New SEC rules on climate reporting in the United States
Regulatory update 2 minute read

New SEC rules on climate reporting in the United States

23 March 2022

On 21st March the Securities and Exchange Commission (SEC) proposed new rules amendments targeting domestic and foreign registrants to report on climate change and how it impacts their business, in line with the proposed disclosures of the Task Force on Financial Disclosure (TCFD). Find out how this may affect you.

What are the proposed climate-related disclosure changes?

The disclosures will amend statements and periodic reporting such as the 10-K forms for registrants to make on climate related risks. It would also entail disclosing the risk management frameworks entities have put in place to manage and monitor climate risks and the way they impact their business.

In recent months investors provided feedback to the SEC regarding their expectations around disclosure:

“More than 550 unique comment letters were submitted in response to my fellow Commissioner Allison Herren Lee’s statement on climate disclosures in March. Three out of every four of these responses support mandatory climate disclosure rules,” stated SEC Chair, Gary Gensler.

On 21st March as the SEC launched its landmark climate risk disclosure rule that could require thousands of companies across corporate America to begin publicly reporting information about their environmental footprint, including greenhouse gas emissions.

The proposed rule changes would require a registrant to disclose information about:

  1. the registrant’s governance of climate-related risks and relevant risk management processes
  2. how any climate-related risks identified by the registrant have had or are likely to have a material impact on its business and consolidated financial statements, which may manifest over the short, medium, or long term
  3. how any identified climate-related risks have affected or are likely to affect the registrant’s strategy, business model and outlook
  4. the impact of climate-related events (severe weather events and other natural conditions) and transition activities on the line items of a registrant’s consolidated financial statements, as well as on the financial estimates and assumptions used in the financial statements.

The proposed rules also would require a registrant to disclose information about its greenhouse gas (GHG) emissions as follows:

Scope 1 – direct greenhouse gas emissions

Scope 2 – indirect emissions from purchased electricity or other forms of energy

Scope 3 – GHG emissions from upstream and downstream activities in its value chain

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 approach, to promote the reliability of GHG emissions disclosures for investors.

The earliest timeline for accelerated filers is fiscal year 2023.

How can TMF Group help?

TMF Group helps clients incorporate ESG considerations throughout the investment lifecycle via an ESG Oversight Framework. We can assist you during the pre-investment phase and while running investments right up until exit. We can:

  • enhance ESG alignment against target outcomes
  • identify and plan for ESG portfolio risks
  • strengthen board level understanding and oversight of ESG
  • solidify ESG policies, procedures and reporting compliance.

We help you identify the top ESG risks across your portfolio and provide the data analysis needed for reporting and strategic decision making. We work with our partners to bring world-class solutions to help streamline your sustainability game plan.

With the help of our partners we can provide you with:

  • Clear ESG metrics
  • Performance improvement
  • Reliable ratings
  • Performance benchmarking
  • Real-time calculation of ESG KPIs to address climate related disclosures
  • Report extraction

To find out more about our ESG Oversight Framework contact us.

Written by

Flavia Micilotta and Kwame Lewis

Director ESG Solutions, Fund Services and Co-Head of Funds Services

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