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Getting ready for the SEC Climate Disclosure Rule

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Enhancing and standardizing climate-related disclosures

On March 21, 2022 the U.S. Securities and Exchange Commission proposed rule changes requiring companies to disclose certain climate-related information, ranging from greenhouse gas emissions to expected climate risks to transition plans. 

Drawing from the TCFD framework, the proposals would provide investors with consistent, comparable, and decision-useful information for making investment decisions, and consistent and clear reporting obligations for issuers.

Let us help you prepare for the SEC Climate Disclosure Rule

Highlights of the SEC’s climate disclosure proposal 

According to the SEC, the newly proposed rule would require SEC-registered domestic or foreign companies to include climate-related information in registration statements and periodic reports such as 10-K annual reports.

Key proposed disclosures include: 

  • Climate-related risks and their actual or likely material impacts on business, strategy, and outlook. 
  • Details about governance practices on climate-related risks and relevant risk management processes. 
  • Scope 1 and Scope 2 greenhouse gas emissions, which would require attestation reports for accelerated filers.
  • Scope 3 emissions if either of two conditions are present: 1) If Scope 3 emissions are material to the company or 2) if the company has set an emissions target or goal that includes Scope 3 emissions. 
  • Certain climate-related financial statement metrics and related disclosures in a note to audited financial statements.
  • Information about climate-related targets and goals, and transition plan, if any.

Source: U.S. Securities and Exchange Commission Fact Sheet: Enhancement and Standardization of Climate-Related Disclosures

Five steps to prepare for SEC Climate Disclosure Requirements

Following the U.S. Securities and Exchange Commission (SEC) proposed rules for climate disclosure, the pressure is building up for public companies to accelerate their plans to capture, measure and disclose emissions data.

Are you looking to run a sustainability report for the first time? Measure GHG emissions, understand material environmental, social and governance topics, and report sustainability performance in line with well-recognized global reporting frameworks and peer disclosure practices with our Sustainability Starter Pack.

  • Step 1
  • Step 2
  • Step 3
  • Step 4
  • Step 5

Step 1

Under the proposed rule, companies would be required to disclose their direct (Scope 1) and indirect (Scope 2) GHG emissions, and potentially disclose their value chain emissions (Scope 3).

Workflow
  • Calculate carbon footprints that quantify GHG emissions across the entire global value chain, including company operations, supply chains and downstream products in use.
  • Measure financed emissions in multi-asset investment portfolios or loan books.
Solutions

 

Case Studies
  • Integrating Net Zero Analysis in a Company's Reporting System

    Learn More

  • An Insurance Company Raises Its ESG Intelligence

    Learn More

Step 2

Under the proposed rule, companies would be required to disclose the material risks posed by climate change to their business and their consolidated financial statements, including physical risks (such as sea level rise and extreme weather events) and transition risks (such as changes in regulations and market trends). Companies would also be required to disclose the scenario analysis results (if they use one) that assess the potential impact of different climate scenarios on their business.

Workflow
      • Understand asset-level physical risks and quantify their financial impact
      • Evaluate the business impact of climate transition risks
      • Undertake scenario analysis to assess the potential effects of physical and transition risks
      • Translate climate scenarios into drivers of financial performance

Solutions
  • Calculate modelled average annual loss attributed to climate-related physical risks with Physical Climate Risk analysis.
  • Quantify transition risks like policy, technology, market and reputation risks arising from a low carbon transition, and apply climate scenarios to enable you to assess the impact of a lower carbon economy with our TCFD Solutions.
  • Apply climate scenarios to enable you to assess the impact of a lower carbon economy with our Scenario Analytics, that are aligned with frameworks like the TCFD.

 

Case Studies
  • Aligning a Consumer Goods Company with the TCFD Sustainability Recommendations

    Learn More

  • A Super Fund Charts Its Path to Net Zero

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  1. Principle 3 (Ensuring Independence and Managing Conflicts of Interest):

(1) Establish effective policies so the organization can make decisions and appropriately address conflicts of interest that may arise (2) Identify activities and situations that could undermine the independence, objectivity, and neutrality of the business, and avoid potential conflicts of interest.

Proposed Draft Statement

Sustainable1 has implemented several controls, policies, and a detailed code of conduct (collectively the “Policies”) to ensure all employees are independent and properly insulated from any conflicts of interest. In particular, the policies and controls drive the following:

  1. compliance arrangements to enable actual or potential conflicts to be identified, managed, eliminated, and disclosed appropriately (P3, Guideline 1),
  2. a clear separation between employees who analyze and develop S&P Global ESG Scores, and employees involved in commercial and marketing activities (P3, Guideline 2),
  3. restrictions on employees to ensure that no personal interests (including securities holdings and outside business activities) conflict with duties of independence and objectivity towards clients (P3, Guideline 4),
  4. employee reporting lines and compensation arrangements that reinforce the exercise of independence and objectivity (P3, Guideline 5)

Sustainable1 also has measures in place to ensure that no consulting, advisory or other business relationships with scored entities compromise its ability to provide independent and objective assessments on those entities (P3, Guideline 2).    

Step 4

Although targets are not currently proposed, refer to the Science Based Targets initiative to set robust and science-based targets to strengthen your commitment to managing climate-related issues and align your strategy with the goal of the Paris Agreement.

Workflow
  • Set science-based targets for emission reduction
  • Understanding how much and how quickly you need to reduce carbon emissions to align with the Paris Agreement
Solutions

 

Case Studies
  • Actions to Reduce Emissions at an Asian Financial Services Firm

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  • A Bank Looks to Take a Lead Position on Climate Action

    Learn More

Step 5

Under the proposed rule, companies would be required to disclose the extent of their board's role in overseeing climate-related risks and opportunities. Reporting based on recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) is acceptable.

Workflow
  • Disclose activities in line with the recommendations of the TCFD
  • Engage with stakeholders
Solutions

 

Case Studies
  • An Oil and Gas Company Plans for Net Zero

    Learn More

  • A Regional Bank Embraces ESG Reporting

    Learn More

  • Step 1
  • Step 2
  • Step 3
  • Step 4
  • Step 5

Get Started on Your Sustainability Journey

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Drawing from the TCFD framework

The SEC’s proposed rule is modeled on the framework created by the Task Force on Climate-related Financial Disclosures, or TCFD, and would require companies to outline their climate-related governance practices, expected risks and energy transition plans, including for meeting decarbonization targets, if the companies have set them.

The rule invites companies to outline any opportunities they see coming from climate change. And it would provide companies a safe harbor from lawsuits for any forward-looking statements, except those made in connection with an initial public offering.

How we can help

  • Sustainability Starter Pack

    Get started on your ESG reporting journey with a starter pack that provides a holistic view.

    Learn More

  • TCFD Reporting

    Our in-depth climate analytics and specialist support services inform every step of your TCFD reporting journey.

    Learn More

  • Streamlined Sustainability Reporting

    Our modular, end-to-end solution streamlines compliance with sustainability regulatory reporting requirements, from data sourcing through to the submission of disclosures.

    Learn More

  • Physical Climate Risk

    Discover comprehensive data coverage and hyper-local insight on weather related risks and trends across asset locations, investment portfolios and supply chains.

    Learn More

  • Science Based Target Setting

    Set robust science-based targets to strengthen your commitment to managing climate-related issues and align your strategy with the goal of the Paris Agreement.

    Learn More

  • Data Delivery and Workflow Tools

    Access essential sustainability data intelligence via a single, streamlined desktop platform and tech-forward productivity tools.

    Learn More

Insights

These requirements could change depending on the content of the SEC’s final rule.

Events

  • Politics & Policy Live: Trade and Sustainability Amidst Volatile Markets

    Live Event

  • Politics & Policy: Sustainability Measures and Physical Risks

    Webinar

  • SEC Climate Disclosure Requirements Heating Up: How to Take Action

    Webinar Replays

ESG Regulatory Tracker

In this recurring series, S&P Global Sustainable1 presents key environmental, social and governance regulatory developments and disclosure standards from around the world.

Learn More

Are you ready for TCFD?

Take our short quiz to assess your readiness, get insights and recommended next steps.

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Why S&P Global?

Accelerate Your Sustainability Journey

Gain unparalleled insight into critical topics like ESG performance, net zero, energy transition, sustainable financing, regulatory compliance and more.

Discover End-to-End Market Perspectives

Leverage intelligence that is tried-and-tested throughout the global value chain, applying deep knowledge of corporate sustainability assessments that scales analytics for asset owners, investment managers and banks.

Connect Your Workflows

Link sustainability data with financial data and market intelligence, and dig deep with screening tools, real time updates, data visualizations and customized dashboards.

Increase Your Productivity

Access data when and how you want it with flexible delivery options that include a leading desktop solution, APIs, data feeds and cloud access, underpinned by robust data linking, AI and machine-learning technologies.

Rely on a Deep Heritage of Innovation

Put 20+ years of experience behind your sustainability strategy, getting ahead of disclosure trends with active corporate engagement and granular data modelling, and delivering enhanced solutions recognized by numerous industry awards.

Enjoy Superior Customer Service

Know you have 24x7x365 backup and specialist assistance from ESG specialists and research analysts across our global offices.