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Addressing the New SEC Climate Disclosure Rule

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Standardizing climate-related disclosures

On March 6, 2024 the U.S. Securities and Exchange Commission adopted rule changes requiring companies to disclose certain climate-related information, ranging from greenhouse gas emissions to expected climate risks to transition plans. 

The requirements aim to provide investors with consistent, comparable, and decision-useful information for making investment decisions, and consistent and clear reporting obligations for issuers.

Highlights of the SEC’s climate disclosure rule

According to the SEC, the newly adopted rule will require SEC-registered domestic or foreign companies to include climate-related information in filing documents such as registration statements and periodic reports such as 10-K annual reports.
Key required disclosures include:

  • Climate-related risks and their actual or likely material impacts on, company strategy, business model and outlook. 

  • Details about governance practices on climate-related risks and relevant risk management processes. 

  • Material Scope 1 and Scope 2 greenhouse gas emissions, which would require an assurance report at the limited assurance level for accelerated filers. Smaller and emerging growth companies would be exempted from disclosing Scope 1 and Scope 2 emissions.

  • Large accelerated filers will require assurance at the reasonable assurance level following a transition period

  • Climate-related financial statement metrics and related disclosures in a note to audited financial statements.

  • Information about activities to mitigate or adapt to material climate-related risks, targets and goals, and use of transition plans or scenario analysis, if any.


Source: https://www.sec.gov/news/press-release/2024-31

Five steps to prepare for SEC climate disclosure requirements

Following the adoption of U.S. Securities and Exchange Commission (SEC) rules for climate disclosure, the pressure is on for public companies to accelerate their plans to capture, measure and disclose emissions data.

Are you looking to run a sustainability report for the first time? Measure GHG emissions, understand material environmental, social and governance topics, and report sustainability performance in line with well-recognized global reporting frameworks and peer disclosure practices with our Sustainability Starter Pack.

  • Step 1
  • Step 2
  • Step 3
  • Step 4
  • Step 5

Step 1

Under the new rule, large accelerated filers and accelerated filers would be required to disclose their direct (Scope 1) and indirect (Scope 2) GHG emissions when such emissions are deemed material.

Workflow
  • Calculate carbon footprints that quantify GHG emissions across your company’s operational footprint.
  • Conduct analysis to identify the most material sustainability issues impacting your operations.
Solutions

Step 2

Under the new rule, companies are required to disclose the material risks posed by climate change to their business and their consolidated financial statements, including physical risks (such as sea level rise and extreme weather events) and transition risks (such as changes in regulations and market trends). Companies must also disclose the scenario analysis results (if utilized) that assess the potential impact of different climate scenarios on their business. Task Force on Climate-related Financial Disclosures (TCFD alignment, while not required, can serve as a starting point for SEC disclosures. Nonetheless, TCFD alignment, by itself, does not constitute compliance with the rules. In fact, the SEC notes “while the final rules use concepts from both TCFD and the GHG Protocol where appropriate, the rules diverge from both of those frameworks in certain respects where necessary for our markets and registrants and to achieve our specific investor protection and capital formation goals.”

Workflow
      • Understand asset-level physical risks and quantify their financial impac
      • Evaluate the business impact of climate transition risks
      • Undertake scenario analysis to assess the potential effects of physical and transition risks
      • Translate climate scenarios into drivers of financial performance

Solutions
  • Calculate modelled average annual loss attributed to climate-related physical risks with Physical Climate Risk analysis.
  • Quantify transition risks like policy, technology, market and reputation risks arising from a low-carbon transition, and apply climate scenarios to enable you to assess the impact of a lower-carbon economy with our TCFD Solutions.
  • Apply climate scenarios to enable you to assess the impact of a lower-carbon economy with our Scenario Analytics, which are aligned with frameworks like the TCFD

Step 3

Under the new rule, it is considered optional for companies to identify climate-related opportunities that could arise from the transition to a low carbon economy, including how well existing product portfolio and future development plans are positioned for the low carbon transition.

Workflow
      • Translate climate scenarios into drivers of financial performance
Solutions

 

Step 4

Although target setting is not required under the new rule, refer to the Science Based Targets initiative (SBTi) to set robust and science-based targets to strengthen your commitment to managing climate-related issues and align your strategy with the goals of the Paris Agreement.

Workflow
  • Set science-based targets for emission reduction
  • Understanding how much and how quickly you need to reduce carbon emissions to align with the Paris Agreement
Solutions

 

Step 5

Under the new rule, companies are required to disclose the extent of their board's role in overseeing material climate-related risks. Reporting based on recommendations of the TCFD can provide an adequate starting point.

Workflow
  • Disclose activities in line with the recommendations of the TCFD
  • Engage with stakeholders
Solutions

 

  • Step 1
  • Step 2
  • Step 3
  • Step 4
  • Step 5

Get Started on Your Sustainability Journey

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Drawing from the TCFD framework

The SEC’s proposed rule is modeled on the framework created by the Task Force on Climate-related Financial Disclosures, or TCFD, and would require companies to outline their climate-related governance practices, expected risks and energy transition plans, including for meeting decarbonization targets, if the companies have set them.

The rule invites companies to outline any opportunities they see coming from climate change. And it would provide companies a safe harbor from lawsuits for any forward-looking statements, except those made in connection with an initial public offering.

How we can help

  • Sustainability Starter Pack

    Get started on your ESG reporting journey with a starter pack that provides a holistic view.

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  • TCFD Reporting

    Our in-depth climate analytics and specialist support services inform every step of your TCFD reporting journey.

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  • Streamlined Sustainability Reporting

    Our modular, end-to-end solution streamlines compliance with sustainability regulatory reporting requirements, from data sourcing through to the submission of disclosures.

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  • Physical Climate Risk

    Discover comprehensive data coverage and hyper-local insight on weather related risks and trends across asset locations, investment portfolios and supply chains.

    Learn More

  • Science Based Target Setting

    Set robust science-based targets to strengthen your commitment to managing climate-related issues and align your strategy with the goal of the Paris Agreement.

    Learn More

  • Data Delivery and Workflow Tools

    Access essential sustainability data intelligence via a single, streamlined desktop platform and tech-forward productivity tools.

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Why S&P Global?

Accelerate Your Sustainability Journey

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Leverage intelligence that is tried-and-tested throughout the global value chain, applying deep knowledge of corporate sustainability assessments that scales analytics for asset owners, investment managers and banks.

Connect Your Workflows

Link sustainability data with financial data and market intelligence, and dig deep with screening tools, real time updates, data visualizations and customized dashboards.

Increase Your Productivity

Access data when and how you want it with flexible delivery options that include a leading desktop solution, APIs, data feeds and cloud access, underpinned by robust data linking, AI and machine-learning technologies.

Rely on a Deep Heritage of Innovation

Put 20+ years of experience behind your sustainability strategy, getting ahead of disclosure trends with active corporate engagement and granular data modelling, and delivering enhanced solutions recognized by numerous industry awards.

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