Get ready for standardized climate disclosure.

The U.S. Securities and Exchange Commission now requires public companies to disclose their material climate-related risks and the measures they are taking to manage those risks. Ceres can help you understand the rule and its impact.

On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) adopted its landmark climate disclosure rule, The Enhancement and Standardization of Climate-Related Disclosures for Investors. The rule responds to investors’ need and overwhelming demand for clear, consistent, and comparable climate reporting from companies. Standardized disclosures in financial filings will bring significant improvements to the current patchwork of voluntary disclosures.  

The rule requires transparency on how material climate-related risks impact companies’ financial and operational performance and how companies are integrating climate into their broader strategy and governance. What does this mean for you?  

  • Better data: Under the rule, standardized information will enable investors to manage physical and transition risks to their portfolios, prioritize investment stewardship and engagement with companies, and identify investment opportunities.  
  • Clear expectations: The rule provides consistent and clear reporting expectations for companies—and helps them better align with the global regulatory landscape and shifts in market demand.  
  • Global alignment: This rule brings the U.S. closer to global peers who have mandated TCFD-aligned climate-related financial disclosures.  
  • Market protection: Climate change is a systemic financial risk that is already impacting or is expected to impact nearly every facet of the U.S. and global economies through both physical and transition-related risks. Comprehensive climate information is vital to protect investors; maintain fair, efficient, and orderly markets; and facilitate capital formation 

Learn more about the rule in this summary document, comparison of the final rule vs. the proposal, as well as Ceres’ positions on the rule in the FAQs below. If you have questions, please reach out to Randi Mail, Director of Campaigns, at [email protected]

TAKE ACTION

  • POST ON SOCIAL MEDIA: Share a short message on social media about your organization’s support for the disclosure of climate –related financial risk. 
  • CONTACT YOUR LAWMAKER: Call or write to your lawmakers and urge them to support the implementation of the climate disclosure rule. Send a letter.  

FREQUENTLY ASKED QUESTIONS

We congratulate the SEC on this important step forward to bring the U.S. closer in line with its global counterparts (see Ceres statement). The rule mandates the disclosure of consistent, comparable, and material information on physical- and transition-related climate risks vital to investment decision-making. Climate information in SEC filings requires a level of scrutiny and diligence from companies that is lacking from voluntary reporting. While it is disappointing that the rule does not include some key provisions from the 2022 proposal, including Scope 3 greenhouse gas (GHG) emissions disclosure, investor demand for that information continues to grow and many companies will be required to disclose this data in other jurisdictions.  

See Ceres’ multiple comments on the proposed rule:  

  • April 6, 2023: Joint letter with Persefoni on additional details related to costs to issuers and investors, as well as counterarguments to misleading arguments related to the cost-benefit analysis 
  • March 28, 2023: Joint letter with Center for Audit Quality on alternatives to S-X proposed requirements 
  • February 1, 2023: Evidence regarding increased disclosures of emissions data & TCFD-aligned information 
  • December 12, 2022: Joint business coalition letter with recommendations on key provisions plus possible amendments 
  • December 2, 2022: Data on support for rulemaking, investor use cases, issuers’ support for Scope 1 and 2 disclosure, link to letter by 86 Chief Financial Officers to the International Sustainability Standards Board 
  • November 10, 2022: Articles on businesses leading on Scope 3 emissions and risks to investors 
  • June 17, 2022: Main comments on proposed rule 
  • June 10, 2021: Recommendations for a strong proposed rule 

The final rule applies to all SEC registered companies (registrants), but compliance dates and some requirements vary. The rule covers large accelerated filers, accelerated filers, and foreign private issuers. The rule also applies to non-accelerated filers, smaller reporting companies, and emerging growth companies, and these groups are exempt from the emissions disclosure requirements.  

The SEC defines registrants as different types of filers, as follows: 

  • Accelerated filers (AFs) have a public float between $75 million and $700 million and have been public for at least one year. A company’s float is its outstanding shares that are not restricted—essentially the publicly tradeable portion of a company’s market capitalization.  
  • Large accelerated filers (LAFs) are accelerated filers with a float of more than $700 million.  
  • A smaller reporting company (SRC) has a float of less than $250 million, or: (a) less than $100 million in annual revenues, and (b) a public float of less than $700 million (or no float).  
  • An emerging growth company (EGC) has less than $1.235 billion in annual revenues and has not sold common stock under a registration statement. A company continues to be an EGC for the first five fiscal years after it completes an initial public offering (IPO), unless one of the following occurs: its total annual gross revenues are $1.235 billion or more; it has issued more than $1 billion in non-convertible debt in the past three years; or it becomes an LAF.  

The SEC’s final rule takes effect 60 days after it is published in the Federal Register. Disclosure compliance dates range from fiscal year beginning (FYB) 2025 to FYB 2028, and assurance compliance dates range from FYB 2029 to FYB 2033:

There is a clear trend toward climate risk disclosure rules from financial regulators worldwide. The EU Corporate Sustainability Reporting Directive and California’s climate disclosure laws will impact thousands of U.S. companies. Companies should ensure they have systems in place to collect, analyze and disclose climate risk information, paying particular attention to developments in the areas of assurance and Scope 3 GHG emissions. 

The CSRD has the most extensive climate disclosure requirements because it requires reporting of both financial impacts to the company from sustainability risks, as well as the company’s impacts on its stakeholders and the broader society, known as double materiality. The CSRD also spans a range of sustainability topics beyond just climate. Aspects of the ISSB standards are more robust than the SEC’s rule, although there is good interoperability between the two. Fifteen countries so far have publicly expressed their intention to align with ISSB standards for mandatory climate disclosure.   

The California laws focus on Scopes 1-3 GHG emissions (SB 253) and TCFD-aligned climate risk reporting (SB 261). There is significant overlap between the California laws and the SEC’s final rule, which is similarly underpinned by the TCFD framework and Greenhouse Gas Protocol-aligned emissions reporting; aspects of the SEC rule, including the disclosure of climate-related financial statement metrics, go beyond the requirements of the California laws. California’s emissions disclosure law includes Scope 3 emissions, while the SEC rule does not. 

Important CSRD requirements, such as sector-specific standards, will not be finalized for some time, and the California laws require regulatory implementation before companies begin disclosing. The ISSB standards are only effective through legislation or rulemaking on a country-by-country basis. We expect some variations in the specific rules each country chooses to adopt, as well as variance in the applicability of those rules to U.S.- and other non-EU companies. Finally, both the CSRD and ISSB frameworks encompass issues beyond climate change, which will factor into many companies’ decisions about which sustainability issues they assess and disclose. 

Because aspects of these climate disclosure requirements are in flux, we recommend monitoring the requirements and seeking additional advice. The requirements are being assessed by accountants, lawyers and others.  For example, Deloitte provides resources on the ISSB, CSRD and related requirements. The ISSB’s climate disclosure educational materials and sustainability knowledge hub are helpful resources, and their Transition Implementation Group fields questions from preparers and stakeholders about climate risk and sustainability disclosure.  

Ceres has analyzed what has stayed the same and what has changed related to GHG emissions, financial statement footnote disclosure, assurance, timing of disclosures, governance, physical risks disclosure, strategy, business model, and outlook, liability safe harbors, and substituted compliance. See Ceres’ comparison of the proposed and final rule. 

Many companies will continue to use voluntary climate risk disclosure to communicate with their full range of stakeholders. Ceres’ vision for corporate sustainability transparency and disclosure (including climate risks) is included in our Roadmap 2030. We encourage companies to recognize the value of sustainability disclosure and its ability to stimulate ingenuity and strategic thinking, improve sustainability performance, increase competitiveness in a resource-constrained economy and create value for shareholders. We encourage companies to deliver both quantitative and qualitative information in ways that are consistent, decision-useful and comparable, ensuring disclosures are accessible and relevant to shareholders and other stakeholders. For more information, see Ceres Roadmap 2030, Transparency and Disclosure. 

WHAT INVESTORS SAID

AS OF 2022 RULE PROPOSAL 

Why support climate disclosure?

15
countries have publicly expressed their intention to align with ISSB standards for mandatory climate disclosure, while the European Union has enacted its own mandatory disclosure standards that will apply to thousands of non-EU companies.
85%
of Americans want U.S. companies to be transparent about their impact on people and the planet, according to a poll conducted by Just Capital.
$52TN
in assets managed by investors supporting mandatory climate risk disclosure.