SEC Adopts Final, Comprehensive Climate Disclosure Rules

The SEC adopted a comprehensive and uniform regulatory framework for climate-related disclosures by public companies. Although pared back from their scope as initially proposed, the final rules represent a major expansion of the SEC’s disclosure regime. The rules, which apply equally to business development companies, address climate-related risk by:

• Mandating new disclosures to be made in annual reports and in registration statements regarding oversight of climate-related risk, climate-related impacts on the business, and greenhouse gas emissions.
  
• Requiring large accelerated filers and accelerated filers to provide attestations of their disclosure of Greenhouse Gas Protocol Scope 1 and Scope 2 emissions. Notably, the final rules do not require disclosure Scope 3 emissions.
• Requiring certain climate-related disclosure in the notes to registrants’ financial statements.

The final rules provide for phased-in compliance dates depending on the status of the filer and the particular requirement, as described in the OnPoint. Most of the new disclosures will be required of large accelerated filers in 2026 for fiscal year 2025, with obligations for accelerated filers other than smaller reporting companies and emerging growth companies beginning with fiscal year 2026 and obligations for smaller reporting companies, emerging growth companies and non-accelerated filers beginning with fiscal year 2027.   

The final rules are expected to impose significant costs on many issuers, as detailed in the OnPoint. The potential compliance burden has already led to challenges brought by companies, industry groups, and 25 states’ Attorneys General in four federal courts of appeal (as of publication of this OnPoint), with a panel of the Fifth Circuit Court of Appeals issuing a temporary stay of the rules on March 15, 2024.