SEC Climate Change Disclosure Rules for Public Companies

On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) adopted rules to strengthen and standardize climate-related disclosures by public companies and public offerings. It will take two years for the Commission to adopt rules. The original proposed rule, announced in March 2022, aimed to ensure consistency in how public companies provide climate-related information to investors.

These new rules join existing regulations in the U.S. and around the world that require companies to disclose climate-related information and provide other ESG-related metrics. For example, California requires Scope 3 emissions disclosure in legislation passed by the end of 2023, while the European Union’s Corporate Sustainability Reporting Directive, which mandates disclosure on a variety of sustainability issues, was implemented earlier this year. It has been adopted.

New SEC rules require companies to disclose:

Climate-related risks and costs

• Climate-related risks that have had, or are reasonably likely to have, a material impact on the registrant’s business strategy, results of operations or financial condition;
• The actual or potential material impact of identified climate-related risks on the registrant’s business model, prospects and strategies;
• Capitalized costs, expenses, expenses and losses incurred as a result of severe weather and other natural conditions, such as hurricanes, tornadoes, floods, droughts, wildfires, extreme temperatures and sea level rise, are subject to the applicable 1% and minimum limits. Disclosure thresholds disclosed in the notes to the financial statements.

Mitigation and Oversight Efforts

• If the registrant has undertaken activities to mitigate or adapt to significant climate-related risks, a quantitative and qualitative description of any significant expenditures incurred and any significant impacts on financial estimates and assumptions resulting directly from such mitigation or adaptation activities;
• Certain disclosures regarding the registrant’s activities (if any) to mitigate or adapt to material climate-related risks, including the use (if any) of transition plans, scenario analyzes or internal carbon pricing;
• Board oversight of climate-related risks and management’s role in assessing and managing the registrant’s material climate-related risks.
• Any processes the registrant has in place to identify, assess and manage material climate-related risks, and, if the registrant manages such risks, whether and how such processes are integrated into the registrant’s overall risk management system or processes;
• Information about the registrant’s climate-related goals or objectives that have materially affected, or are reasonably likely to affect, the registrant’s business, results of operations or financial condition. Disclosures include material expenditures and material impacts on financial estimates and assumptions as a direct result of goals or objectives or actions taken to achieve progress toward achieving goals or objectives.

Emission information

• Information on material Scope 1 emissions and/or Scope 2 emissions for large accelerated pilers (LAF) and accelerated pilers (AF) that are not otherwise exempt
• Limited assurance level assurance reports if Scope 1 and/or Scope 2 emissions are required to be disclosed. For LAF, this will be a reasonable level of assurance after an additional transition period.

Where does the disclosure take place?

The SEC requires companies to include required climate-related disclosures in their filings with the Commission, including registration statements and annual reports.

When should companies start going public?

The new regulations will take effect 60 days after publication in the Federal Register. However, there will be a phase-in period for compliance, with large companies required to report climate-related risks by fiscal year 2025 and emissions by 2026. The compliance date for small companies is between 2026 and 2028. Registrant type.

How can IBM help?

IBM offers products to help organizations track and report their environmental impacts and exposure to climate risks. IBM Envizi ESG Suite provides a single system of record for ESG data, GHG emissions calculations and reporting tools that organizations can use to manage their disclosures.

IBM Consulting Sustainability Services can help organizations comply with the SEC’s climate disclosure regulations through a comprehensive approach that includes data curation, gap analysis, strategy development and reporting services. Through IBM’s broad portfolio of sustainability solutions, we help clients operationalize reporting to drive business value and translate sustainability goals into action.

Explore IBM Envizi ESG Suite today

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