to $75M in Public Float
- Regular climate risk disclosure is due by 2027
Where does this need to be reported?
- Greenhouse gas emissions will be disclosed in the Form 10-Q at the end of Q2 each fiscal year.
- Climate-related risks, targets, and transition plans will be disclosed in SEC filings such as annual reports and registration statements.
- Financial information related to severe weather events, including capitalized costs, expenditures, and losses from severe weather events such as fires, sea level rise, and flooding will be disclosed in a note to the financial statements.
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