After two years and over 24,000 comment letters, the Securities and Exchange Commission (SEC) approved their 886-page climate rule on March 6, 2024. These SEC new rules mandate detailed climate-related disclosures in annual reports and registration statements for registrants. The amendments affect Regulation S-K and Regulation S-X under the Securities Act of 1933 and the Securities Exchange Act of 1934. Under Regulation S-K, climate-related disclosures must be presented in a designated section of a company’s registration statement or annual report, or in other relevant sections such as Risk Factors, Description of Business, or Management’s Discussion and Analysis. Alternatively, companies can incorporate such disclosures by reference from another SEC filing. The final rules will require a registrant to disclose:
-
Climate-related risks that have impacted or are likely to affect the registrant’s business strategy, financial condition, or operational results.
-
Material impacts of identified climate-related risks on the registrant’s strategy, business model, and outlook.
-
Description of activities undertaken to mitigate or adapt to significant climate-related risks, along with associated expenditures and financial impacts.
-
Specific disclosures on mitigation or adaptation activities, including transition plans, scenario analysis, or internal carbon pricing.
-
Board oversight of climate-related risks and management’s role in assessing and managing such risks.
-
Processes for identifying, assessing, and managing material climate-related risks, and their integration into overall risk management.
-
Information on climate-related targets or goals affecting the registrant’s business, operations, or financial condition, including associated expenditures and impacts.
-
Disclosure of Scope 1 and/or Scope 2 emissions for large accelerated filers (LAFs) and accelerated filers (AFs), along with assurance reports at specified levels.
-
Disclosure of capitalized costs, expenditures, and losses due to severe weather events and natural conditions in financial statements.
-
Disclosure of costs, expenditures, and losses related to carbon offsets and renewable energy credits if integral to meeting climate-related targets.
-
Qualitative description of how severe weather events, natural conditions, or climate-related targets impact financial estimates and assumptions in financial statements.
The rules will take effect 60 days after publication in the Federal Register and will be phased in for registrants based on their status and the content of disclosure. Compliance will commence with certain requirements for LAFs starting from the first annual report on Form 10-K for fiscal years beginning on or after January 1, 2025, extending to fiscal year 2033 for reasonable assurance on attestation reports for LAFs.