SEC Adopts Final Climate-Related Disclosure Rules

Disclosure

2022 Proposed Rules

2024 Final Rules

Climate-Related Risks

How identified climate-related risks, including physical and transition risks, have had or are likely to have a material impact on the registrant’s consolidated financial statements, business operations, or value chains, over the short, medium, or long term.

Generally adopted as proposed. Minor modifications made to the definition of “climate-related risks” and changing the relevant time horizons to short-term and long-term, consistent with existing MD&A requirements.

Impact on Strategy, Business Model and Outlook

How identified climate-related risks have affected or are likely to affect the registrant’s strategy, business model, and outlook, including how such impacts are considered as part of business strategy, financial planning, and capital allocation.

Generally adopted as proposed with addition of materiality qualifier.

Transition Plans

If a transition plan is adopted as part of the registrant’s climate-related risk management strategy, a description of how the registrant plans to mitigate or adapt to any identified physical or transition risks, and an annual update describing actions taken in accordance with the plan’s targets or goals.

Generally adopted as proposed with addition of materiality qualifier and safe harbor applicability. Disclosure only required if adopted a plan to manage a material transition risk. Final rules do not mandate that registrant adopt a transition plan.

Scenario Analysis

Any analytical tools (e.g., scenario analysis) used to assess the impact of climate-related risks on the registrant’s business and financial statements, or to support the resilience of its strategy and business model in light of foreseeable climate-related risks.

Generally adopted as proposed with addition of materiality qualifier and safe harbor applicability.

Internal Carbon Price

If used as part of an emissions reduction strategy, details regarding the registrant’s internal carbon price, how it is set and used, and the rationale for its use.

Generally adopted as proposed with addition of materiality qualifier and safe harbor applicability. Disclosure only required where use of internal carbon pricing is material to how a registrant evaluates and manages a climate-related risk. Eliminated the requirement to describe the rationale for selecting the internal carbon price applied.

Oversight and Governance

How the board and management exercise their oversight of climate-related risks and engage on the setting of climate-related targets and goals, as well as disclosure regarding climate-related expertise.

Adopted with modifications. Eliminated some of the more prescriptive requirements, including the identity of specific board members responsible for climate-risk oversight, whether any board member has expertise in climate-related risks, how frequently the board is informed of such risks, and information regarding whether and how the board sets climate-related targets or goals (including interim targets or goals). Will require disclosure of the relevant climate expertise of certain management members.

Risk Management

Process for identifying, assessing, and managing climate-related risks and whether any such processes are integrated into the registrant’s overall risk management system.

Generally adopted as proposed with addition of materiality qualifier.  Eliminated requirement to disclose if it has a separate board or management committee to assess and manage climate-related risks.

Targets and Goals

Climate-related targets or goals, and transition plan, if any, including the baseline year (which should be consistent across multiple targets) and the registrant’s progress.

Carbon Offsets and Renewable Energy Credits

If used, the role that carbon offsets or renewable energy credits or certificates (RECs) play in the registrant’s climate-related business strategy, and the potential costs and risks associated with such offsets or RECs.

Adopted with modifications. Disclosure only required if they have been used as a material component of a registrant’s plan to achieve climate-related targets or goals.

GHG Emissions

GHG emissions data for the most recently completed fiscal year and for the historical fiscal years (to the extent available) included in the financial statements in the applicable filing, including:

• Scope 1 GHG emissions (i.e., from operations that are owned or controlled by the registrant) and Scope 2 GHG emissions (i.e., from the generation of purchased electricity, steam, heat, or cooling that is consumed by operations) metrics, separately disclosed, expressed both by disaggregated constituent GHGs and in the aggregate, and in absolute and intensity terms; and

•  Scope 3 GHG emissions (i.e., all indirect GHG emissions not otherwise included in Scope 2) in absolute and intensity terms, only if material or if the registrant has set a target or goal that includes its Scope 3 emissions.

Scope 1 and 2 adopted with modifications. Scope 3 eliminated. Scope 1 and 2 disclosures confirmed subject to phase-in periods (see table below).

Attestation Requirements over GHG Disclosure

Accelerated filers and large accelerated filers (including such filers that are FPIs) to provide an attestation report covering, at a minimum, Scope 1 and Scope 2 emissions and certain disclosures about the attestation service provider. 

Adopted with modifications. See attestation compliance dates in table below. Not applicable to private companies in a business combination transaction involving a securities offering registered on Form S-4 or F-4.  

Financial Statement Footnote Disclosure

New climate-related metrics and disclosure in a note to the financial statements, including disclosures regarding the financial impact of climate-related events (severe weather events, other natural conditions, and identified physical risks) and transition activities (including identified transition risks) on any relevant line items in the registrant’s financial statements. The financial statement metrics would be subject to audit by the registrant’s accounting firm and come within the scope of the registrant’s internal control over financial reporting.

Adopted with modifications. Financial impact metrics not adopted. Final rule focused on disclosures of discrete expenditures, costs and charges related to severe weather events and other natural conditions that are already captured in the registrant’s financial statements under GAAP. Disclosures remain subject to applicable 1% or certain de minimis disclosure thresholds.

Compliance Dates under the Final Rules¹

Registrant Type

Disclosure and Financial Statement Effects

GHG Emissions/Assurance

Electronic Tagging

All Reg. S-K and S-X disclosures, other than as noted in this table

Item 1502(d)(2), Item 1502(e)(2), and Item 1504(c)(2)²

Item 1505
(Scopes 1 and 2 GHG emissions)

Item 1506 – Limited Assurance

Item 1506 – Reasonable Assurance

Item 1508 – Inline XBRL tagging for subpart 1500³

LAFs

FYB 2025

FYB 2026

FYB 2026

FYB 2029

FYB 2033

FYB 2026

AFs (other than SRCs and EGCs)

FYB 2026

FYB 2027

FYB 2028

FYB 2031

N/A

FYB 2026

SRCs, EGCs, and NAFs

FYB 2027

FYB 2028

N/A

N/A

N/A

FYB 2027

¹As used in this chart, “FYB” refers to any fiscal year beginning in the calendar year listed, “SRC” refers to smaller reporting company, “EGC” refers to emerging growth company, and “NAF” refers to non-accelerated filer.

²The requirements to provide quantitative and qualitative disclosures about material expenditures and material impacts to financial estimates and assumptions.

³Financial statement disclosures under Article 14 will be required to be tagged in accordance with existing rules pertaining to the tagging of financial statements. See Rule 405(b)(1)(i) of Regulation S-T.