On March 21, The U.S. Securities and Exchange Commission (SEC) proposed for public comment amendments to the U.S. Securities Act that would mandate disclosure of climate change risks by registrants in annual reports and registration statements. As part of President Biden’s climate change initiative, the new corporate disclosure rules require companies to disclose energy usage, greenhouse gas emissions, and other environmental metrics that may be material to a company’s business and financial performance.
Under the proposed rule change, known as The Enhancement and Standardization of Climate-Related Disclosures for Investors, corporations would have to disclose certain information on risks that climate change poses to its business operations, as well as which environmental goals it has set and how it intends to achieve them. Specifically, the proposed rules would require disclosure regarding:
- The registrant’s processes for identifying, assessing, and managing climate-related risks, and whether any such processes are integrated into the registrant’s overall risk management system or processes;
- If the registrant uses scenario analysis to assess the resilience of its business strategy to climate-related risks, a description of the scenarios used, as well as the parameters, assumptions, analytical choices, and projected principal financial impacts;
- The registrant’s direct greenhouse gas emissions (Scope 1) and indirect greenhouse gas emissions from purchased electricity and other forms of energy (Scope 2); and
- Indirect emissions from upstream and downstream activities in a registrant’s value chain (Scope 3).
Identifying and understanding the necessary environmental metrics will be crucial for companies to integrate ESG into business strategy, maintain compliance, and set environmental goals. Roux ESG’s team of economists, environmental engineers/scientists, and regulatory experts is uniquely qualified to help companies, insurers, and investors understand the SEC’s proposed regulatory framework. Roux’s experience in financial reporting, environmental data management, and technical expertise makes Roux well positioned to help our clients adapt to the new SEC environmental rules.
For more information on Roux’s ESG practice, please contact us using the form below.