Under the new rule, registered entities will have to provide information in their annual reports and registration statements relating to the following areas:

• Financial statement impacts and material impacts on entities’ financial statements and assumptions due to severe weather events and other natural conditions – a roll-forward of carbon offsets and renewable energy credits or certificates (RECs), if carbon offsets and RECs are a material component of meeting the entity’s climate-related targets and goals.
• Disclosures required outside of the financial statements include:
  • For large accelerated filers and accelerated filers, material Scope 1 and Scope 2 greenhouse gas (GHG) emissions, with assurance requirements that will be phased-in;
  • governance and oversight of material climate-related risks;
  • material impact of climate risks on the company’s strategy, business model and outlook risk management processes for material climate-related risks;
  • material climate targets and goals.

The final rule will become effective 60 days after publication in the Federal Register, and compliance will be phased in from 2025 to 2033.

Unlike other standards already published (standards of ISSB, ESRS) which cover the sustainability reporting from wider perspective, the SEC rule covers for now only climate-related disclosures.

As is the case with other disclosed information in annual reports, these newly required climate-related disclosures should also be validated within internal control framework of companies and within audit requirements for companies. Specific requirements on assurance will be required gradually for the Information related to GHG emission disclosure.

For more details, please visit iasplus.com.