Regulatory Update: SEC and California Climate Rules

Mini podcast March 14, 2024


On the 6th of March 2024 the US Securities and Exchange Commission -or SECFINALLY published its long awaited rule on climate-related disclosures. The rules will, for the first time, mandate that SEC registrants, mostly listed companies, report on the impact of climate-related risks to their business, as well as the Scope 1 and 2 emissions

While this is clearly a major milestone, many commentators were disappointed with the ambition of the final rule versus the proposed rule from 2022. For example, the requirement to report on Scope 3 emissions, which we know represent around 80% of emissions globally, has been removed entirely. For Scopes 1 and 2 there is also no requirement for around 50% of registrants to report this at all and those that do report can do so subject to their own “materiality” assessment. Finally, the requirement to quantify climate risks in the financial statements now only applies to those risks related to severe weather events.

While there are reasons to be pessimistic, it is also the case that US companies may be captured by other more ambitious rules, such as the EU’s CSRD or US state legislation. One example of the latter is the California Climate Accountability Package, passed in late 2023. This rule will require Californian companies to report on climate-related risks, as well as the Scope 1,2 and 3 emissions, and covers many of the same companies captured by the SEC rule. 

While we are seeing progress, both the California and the SEC rules are already facing legal challenges. We eagerly await the outcome of those challenges and look forward to more progress on climate reporting globally.  

See here the legal challenges of the rule and the delay in its implementation.

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