The Securities and Exchange Commission (SEC) has announced the adoption of new rules aimed at improving and standardising climate-related disclosures for public companies and in public offerings.
These rules, adopted on 6 March, are designed to meet the increasing demand from investors for consistent and reliable information regarding the financial impacts of climate-related risks and follow similar directives from Europe, such as the Corporate Sustainability Reporting Directive (CSRD).
“Our federal securities laws lay out a basic bargain. Investors get to decide which risks they want to take so long as companies raising money from the public make what President Franklin Roosevelt called ‘complete and truthful disclosure,’” said SEC Chair Gary Gensler.
“Over the last 90 years, the SEC has updated, from time to time, the disclosure requirements underlying that basic bargain and, when necessary, provided guidance with respect to those disclosure requirements.”
Under the new rules, companies will be required to disclose a variety of details, such as the potential financial impact of climate change on the company’s business, all efforts taken by the company to mitigate or adapt to climate risks, the oversight by the board of directors regarding climate risks, and any climate-related goals the company has set.
The specific requirements will vary depending on the size of the company. Larger companies will be required to disclose more information, including certain greenhouse gas emissions data.
The rule’s adoption follows a two-year drafting process, with some adjustments based on public feedback. Notably, Scope 3 emissions disclosure is not currently mandated.
The rule is anticipated to face legal challenges and may encounter political opposition from the House of Representatives and Republican controlled states, which have raised concerns about the intersection of corporate activism, often labelled as “woke capitalism,” and antitrust regulations.
As for next steps, following publication in the Federal Register, the final rules become effective after 60 days. Compliance will be phased in for all companies, with the first deadlines starting in 2026.
