On March 21, 2022, the Securities and Exchange Commission (“SEC”) proposed rule amendments (the “Amendments”) requiring registrants to specifically disclose climate-related risks in registration statements and periodic reports. In line with the SEC’s focus on Environmental, Social and Governance (“ESG”)issues, the proposed Amendments reflect the ESG recommendations of the SEC Investor Advisory Committee Relating to ESG Disclosure. The Amendments also respond to perceived investor demand for standardized disclosure regarding the potential impacts of climate-related risks on individual businesses.
The Amendments would require a registrant to disclose information regarding:
- The oversight and governance of climate-related risks by its board and management;
- The actual or likely impact of climate-related risks on its business, consolidated financial statements, strategy, and outlook;
- Its transition plan as part of its climate-related risk management strategy;
- Testing of its business strategy in light of climate-related risks;
- The impact of climate-related events and transition activities on the line items of a registrant’s consolidated financial statements; and
- Specific to carbon issues:
- Information about its internal carbon price;
- Aggregated and disaggregated data regarding its direct (“Scope 1”) and indirect (“Scope 2”) GHG emissions, as well as indirect emissions from upstream and downstream activities in its value chain (“Scope 3”); and
- Significant additional disclosures relating to any publicly set climate-related targets.