SEC Announces Scaled Back Climate Rules

The U.S. Securities and Exchange Commission (SEC) has announced its long-awaited climate-related disclosure rules. Similar to the TCFD approach, the SEC rules will require large US public companies to report their climate related risks and impacts and disclose the GHG emissions from their operations.

The SEC climate rules were first proposed in March 2022 but lengthy consultations and discussions with companies around cost and feasibility have severely delayed the final guidelines.

Many of the original elements have now been stripped out of the final rules.

For example, reporting of Scope 3 emissions will no longer be required, while requirements for reporting on Scopes 1 and 2 are limited to larger organisations and only mandatory when considered material. This will leave companies to determine for themselves whether their emissions are significant to their investors, potentially leaving space for greenwashing.

Timings have also been extended and requirements around assurance reduced.

The SEC’s final decision has prompted objections both from Republican-led states and environmental groups, with the former seeking to challenge the rules as too far reaching and the latter as too weak.

Overall, the changes constitute a significant scaling back on what was considered an ambitious approach to climate disclosure. None-the-less, the final rules mark a milestone for the US in terms of mandatory climate reporting for public companies, following in the footsteps of other countries including the UK, EU, China, and India.

We are working through the final rules to provide a more detailed summary.