WHAT IS THE SEC CLIMATE DISCLOSURE RULE?
On March 21, 2022, the SEC issued a rule proposal, also known as the SEC Climate Disclosure Rule, to force publicly traded companies to report their greenhouse gas (GHG) emissions and environmental impact along with their financial statements. In other words, businesses must disclose how they assess, measure and manage climate-related risks every year.
There are two goals to the Climate Disclosure Rule. For one, it would make it easier for investors and consumers to access and compare ESG data between companies, enabling them to decide better which organizations they should invest in or buy from. This level of accountability would ensure that companies actually contribute to fighting climate change—rather than greenwashing their efforts.
Secondly, the Climate Disclosure Rule would bring a new level of standardization to the information companies provide on climate-related goals. To date, there are varying degrees of reporting and discrepancies even between organizations in the same industry; many disclosures are idiosyncratic and incomparable year after year, making it challenging to concretely and accurately measure the rate of emissions reduction and progress. The SEC’s rule aims to change that with a harmonized framework that would require companies to provide emission targets based on type (absolute- or intensity-based), scope, progress when analyzed with a baseline, milestones and strategies to meet emission reduction goals.