Regulatory Guidelines for Climate Finance

Yesterday, the U.S. Securities and Exchange Commission (SEC) published its Final Rule, “The Enhancement and Standardization of Climate-Related Disclosures.” We welcome the Final Rule's provision of a framework for climate-related financial disclosures closely tied to financial statements. This information, encompassing governance, strategy, risk management, targets, and GHG emission data, empowers investors to allocate capital effectively, safeguarding against the build up of climate-related systemic financial risks and promoting transparency and comparability in global markets. It is encouraging to see the U.S. join peer regulators around the world, making climate-related financial disclosures mandatory to support greater transparency and accountability across markets and jurisdictions. WBCSD – World Business Council for Sustainable Development supports the global harmonization of climate-related financial disclosures to drive transparency, accountability, and performance in markets worldwide. A globally consistent approach to climate-related financial disclosures is needed to provide investors with consistent, comparable, and decision-useful risk disclosures. This will also reduce companies' compliance costs and complexity. We commend the SEC for adopting this ruling, which will contribute to a global baseline of climate risk disclosure, help maintain U.S. leadership, and keep U.S. companies competitive in global markets.  However, since a company’s supply chain can account for as much as 90% of its indirect greenhouse gas emissions, we are disappointed that Scope 3 emissions disclosure is not in the final rule. We also regret that the ruling does not require companies to use internationally comparable climate scenario frameworks to inform their management of climate risk. We look forward to future developments of the SEC’s rulings on climate-related disclosures to support greater alignment with California’s climate disclosure laws, and with global frameworks such as the International Sustainability Standards Board (ISSB) S2 Standard for Climate-Related Financial Disclosures, the European Union Corporate Sustainability Reporting Directive (CSRD) reporting framework set out in the European Sustainability Reporting Standards (ESRS), and the disclosures aligned with the widely-accepted Taskforce on Climate-Related Financial Disclosures (TCFD). 

#SEC #climatereporting #climaterisks 🙌 Celebrating a huge milestone, applauding efforts of many that worked tirelessly to get this into effect. Fantastic discussion from both sides… 2 yrs in draft, 24k comments, 3-2 vote in favour, Climate-Related disclosure rule passes. 🔥The U.S. Securities and Exchange Commission (SEC) approves a landmark rule requiring companies to report information on their GHG emissions and climate related financial risks. Clear intent is to give investors better information, reduce disclosure asymmetry and continued transparency of business relevant risks. The final rule balanced the needs of investors with public feedback and burden of compliance. It will enhance consistency, comparability, reliability and decision usefulness of climate related risk disclosures, and bring US regulations closer to those being enacted globally. ☑️ Disclose scope 1 and scope 2 #ghgemissions. No requirement of scope 3 reporting. Larger registrants required to file attestation reports. ☑️ Disclosures on #climaterisks, if materially relevant; including strategy, impact on operations, governance and management of these risks, targets and goals and transition plans. ☑️ Enhanced requirements on SK, footnotes, layered approach on timing of annual filings. Details and fact sheet : https://lnkd.in/gBAg4w3e

#𝗘𝗦𝗚𝗶𝗻𝗧𝗵𝗿𝗲𝗲: Final SEC Climate Rule is out – the time to act is now As many digest the requirements in the final #SEC #Climate Disclosure Rule https://lnkd.in/ehEu6H9P, it’s clear this rule marks a significant shift in corporate disclosure & requires impacted orgs to take action today. While many headlines have focused on the ‘scale back’ of the requirements, attention needs to be focused on preparation for the requirements that will go into effect for many in FY25, to be reported in 2026 filings. Many orgs are already preparing for broader #ESG disclosure requirements (EU #CSRD, #ESRS, #CA Climate Legislation, #ISSB). So now what? A few initial considerations: 1. 𝗠𝗮𝘁𝗲𝗿𝗶𝗮𝗹𝗶𝘁𝘆: is the name of the game! Impacted orgs will need to establish the processes & controls related to all elements of the rule to conclude on materiality for SEC climate-related disclosure purposes. While examples were included, this will likely be complex & require sufficient time. Orgs will need to explicitly consider additional reg requirements under foreign (potentially #CSRD) or state law (potentially #CA), in addition to how climate info can inform investor decisions, in the materiality determination. Also, the SEC #IAC met on 3/7 to consider, among other matters, materiality & a refresh to #SAB99 https://lnkd.in/e_UUzx5v. The work of the #ISSB around materiality was referenced (#ISSB standards https://lnkd.in/embcMcbV) & provides helpful guidance on materiality determination for sustainability related financial disclosures. 2. 𝗥𝗲𝗴 𝗦𝗫 𝗿𝗲𝗾𝘂𝗶𝗿𝗲𝗺𝗲𝗻𝘁𝘀: will require impacted orgs to establish & test policies (including criteria), procedures & controls by Jan. 1, 2025 (for LAFs) related to disaggregation of financial information; expenditures & capitalized costs incurred as a result of severe weather events & other natural conditions, expenses related to carbon offsets & #RECs used if material to achieving climate-related targets & goals. The thresholds of 1% or de minimis are narrow & if required, will be subject to #ICFR & the audit for 2025. For many orgs this will likely be new & will take time.  3. 𝗥𝗲𝗴 𝗦𝗞 𝗿𝗲𝗾𝘂𝗶𝗿𝗲𝗺𝗲𝗻𝘁𝘀: include #TCFD-aligned disclosures. Many orgs need to act now to establish formal policies, processes & controls for disclosure requirements; governance, strategy, risk management, targets & goals. Look to existing voluntary sus disclosures; TCFD, #GRI, #CDP & other #ESG raters & rankers, among others, as well as broader regulatory disclosure preparation underway & then evaluate further through an SEC materiality lens. A safe harbor was introduced related to transition plans, scenario analysis, the use of #ICT & targets & goals (except for historical facts). The ESG regulatory landscape has just gotten even more complex, but a proactive, strategic & systematic approach can quickly establish alignment, interoperability, efficiency & confidence. https://lnkd.in/eyytgviJ  #deloitteesgnow