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May 16, 2022

SEC Extends Comment Period for Rules on Climate-Related Disclosures

Following intense criticism over the short comment deadline, the U.S. Securities and Exchange Commission (SEC) announced last week that it will give stakeholders an additional 30 days to weigh in on its proposed rule mandating climate risk disclosures. The new deadline is June 17, 2022.

As Connecting the Dots reported in March, the draft rule, if finalized, would enhance and standardize climate-related disclosures by public companies. Specifically, the SEC has proposed to require public companies to:

  • Report greenhouse gas (GHG) emissions generated directly by a company’s operations or indirectly by a company’s energy usage. If “material” to investors, companies also would have to report emissions resulting from upstream and downstream activities in their value chain. (This requirement could impact private companies that would have to coordinate with and report to their publicly-traded business partners.)
  • Analyze climate impacts on their existing financial statement line items, including revenues, cash flow, and capital expenses.
  • Assess and disclose “physical risks” (like fires and floods) and “transition risks” (like climate regulations or new green business models) related to climate change and to outline how they are working to mitigate them.

The rule also would require public companies that have made certain climate pledges to report information on how these goals are set, tracked, and accomplished.

As some legal experts have pointed out, although the proposed climate disclosure rule is much more expansive, parallels can be drawn to the SEC’s conflict minerals rule that MSCI opposed. Those similarities include free speech concerns since the proposed rule would require companies to disclose large amounts of data and subject that data to internal and external controls to ensure its reliability.

Find the SEC’s announcement and information about how to submit comments here.

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