SEC Finalizes Climate-Related Disclosure Rules Ushering in a New Era of Public Company Climate Reporting

On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) adopted final rules that will require domestic and foreign registrants to include extensive climate-related information in their registration statements and periodic reports.

These include disclosure of:

  • Climate-Related Risks. Climate-related risks that have materially impacted or are reasonably likely to have a material impact on the registrant, including on its strategy, results of operations, or financial condition.
  • Impacts of Climate-Related Risks. The actual and potential material impacts of material climate-related risks on a registrant’s strategy, business model, and outlook, including certain material impacts, transition plans, and scenario analysis.
  • Governance and Management. The manner in which a registrant’s board of directors oversees climate-related risks and management’s role in assessing and managing those risks.
  • Risk Management. Processes for identifying, assessing, and managing material climate-related risks.
  • Targets and Goals. Any climate-related target or goal that has materially affected or is reasonably likely to materially affect the registrant’s business, results of operations, or financial condition.
  • Financial Statement Effects. Various financial statement effects resulting from severe weather events and other natural conditions and material expenditures directly related to climate-related activities as part of a registrant’s strategy, transition plan and/or targets and goals.
  • GHG Emissions. Direct (Scope 1) and indirect (Scope 2) greenhouse gas (GHG) emissions data for large accelerated filers and accelerated filers, if material to the registrant, with an attestation report requirement at the limited assurance level and, following an additional transition period, at the reasonable assurance level for a large accelerated filer.

The final rules will thus impose substantial new mandatory disclosure requirements on public companies in their SEC filings. Whereas many registrants already publish voluntary climate-related disclosures in reports outside of SEC filings, the final rules will require registrants to now disclose such information in SEC filings according to rigorous methods and standards elaborated by the SEC, and certain of this information will be subject to attestation requirements. The need to produce new disclosures, possibly alongside disclosures required by legislation recently passed in California, the European Union (EU) and/or the United Kingdom (UK), will compel companies to apply added attentiveness to climate-related issues and may necessitate stepped-up engagement with external experts in climate change and carbon accounting.

This Sidley Update summarizes the principal features of the final rules and provides practical guidance for companies considering next steps in light of the final rules. Click here to read the full update.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.