Get ready for standardized climate disclosure

We congratulate the SEC on this important step forward to bring the U.S. closer in line with its global counterparts (see Ceres statement). The rule mandates the disclosure of consistent, comparable, and material information on physical- and transition-related climate risks vital to investment decision-making. Climate information in SEC filings requires a level of scrutiny and diligence from companies that is lacking from voluntary reporting. While it is disappointing that the rule does not include some key provisions from the 2022 proposal, including Scope 3 greenhouse gas (GHG) emissions disclosure, investor demand for that information continues to grow and many companies will be required to disclose this data in other jurisdictions.  

See Ceres’ multiple comments on the proposed rule:  

• April 6, 2023: Joint letter with Persefoni on additional details related to costs to issuers and investors, as well as counterarguments to misleading arguments related to the cost-benefit analysis 

• March 28, 2023: Joint letter with Center for Audit Quality on alternatives to S-X proposed requirements 

• February 1, 2023: Evidence regarding increased disclosures of emissions data & TCFD-aligned information 

• December 12, 2022: Joint business coalition letter with recommendations on key provisions plus possible amendments 

• December 2, 2022: Data on support for rulemaking, investor use cases, issuers’ support for Scope 1 and 2 disclosure, link to letter by 86 Chief Financial Officers to the International Sustainability Standards Board 

• November 10, 2022: Articles on businesses leading on Scope 3 emissions and risks to investors 

• June 17, 2022: Main comments on proposed rule 

• June 10, 2021: Recommendations for a strong proposed rule 

The CSRD has the most extensive climate disclosure requirements because it requires reporting of both financial impacts to the company from sustainability risks, as well as the company’s impacts on its stakeholders and the broader society, known as double materiality. The CSRD also spans a range of sustainability topics beyond just climate. Aspects of the ISSB standards are more robust than the SEC’s rule, although there is good interoperability between the two. Fifteen countries so far have publicly expressed their intention to align with ISSB standards for mandatory climate disclosure.   

The California laws focus on Scopes 1-3 GHG emissions (SB 253) and TCFD-aligned climate risk reporting (SB 261). There is significant overlap between the California laws and the SEC’s final rule, which is similarly underpinned by the TCFD framework and Greenhouse Gas Protocol-aligned emissions reporting; aspects of the SEC rule, including the disclosure of climate-related financial statement metrics, go beyond the requirements of the California laws. California’s emissions disclosure law includes Scope 3 emissions, while the SEC rule does not. 

Important CSRD requirements, such as sector-specific standards, will not be finalized for some time, and the California laws require regulatory implementation before companies begin disclosing. The ISSB standards are only effective through legislation or rulemaking on a country-by-country basis. We expect some variations in the specific rules each country chooses to adopt, as well as variance in the applicability of those rules to U.S.- and other non-EU companies. Finally, both the CSRD and ISSB frameworks encompass issues beyond climate change, which will factor into many companies’ decisions about which sustainability issues they assess and disclose. 

Because aspects of these climate disclosure requirements are in flux, we recommend monitoring the requirements and seeking additional advice. The requirements are being assessed by accountants, lawyers and others.  For example, Deloitte provides resources on the ISSB, CSRD and related requirements. The ISSB’s climate disclosure educational materials and sustainability knowledge hub are helpful resources, and their Transition Implementation Group fields questions from preparers and stakeholders about climate risk and sustainability disclosure.  

Ceres has analyzed what has stayed the same and what has changed related to GHG emissions, financial statement footnote disclosure, assurance, timing of disclosures, governance, physical risks disclosure, strategy, business model, and outlook, liability safe harbors, and substituted compliance. See Ceres’ comparison of the proposed and final rule. 

Many companies will continue to use voluntary climate risk disclosure to communicate with their full range of stakeholders. Ceres’ vision for corporate sustainability transparency and disclosure (including climate risks) is included in our Roadmap 2030. We encourage companies to recognize the value of sustainability disclosure and its ability to stimulate ingenuity and strategic thinking, improve sustainability performance, increase competitiveness in a resource-constrained economy and create value for shareholders. We encourage companies to deliver both quantitative and qualitative information in ways that are consistent, decision-useful and comparable, ensuring disclosures are accessible and relevant to shareholders and other stakeholders. For more information, see Ceres Roadmap 2030, Transparency and Disclosure.