US Commission proposes new rules on climate-related disclosures

Carbon Accounting Commission

The United States Securities and Exchange Commission (SEC) has proposed rule changes that would require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including Scope 1, Scope 2, and Scope 3 emissions.

Information about climate-related risks that are reasonably likely to have an impact on their business, results of operations, financial condition, and certain climate-related financial statement metrics, could all be included in the new proposal.

“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.

“Our core bargain from the 1930s is that investors get to decide which risks to take, as long as public companies provide full and fair disclosure and are truthful in those disclosures. Investors representing literally tens of trillions of dollars have shown support for climate-related disclosures because they recognise that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions.

“The 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.”

The proposed rules would also require a registrant to disclose information about its direct greenhouse gas (GHG) emissions (Scope 1) and indirect emissions from purchased electricity or other forms of energy (Scope 2). In addition, a registrant would be required to disclose GHG emissions from upstream and downstream activities in its value chain (Scope 3), if the registrant has set a GHG emissions target or goal that includes Scope 3 emissions.

Under the proposed rule changes, accelerated filers and large accelerated filers would be required to include an attestation report from an independent attestation service provider covering Scopes 1 and 2 emissions disclosures, with a phase-in over time, to promote the reliability of GHG emissions disclosures for investors.

Josh Griffin, co-founder and CPO of carbon accounting software company nZero, said: “Investors are increasingly motivated to put their money in companies that pledge to reduce their carbon emissions.   Similarly, more and more companies are announcing climate and GHG-reducing goals.  As such, the SEC’s proposed rules create requirements for companies that make their goals public, to validate and prove the progress on their claims. The SEC wants to ensure investors are making investments in companies that are actually meeting the targets they publish.

“It is hard to predict how all companies will react to these proposed rules. In general, however, this has been a long time coming. Investors, climate activists, policymakers, and, of course, regulators, have been discussing this for years.  The SEC’s proposed rules follow many, many months of staff work.  

“The short-term impact on nZero is clear.  We are a useful, nimble and affordable tool for companies who want a better and more accurate understanding of their footprint and an operational ability to reduce emissions. Further, as we already assist our customers in reporting to a variety of standards, we will closely follow the rule-making process to assist our customers in complying with these requirements.”  

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