On March 21, 2022, the U.S. Securities and Exchange Commission issued a rule proposal that, if adopted, would impose new climate-related disclosure requirements on publicly traded companies. The rule would require these “registrants” to disclose information on climate risks and opportunities such as greenhouse gas emissions, severe weather risks, and transitions to lower carbon footprints.
As to greenhouse gas emissions, companies would be required to disclose Scope 1 and Scope 2 emissions, (those generated by their operations or their energy use, respectively). Additionally, Scope 3 emissions, or indirect emissions generated by a company’s suppliers and customers who use their products, will need to be disclosed if they are deemed meaningful to investors. Smaller Reporting Companies (SRCs) may be exempt from the Scope 3 emissions reporting. Companies with set greenhouse gas reduction goals will have additional reporting requirements, including annual reports on progress and the use the carbon offsets or energy credits.
Companies will further be required to report actual or likely material impacts that climate risks will have on business, strategy, or expenditures. Other risks included in the mandatory disclosures include information related to severe weather events risks and transition risks, or risks associated with changing policies related to the reduction of a company’s carbon footprint.
These disclosure requirements would be phased in for companies depending on their size and filing status. Specifically, disclosure of Scope 1 and Scope 2 emissions would be required within one fiscal year from the rules’ effective date, but Scope 3 emissions would have a 2-fiscal year phase in period.
If you would like to discuss how these proposed requirements might impact your company, please contact Agnes Antonian or Christina Sartorio Ku.
Christina Ku practices in Connell Foley’s Environmental Law group, where she applies a background in biological sciences and environmental regulation to a wide range of complex environmental matters. In particular, Christina ...
As Chair of Connell Foley's Environmental Law practice group, Agnes Antonian draws on her engineering background to address a broad range of complex environmental litigation and land use matters. Her environmental litigation ...