The SEC May Have Been Outdone on Climate Disclosures

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In 2022, the ESG community was buzzing with anxiety and anticipation over the SEC’s proposed Climate-related Disclosures Rule which would require companies to disclose Scope 1, 2, and 3 emissions as well as certain climate-related risks. In the almost two years since the proposal’s publication, the landscape has drastically changed and the SEC’s final rule – currently scheduled for this April – is not necessarily top of mind or even arguably particularly critical. GreenBiz recently ran an article discussing the potential impact, or possible lack thereof, of a final SEC rule, stating that:

“Regulations in Europe and California, itself the world’s fifth-largest economy, have established disclosure policies companies will need to meet regardless of what form the SEC rule — now expected in April — actually takes. Under the European Union’s Corporate Sustainability Reporting Directive, all organizations listed in an EU-regulated market with 500 or more employees must start reporting in 2025 with data for the 2024 financial year. Other large companies will be required to do the same in subsequent years, followed by small and midsize enterprises.”

The regulatory landscape has changed a lot in the past two years, and many of the SEC’s proposed requirements are now covered by new legislation from other jurisdictions. Lawrence indicated that this point was echoed by many at last week’s GreenBiz24. Additionally, the article discusses the rumors that the SEC’s final rule will be watered down from the initial proposal, possibly omitting the disclosure of Scope 3 emissions. Many companies may face more stringent regulations from other jurisdictions, making compliance with the SEC’s rule comparatively easy.  There was wisdom in the SEC’s delay of the final rule. Not only did it give them time to refine the rule to take all comments into account and withstand potential legal challenges, it also took some political heat off of the SEC.

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