SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors - Smart Energy Decisions

GHG Emissions, Regulation  -  March 22, 2022

SEC Proposes Scope 1, 2 and 3 Disclosures for Investors

The Securities and Exchange Commission proposed a set of rule changes that would require public companies to include climate-related disclosures in their registration statements and periodic reports.

The proposed rules include disclosing information about direct GHG emissions (Scope 1) and indirect emissions from purchased electricity or other forms of energy (Scope 2). Disclosures about GHG emissions from upstream and downstream activities in its value chain (Scope 3) would be required if material or if the registrant has set a GHG emissions target or goal that includes Scope 3 emissions. These proposals for GHG emissions disclosures would provide investors with decision-useful information to assess a registrant’s exposure to, and management of, climate-related risks, and in particular transition risks. 

Companies would also have to include information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements. 

The required information about climate-related risks also would include disclosure of a registrant’s GHG emissions, which have become a commonly used metric to assess a registrant’s exposure to such risks.

"I am pleased to support today’s proposal because, if adopted, it would provide investors with consistent, comparable, and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers," said SEC Chair Gary Gensler in a statement. "Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions. Today’s proposal would help issuers more efficiently and effectively disclose these risks and meet investor demand, as many issuers already seek to do. Companies and investors alike would benefit from the clear rules of the road proposed in this release."

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