A summary: SEC Climate Rules (SEC)
The US Securities and Exchange Commission (SEC) has proposed draft rules for climate-related disclosures which will require companies to disclose their greenhouse gas emissions, risks related to climate change, and how they plan to mitigate those risks. The SEC proposed rule on climate-related disclosures has not yet been finalised, it is expected to be finalised within 2023.
Who does it apply to:
The SEC climate rules apply to companies in the United States that fall under the jurisdiction of the SEC. SEC has proposed a phased-in approach, with large accelerate fliers, as defined by SEC as companies with a market value of at least $700m, proposed as the first to file in 2024 for fiscal year 2023 (TBC given the rule has yet to be finalised).
What are the sections relevant to carbon accounting:
Under section G. GHG Emissions Metrics Disclosure, the proposed rules require scope 1 and 2 to be disaggregated by type of greenhouse gas and in the aggregate, accompanied by an emissions intensity measure; Scope 3 to be reported if material or included in the company’s GHG emissions reduction target or goal, accompanied by a scope 3 emissions intensity measure.
What are the disclosure requirements outside of carbon accounting that sumday advisors may be able to support:
Similar to the TCFD framework, the SEC requires companies disclose information on their governance, strategy, risk management, and metrics and targets related to climate-related risks and opportunities, which includes carbon accounting.
Key takeaways for advisors:
Sumday can assist advisors in facilitating their reporting to SEC Climate Rules through our learning courses and automated reporting. Our courses are designed using the GHG Protocol to provide advisors with the technical knowledge necessary to report on Scope 1, 2, and 3 GHG emissions. Our platform, built upon the GHG Protocol as our carbon accounting methodology, can generate automated reports that meet SEC requirements.
Getting ready - what’s next:
You may consider supporting clients to get ready by:
- Reading through this guidance and the relevant sections
- Proposing a baseline emissions assessment to comply with emission reporting requirements
- Identifying the source of data that would enable the client to assess risks across other categories covered by the standards
- Making a plan to gather data that does not exist in anticipation of reporting requirements
- Creating a target timeline for data collection, revisions, assessment and reporting from now until mandatory disclosures are forecast to impact your client (2025).
Disclosure examples:
- N/A - no reports currently exist as the standards have yet to be finalised. Example voluntary reporting framework the SEC are based upon is TCFD.
- Insurance, UK: https://www.aviva.com/sustainability/reporting/climate-related-financial-disclosure/
- Energy, US: https://www.aes.com/sites/default/files/2021-03/2021_AES_Climate_Scenario_vFinal.pdf
