SEC Releases Corporate Climate Disclosure Final Rule

Last week, the Securities and Exchange Commission (SEC) in a 3-2 vote, finalized the rule proposal “The Enhancement and Standardization of Climate-Related Disclosures” that was originally proposed on March 21, 2022. The initial proposal would have required registrants to provide climate-related disclosure in registration statements and periodic reports, including Scope 3 GHG emissions. Additionally, as outlined in a Morgan Lewis client alert, “rather than a universal requirement that all issuers need to disclose Scope 1 and Scope 2 GHG emissions, the final rule requires that only large-accelerated and accelerated filers provide material Scope 1 and Scope 2 GHG disclosure.” The Commission also rolled back requirements that were included in the proposal related to certain corporate governance disclosures noting that the climate rules are “not intended to mandate a specific corporate governance structure or risk-management methodology.” In his statement of support for the final rule, SEC Chair Gary Gensler noted the final rules, “would provide investors with consistent, comparable, decision-useful information, and issuers with clear reporting requirements.” He noted there was lively debate at the Commission and from public commenters that helped shape the more layered approach the Commission put forth in the final rule. In her comments “Green Regs and Spam,” Commissioner Hester Peirce emphasized that existing disclosure requirements “already requires companies to inform investors about material risks and trends—including those related to climate—by empowering companies to tell their unique story to investors.” Commissioner Peirce’s comments also highlight the increased costs of the final rules and that these costs will likely be passed along to the investor.

Click here to read the Commission’s final rule on corporate climate disclosure.
Click here to read a fact sheet detailing high-level takeaways from the final rule.
Click here to read the Commission’s press release on the final rule.
Click here to read a client alert from Morgan Lewis covering the final rule.