SEC Expected to Release Sustainability Disclosure Rule

European businesses with reporting requirements in multiple jurisdictions can expect the US Securities and Exchange Commission (SEC) to release within months details of its proposed rule requiring large corporates to make certain disclosures about their global greenhouse gas emissions and climate-related risks that are likely to have a material impact on their business.

The SEC announced plans for the proposed rule, The Enhancement and Standardization of Climate-Related Disclosures for Investors, in March 2022, outlining that public companies would have to include climate-related disclosures in financial statements. Under the proposed rule, a registrant would be required to provide disclosures about GHG emissions (with including for Scope 1 and Scope 2 disclosures), certain financial statement disclosures, and qualitative and governance disclosures within its registration statements and annual reports (e.g., Form 10-K).

It’s not clear which size companies would fall within scope, nor the details of exactly what they’d be required to disclose. Most public companies already make some kind of climate disclosure to the market, often accompanying the filing of their annual accounts. The SEC is expected to release details of its rule following a round of extensive consultation in early 2024.

In the meantime, the SEC has held a number of recent meetings with a range of market participants of late, including the Chamber of Commerce, Amazon, Americans for Financial Reform Education Fund, environmental advocacy organisation Sierra Club and consumer rights advocacy group Public Citizen, American Farm Bureau Federation, ratings agency MSCI, not-for-profit Carbon Disclosure Project, and advocacy organisation Principles for Responsible Investing among others.