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Navigating the Rapidly Changing World of
Climate-Related Disclosures
Part 1: U.S. Securities and Exchange Commission Climate Rules

March 11, 2024

By: Jami Patrick

There are moments in our recent history when we have, as a society, made game-changing shifts.  Remember when wearing seat belts in a vehicle was not required in the U.S.? Or how about when you used to be able to smoke on airplanes?  Well, this is one of those moments.  I can already imagine future conversations around the water cooler… ‘I can’t believe we used to exclude climate impact and risk information from our financial reporting! How the heck did investors make business-critical decisions without knowing that information?’

On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) adopted rules that will require publicly traded companies to disclose climate-related information in SEC filings.  Climate-related risks pose real threats to a company’s business, its longevity, its position in the market, and its financial success.  Similarly, there can be a real upside to this transition to a low-carbon economy, providing growth opportunities to businesses. In either case, investors understand that these risks and opportunities can have a material impact and need to be considered when making investment decisions. For this reason, investors need data – reliable and consistent data, on par with financial data – to understand a company’s climate-related risks, the financial effects of those risks, and how a company is managing them.

For those companies that have fully implemented the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), you might just be wondering what changes you need to make to your processes, controls, and filings to ensure compliance with the SEC rules and prepare investor-ready disclosures. However, a significant number of companies impacted are probably wondering:

Is my company subject to the SEC rules?

What do these rules require?

And by when?

To that end, we have summarized the requirements, their applicability by filer category, and associated timing to help you navigate these questions and set you off on the right foot.  It’s important to note, while a lot of discussion has been around reporting greenhouse gas (GHG) emissions, requirements to disclose climate-related risks will start sooner than the requirements for GHG emissions disclosures.

Disclosure Requirement
    (Adapted from the U.S. SEC Fact Sheet published March 6, 2024)    
($700+ million public float)    
(>$75 but <$700 million public float)    
Climate-related financial disclosures, to be included in the footnotes to financial statements:   
Severe weather and other natural condition financial statement impacts FY beginning in 2025 FY beginning in 2026 FY beginning in 2027
Carbon offset and renewable energy credit (REC) information
Estimates and assumptions
Climate-related risk disclosures, to be included in annual reports at the time of filing:   
Material1 climate-related risks FY beginning in 2025, with items in italics not required until FY beginning 2026 FY beginning in 2026, with items in italics not required until FY beginning 2027 FY beginning in 2027, with items in italics not required until FY beginning 2028
Actual/potential material impacts of the identified risks
Activities implemented to mitigate or adapt to material climate-related risks (including transition plans, scenario analysis, or internal carbon prices)
A quantitative and qualitative description of material expenditures
incurred, and material impacts on financial estimates and assumptions,
that directly result from such mitigation or adaptation activities
Oversight of climate-related risks by the board of directors; role of management in assessing and managing material climate-related risks
Processes for identifying, assessing, and managing material climate-related risks and how these processes are integrated into overall risk management
Climate-related targets or goals, if any; material expenditures and material impacts on financial estimates and assumptions as a direct result of the target or goal or actions taken to make progress toward meeting such target or goal
Greenhouse gas (GHG) emissions disclosures, to be included at the time of filing OR in the second fiscal quarter 10-Q, if additional time is needed:   
Scope 1 and 2 GHG emissions FY beginning in 2026 FY beginning in 2028 Not required   
Scope 3 GHG emissions Not required    Not required    Not required   
Limited assurance on disclosed GHG emissions FY beginning in 2029 FY beginning in 2031 Not required   
Reasonable assurance on disclosed GHG emissions FY beginning in 2033 Not required Not required   

LAF: Large accelerated filer | AF: Accelerated filer | NAF: Non-accelerated filer | SRC: Smaller reporting company | ECG: Emerging growth company

1 From the final rule: ‘A matter is material if there is a substantial likelihood that a reasonable investor would consider it important when determining whether to buy or sell securities or how to vote or such a reasonable investor would view omission of the disclosure as having significantly altered the total mix of information made available.’

Will there be challenges to the final rules? Certainly. (There probably already are by the time you are reading this!) That said, understanding your climate impacts and climate-related risk is a smart business decision regardless of regulatory requirements. Furthermore, these SEC climate rules are not the only climate-related requirements in effect.  In Part 2 of this blog series, we’ll dive into California’s SB 253 and SB 261, which actually have more comprehensive reporting requirements than the SEC rules.  Stay tuned!

The takeaway? It’s not too early to start preparing your GHG inventories and your climate-related disclosures! If you would like a trusted advisor to guide you through this process, we are here to help. We pride ourselves on meeting our clients where they are and on teaching our clients along the way, rather than simply doing.

P.S. Unsure on what Scope 1, Scope 2, and Scope 3 even mean?  No worries!  Reach out and our team can give you a quick, personal GHG emissions/climate impact/climate risk overview! Let us boil things down for you – no need to sit in on a generic webinar and try to learn all this on your own!

Jami PatrickJami Patrick
Vice President, Sustainability and Climate Advisory

Jami has over 28 years of experience working collaboratively with clients and teams to address sustainability challenges through solutions that make business sense. She has worked as an environmental and sustainability consultant in the US as well as in Turkey, England, and the United Arab Emirates, serving as a trusted advisor to clients across the globe. Jami has led organizations in all aspects of their sustainability and climate journeys, from strategy and planning through to program implementation and stakeholder disclosures. Her experience in environmental, health, and safety management systems gives her a solid understanding of business realities and serves as a foundation for helping companies translate sustainability and climate ambitions into actions. In her current role, Jami and her team are actively supporting clients seeking to better understand their Scope 1, 2, and 3 greenhouse gas (GHG) emissions, establish goals and targets to reduce those emissions, and develop decarbonization plans to pave the way to net zero. Jami and the broader Montrose team also support organizations in identifying and assessing climate-related risks and opportunities and their potential impacts to the business. Jami is also helping guide Montrose on its sustainability journey.

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