Similar reporting legislations are being introduced in the US and the UK.
US: Securities and Exchange Commission (SEC) proposed a new set of rules on climate-related disclosures for greater transparency for investors in March 2022.
The SEC requires companies to disclose:
- Climate-related risks and their actual or likely material impacts on the registrant’s business, strategy, and outlook.
- The registrant’s governance of climate-related risks and relevant risk management processes.
- The registrant’s greenhouse gas (GHG) emissions, which, for accelerated and large accelerated filers and with respect to certain emissions, would be subject to assurance.
- Certain climate-related financial statement metrics and related disclosures in a note to its audited financial statements.
- Information about climate-related targets and goals, and transition plan, if any.
Which companies will be affected by SEC climate-related requirements?
The SEC’s proposal applies to all SEC registrants including foreign private issuers, even those with no publicly listed equities.
When will it come into force?
Scope 1 & 2 emissions:
- Large accelerated filers: reporting in 2024 on 2023 data
- Accelerated filers, non-accelerated filers: reporting in 2025 on 2024 data
- Small reporting companies: reporting in 2026 on 2025 data
Scope 3 emissions:
- Large accelerated filers: reporting in 2025 on 2024 data
- Accelerated filers, non-accelerated filers: reporting in 2026 on 2025 data
- Small reporting companies: N/A
UK: In 2019 the UK government committed in law to net-zero greenhouse gas emissions by 2050. This transition must be supported by a significant shift of investment into sustainable projects and green technology. The government published a Roadmap for Greening Finance in 2022 aiming for the integration of environmental factors in decision-making.
The roadmap has three phases:
- Informing investors and consumers: ensuring decision-useful information on sustainability is available.
- Acting on the information: mainstreaming sustainability information into business and financial decisions.
- Shifting financial flows: across the economy to align with the national net-zero commitment and nature-positive economy.
The roadmap is still under construction and aims to implement strong regulations, such as:
- The Task Force on Climate-Related Financial Disclosures (TCFD) provides recommendations for disclosing information about the risks and opportunities of climate change and will be mandatory by 2025.
- New Sustainability Disclosure Requirements will be introduced built on the TCFD, aiming to create an integrated framework for disclosures on sustainability across the economy.
- Development of the UK Green Taxonomy setting out criteria to define environmentally sustainable economic activities following six environmental objectives: climate change mitigation and adaptation, protection of water and marine resources, circular economy, pollution, and biodiversity.