Almost two years after releasing its initial proposal, today the U.S. Securities and Exchange Commission (SEC) finalized its rule on The Enhancement and Standardization of Climate-Related Disclosures for Investors. As noted in the final rule release, “The final rules will require information about a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, results of operations, or financial condition. In addition, under the final rules, certain disclosures related to severe weather events and other natural conditions will be required in a registrant’s audited financial statements.”
The SEC’s proposal received over 24,000 comment letters (including more than 4,500 unique letters). To respond to such stakeholder feedback, the SEC and its staff significantly scaled back the scope of certain requirements included in the proposed rule. These changes include (1) requiring only large accelerated filers and accelerated filers to disclose Scope 1 and Scope 2 greenhouse gas (GHG) emissions, on a phased-in basis, and only when those emissions are material (2) eliminating the requirement to disclose Scope 3 GHG emissions (3) extending the phase-in period for obtaining attestation on Scope 1 and Scope 2 GHG emission disclosures, and requiring only large accelerated filers to eventually obtain reasonable assurance attestation reports (4) providing additional time to file GHG emission disclosures and (5) reducing the extent of disclosure that will be required in the audited financial statements.
Even with these changes, the final rule will require registrants to provide significant incremental disclosure under Regulations S-K and S-X.
The final rule will become effective 60 days after publication in the Federal Register. According to the final rule release, key effective dates for implementation are as follows:
| Compliance Dates under the Final Rules | ||||||
| Registrant Type | Disclosure and Financial Statement Effects Audit | GHG Emissions/Assurance | Electronic Tagging | |||
| All Reg. S-K and S-X disclosures, other than as noted in this table | Item 1502(d)(2), Item 1502(e)(2), and Item 1504(c)(2) | Item 1505 (Scopes 1 and 2 GHG emissions) | Item 1506 – Limited Assurance | Item 1506 – Reasonable Assurance | ||
| Large accelerated filers (LAFs) | FYB 2025 | FYB 2026 | FYB 2026 | FYB 2029 | FYB 2033 | FYB 2026 |
| Accelerated filers (other than Smaller Reporting Companies (SRCs) and Emerging Growth Companies (EGCs) | FYB 2026 | FYB 2027 | FYB 2028 | FYB 2031 | N/A | FYB 2026 |
| SRCs, EGCs, and Nonaccelerated filers (NAFs) | FYB 2027 | FYB 2028 | N/A | N/A | N/A | FYB 2027 |
| “FYB” refers to any fiscal year beginning in the calendar year listed | ||||||
For additional details, refer to the SEC’s Press Release and Fact Sheet.
Stay tuned for more analysis of this rule in the future.