On March 6, 2024, the Securities and Exchange Commission (“SEC”) issued a new rule which will require public companies with certain reporting requirements under the Securities Exchange Act of 1934 to disclose climate-related information in their registration statements and annual reports. The purpose of this new rule is to standardize the climate-related information that public companies provide to help investors compare climate-related risks across companies. The proposed changes, in large part, are due to increasing expectations from investors for greater transparency in corporate disclosures, especially related to business practices detrimental to the climate and a growing awareness of the financial and social impact of ESG (Environmental, Social and Governance) initiatives.
The disclosure requirements include, among other things, reporting on the public company’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, results of operations, or financial condition. The rule also requires disclosure about any oversight by the public company’s board of directors of climate-related risks and any role by management in assessing and managing material climate-related risks and a description of any processes the public company uses to assess or manage material climate-related risks. In addition, under the new rule, certain disclosures related to severe weather events and other natural conditions will be required in a public company’s audited financial statements. Further, the new rule will require certain emission disclosures.
The new rule will become effective 60 days after it is published with the Federal Register and compliance with this new rule will be phased based on the status of public company making the disclosures.
The SEC’s Final Rule is available here and the associated Fact Sheet is available here.
For more information on how these disclosure requirements may impact your business or how to best implement ESG initiatives, please reach out to Keith Gordon, Sylwia Dakowicz, Gelane Diamond, or Eden Fauré.
