4 Things To Know About SEC Climate Reporting Compliance

4 Things To Know About SEC Climate Reporting Compliance

March 11, 2024, Law360

Jayni Hein and Matt Franker’s commentary was included in a Law360 article analyzing the Securities and Exchange Commission’s release of the agency’s climate disclosure rules and the compliance challenges the new requirements pose for businesses. Jayni and Matt discuss the wider effects the finalized rules will have for companies navigating the implementation process.

Jayni said “the California and SEC requirements have some similarities, including that they both use a framework known as the GHG Protocol, which was led by the research nonprofit World Resources Institute, for standardizing how greenhouse gas emissions are reported.” She added that in the forthcoming implementation of its law, California may attempt to align its requirements more closely with the SEC's final rule, noting that the Golden State's law references opportunities to harmonize or avoid duplication with federal requirements. [SEC Chair Gary] Gensler has also previously said it is possible the SEC would attempt to harmonize its final rules with EU regulations.”

Matt commented on how SEC's rules are expected to affect thousands of issuers and clarified that the compliance challenges of the new rules will differ radically from company to company. Apart from the largest firms, most companies will likely face a fairly significant lift in determining what their Scope 1 and 2 emissions are and whether they're material, and the financial reporting element of the SEC's regulation will also pose a challenge for companies and their auditors, he added. The biggest companies are already taking steps such as making disclosures on climate-related risks, he said, "but once you start getting outside the Fortune 100, or maybe a layer below that, you start to get into really uncharted territory for most public companies.”

“In terms of just data gathering and even pulling together the risk and governance disclosures, that's still going to be a challenge, I think, for companies, even though it does have a little bit of a longer implementation period than what they had proposed,” Matt highlighted.