The New SEC Environmental Rules
The Commission published its Rule on climate related disclosures earlier this week. This is the most comprehensive set of rules dealing with environmental issues promulgated by the agency. The proposals were first published about two years ago. The Commission received about 24,000 comments on the proposals. Following modifications based on the comments, the agency passed the proposals by at 3-2 vote at a meeting held on March 6, 2024.
The new rules apply to issuers and foreign private issues. Portions of the new rules will be phased in. While the Commission likes to note that rules have been on the books for decades that impacted environmental issues, the new rules are its the most comprehensive dealing with the topic
The new rules focus on disclosure in a number of key areas which include:
Business: Risks that have, or may have, a material impact on the business or operations of the issuer:
Mitigation: A description of actions taken to mitigate or adopt the issuer to material climate related risk;
Oversite: A description of the oversight of the board of directors and any role by management with regard to environmental issues;
Processes: Any processes the registrant has for identifying, assessing and managing material climate-related risks;
Goals: Information regarding the registrant’s climate-related targets;
Scope 1 &2: For large, accelerated filers, and those not otherwise exempted, information about these material emissions;
Costs
: Capitalized costs, expenditures and charges incurred as a result of severe weather; and
Estimates & Assumptions: If the estimates and assumptions used to produce the financial statements were materially impacted by risks and uncertainties associated with sever weather.
Comment
The rules adopted on March 6 are the most comprehensive on environmental issues adopted to date by the Commission. While the rules do require extensive disclosures, in many ways they center on issuers telling shareholders and investors what, if anything, the company has been doing in the environmental area. Viewed in this context, the rules should not be the generator of huge controversy. The number of comment letters alone brings that claim to a quick halt.
Despite the considerable effort made by the Commission in writing the rules, challenges to their implementation are no doubt being prepared. Those will range from if the SEC can write rules about the environment (e.g. Doesn’t the EPA do that?) to the inadequacy of them (e.g. Why drop Scope 3?) and on every topic in-between. Those challenges, however, should not obscure the accomplishment of crafting rules for all issuer that should provide not just investors but all a flow of important information about the impact of climate on us and the planet. Well Done!
The New SEC Environmental Rules
The Commission published its Rule on climate related disclosures earlier this week. This is the most comprehensive set of rules dealing with environmental issues promulgated by the agency. The proposals were first published about two years ago. The Commission received about 24,000 comments on the proposals. Following modifications based on the comments, the agency passed the proposals by at 3-2 vote at a meeting held on March 6, 2024.
The new rules apply to issuers and foreign private issues. Portions of the new rules will be phased in. While the Commission likes to note that rules have been on the books for decades that impacted environmental issues, the new rules are its the most comprehensive dealing with the topic
The new rules focus on disclosure in a number of key areas which include:
Business: Risks that have, or may have, a material impact on the business or operations of the issuer:
Mitigation: A description of actions taken to mitigate or adopt the issuer to material climate related risk;
Oversite: A description of the oversight of the board of directors and any role by management with regard to environmental issues;
Processes: Any processes the registrant has for identifying, assessing and managing material climate-related risks;
Goals: Information regarding the registrant’s climate-related targets;
Scope 1 &2: For large, accelerated filers, and those not otherwise exempted, information about these material emissions;
Costs
: Capitalized costs, expenditures and charges incurred as a result of severe weather; and
Estimates & Assumptions: If the estimates and assumptions used to produce the financial statements were materially impacted by risks and uncertainties associated with sever weather.
Comment
The rules adopted on March 6 are the most comprehensive on environmental issues adopted to date by the Commission. While the rules do require extensive disclosures, in many ways they center on issuers telling shareholders and investors what, if anything, the company has been doing in the environmental area. Viewed in this context, the rules should not be the generator of huge controversy. The number of comment letters alone brings that claim to a quick halt.
Despite the considerable effort made by the Commission in writing the rules, challenges to their implementation are no doubt being prepared. Those will range from if the SEC can write rules about the environment (e.g. Doesn’t the EPA do that?) to the inadequacy of them (e.g. Why drop Scope 3?) and on every topic in-between. Those challenges, however, should not obscure the accomplishment of crafting rules for all issuer that should provide not just investors but all a flow of important information about the impact of climate on us and the planet. Well Done!