Defining Issues| March 2022
In March 2022, the SEC released its proposed climate rules – The Enhancement and Standardization of Climate-Related Disclosures for Investors. Our talk book, Digesting the SEC’s climate proposal, answers our Top 10 questions about the SEC’s rulemaking proposal – what the proposal would require and how it may impact companies.
Applicability
SEC Release Nos. 33-11042 and 34-94478
- Registrants with Exchange Act reporting obligations pursuant to Exchange Act Section 13(a) or Section 15(d), and companies filing a Securities Act or Exchange Act registration statement
- Includes Foreign Private Issuers
Relevant dates
- Proposal comment period ended June 17, 2022.
- In October 2022, the SEC reopened the comment period for this proposal due to a technical error.
- For possible disclosure and assurance compliance dates, see our Defining Issues: SEC proposes climate reporting and assurance rules.
Key impacts
The SEC’s climate proposal is now available, drawing on the framework of the Task Force on Climate-related Financial Disclosures (TCFD) framework and the Greenhouse Gas (GHG) Protocol. The proposed rules are expansive, and intended to provide more consistent, comparable and decision-useful information so that investors can better evaluate the impact of climate-related matters on a registrant.
Companies will need to understand what the proposed rules would require and then determine their potential impact on their organization. Our talk book is intended to help kick-start a company’s journey down this path.
“While climate disclosures may be a new topic for CAOs and controllers, organizations would need their experience and expertise in meeting the level of rigor required for the SEC’s proposed rules. In addition, the change would provide the opportunity to drive a competitive advantage and allow controllers and CAOs to add value through identification and tracking of progress against strategic imperatives.”
— Sam Jeffery, Partner, KPMG IMPACT Advisory
What’s the impact?
- With change comes opportunity and this proposal is no exception. Considering how to unlock value within your organization, by understanding how the proposal may impact it, is an opportunity to enhance your company’s overall financial position now and for the long-term.
- Companies applying these rules would need processes and controls in place to provide climate-related information of the same quality and timeliness as their financial information.
- Companies that are already producing similar sustainability-related information are likely to find reporting under any final rules easier.
Private companies and IPOs
- The effects of this proposal would likely filter down to private companies (e.g. private companies that are part of a registrant’s value chain) or some may voluntarily choose to apply certain aspects of the proposal (e.g. in response to investor or societal pressure).
- The proposals also apply to registration statements in connection with the registration of a security, a securities offering or an investment company.
What do you need to do?
- The proposal is comprehensive and complex, and would affect nearly all registrants. It is important to understand the impact on your organization.
- Even though the proposal is not final, prepare now for what compliance could mean, and at the same time identify opportunities to drive a competitive advantage.
Top 10 questions
We answer these questions:
- Who and what would be in scope?
- What’s the proposal based on?
- At a glance, what's included where?
- What financial statement disclosures are proposed?
- What GHG emissions disclosures are proposed?
- How does the proposal compare to the TCFD?
- What is the relevance of international developments?
- What is the proposed transition?
- How would the proposal impact IPOs?
- What do you need to do now?
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