SEC’s Proposed Rule for Climate-Related Disclosures Would Flood Public Companies with New Disclosure Obligations

Last week, the U.S. Securities and Exchange Commission released its proposed climate-related disclosure rule that, if ultimately approved, will stand as one of the most comprehensive and complex disclosure initiatives in decades. The SEC’s proposed rule would require registrants to disclose a tidal wave of information in annual reports and registration statements regarding, among other things, climate-related risks, governance and risk management information about board and management processes around climate-related risks, various climate-related expenditures in their financial statements, and certain greenhouse gas (GHG) emission information. As detailed below, the SEC’s proposal would result in a tectonic shift for how public companies assess, track, measure, and disclose climate-related risks, would likely necessitate significant changes to management and board processes and composition, and expose public companies to increased litigation and enforcement risk.

Brief History of the SEC’s Consideration of Climate-Related Disclosures