Question 1

Will the SEC Climate Rule be mandatory?

Accepted Answer

Yes, once finalized, the proposed rule will be mandatory and enforced by the SEC.

Question 2

Who would the SEC Climate Rule apply to?

Accepted Answer

The SEC Climate Rule would apply to public companies reporting to the SEC, including U.S. public companies and Foreign Private Issuers.

Question 3

When will the rule be finalized?

Accepted Answer

It isn't clear precisely when the rule will be finalized. It is on the SEC's regulatory flexibility agenda for the second half of 2023.

Question 4

When is the expected timeline for implementation?

Accepted Answer

The proposal outlined reporting to begin in 2024 related to 2023 data, assuming the rule was adopted in 2022. As the rule was not adopted in 2022, presumptive timing is reported to begin in FY2025 based on FY2024 data.

Question 5

Will scope 3 emissions be incorporated?

Accepted Answer

As currently proposed by the SEC, scope 3 emissions are to be required for public companies in the United States if they are material or if the reporting company has set GHG reduction targets that include Scope 3 emissions. Smaller Reporting Companies would be exempt from this requirement. The inclusion of scope 3 emissions has been the subject of significant discussion and some controversy. We will have to wait to see whether the final rule requires the disclosure of scope 3 emissions.

Question 6

How will the SEC proposed Climate Rule impact private companies?

Accepted Answer

The SEC's Proposed Climate Rule could have an impact on private companies, even though it does not directly apply to them. If public reporting companies are required to disclose their scope 3 emissions, such companies might well seek information from private companies in their value chains to inform their disclosures.

Question 7

What should my company do now to prepare for the rule?

Accepted Answer

Companies will be held accountable not only for climate disclosures but also for data management. The bottom line – companies need to focus on controls and reliability. As we move from a voluntary reporting landscape to a regulated one, GHG data will be treated in a similar manner to financial data. It will be included in companies' annual reports filed with the SEC and will therefore need to be signed off on by companies' CEOs, CFOs, and boards. Companies will need to be confident in their reporting and they will need to be able to show their work.

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