Legal & Regulatory News

US Securities and Exchange Commission releases climate-related disclosures proposal

On 23 March 2022, the US Securities and Exchange Commission (the SEC) released its 506-page proposal in relation to the enhancement and standardisation of climate-related disclosures for investors (the Proposal) in which it set out its proposal for a major expansion of US public company reporting to include climate-related disclosures in both registration statements and annual reports. Under the Proposal, both US domestic and foreign private issuer registrants would be required to make climate-related disclosures, which would be modelled in part on the recommendations of the Task Force on Climate-Related Financial Disclosures and would also draw upon the Greenhouse Gas Protocol.

Under the Proposal, the SEC proposed the addition of a new subpart to Regulation S-K, 17 CFR 229.1500-17 CFR 229.1507 (Subpart 1500 of Regulation S-K) which would require a registrant to disclose certain climate-related information, including information about its climate-related risks that are reasonably likely to have material impacts on its business or consolidated financial statements, and greenhouse gas emissions metrics that could help investors assess those risks. The Proposal also suggests the addition of a new article to Regulation S-X, 17 CFR 210.14-01-17 CFR 210.14-02 (Article 14 of Regulation S-X) which would require certain climate-related financial statement metrics and related disclosures to be included in a note to a registrant’s financial statements, and would be subject to an external audit requirement.

The Proposal requires disclosure of Scope 3 emissions only where these emissions are material or where the registrant has set a greenhouse gas emissions target that includes Scope 3 emissions. Under the Proposal, the SEC suggests that a delayed phase-in, as well as a safe harbour period, would apply for Scope 3 emissions disclosures.

Click here to view the Proposal.