After a two-year delay and intense political debates, the U.S. Securities and Exchange Commission (SEC) – Wall Street’s top regulator – has today adopted rules for climate-related disclosures by public companies and in public offerings.<\/p>\n
The final rules reflect the Commission\u2019s efforts to respond to investors\u2019 demand for more consistent, comparable, and reliable information about the financial effects of climate-related risks on a company\u2019s operations and how it manages those risks, while balancing concerns about mitigating the associated costs of the rules.<\/p>\n
The final rules will, among other information, require a company to disclose:<\/p>\n
\u2b55 Climate-related risks that have had or are reasonably likely to have a material impact on the company\u2019s business strategy, results of operations, or financial condition – including the material impacts of such risks on the company\u2019s strategy, business model, and outlook;<\/p>\n
\u2b55 Any oversight by the board of directors of climate-related risks and any role by management in assessing and managing the company\u2019s material climate-related risks;<\/p>\n
\u2b55 Any processes the company has for identifying, assessing, and managing material climate-related risks and, if the company is managing those risks, whether and how any such processes are integrated into the company\u2019s overall risk management system or processes;<\/p>\n
\u2b55 For large accelerated filers (LAFs) and accelerated filers (AFs) that are not otherwise exempted, information about material Scope 1 emissions and\/or Scope 2 emissions – including an assurance report at the limited assurance level, which, for an LAF, following an additional transition period, will be at the reasonable assurance level;<\/p>\n
\u2b55 The capitalized costs, expenditures expensed, charges, and losses incurred as a result of severe weather events and other natural conditions, such as hurricanes, tornadoes, flooding, drought, wildfires, extreme temperatures, and sea level rise, subject to applicable one percent and de minimis disclosure thresholds, disclosed in a note to the financial statements;<\/p>\n
\u2b55 The capitalized costs, expenditures expensed, and losses related to carbon offsets and renewable energy credits or certificates (RECs) if used as a material component of a company\u2019s plans to achieve its disclosed climate-related targets or goals, disclosed in a note to the financial statements; and<\/p>\n
\u2b55 If the estimates and assumptions a company uses to produce the financial statements were materially impacted by risks and uncertainties associated with severe weather events and other natural conditions or any disclosed climate-related targets or transition plans, a qualitative description of how the development of such estimates and assumptions was impacted, disclosed in a note to the financial statements.<\/p>\n