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    SEC Proposes Climate Disclosure Rules

    Stockholm (NordSIP) –  On Monday, March 21st, the Securities and Exchange Commission, the financial markets regulator in the USA, announced proposed rule changes that would require companies registering with the SEC to include certain climate-related disclosures in their registration statements and periodic reports.

    The SEC will accepts comments on this proposal for 30 days after publication in the Federal Register, or 60 days after the date of issuance and publication on the SEC’s website, whichever period is longer.

    Four Proposed Disclosures

    The proposed rule changes would require registered companies to disclose information about four factors:

    1. Its governance of climate-related risks and relevant risk management processes;
    2. How climate-related risks identified by a company have had or are likely to have a material impact on its business and consolidated financial statements, which may manifest over the short-, medium-, or long-term;
    3. How any identified climate-related risks have affected or are likely to affect the company’s strategy, business model, and outlook; and
    4. the impact of climate-related events (severe weather events and other natural conditions) and transition activities on the line items of a registrant’s consolidated financial statements, as well as on the financial estimates and assumptions used in the financial statements.

    According to SEC Chair Gary Gensler, the disclosures would be provided to investors in a comparable manner, via structured data. The core elements of this proposal would also apply to international filers on Form 20-F, the SEC Chair confirmed

    Emissions Disclosures

    The proposed rules also would require companies to disclose information about its Scope 1 direct greenhouse gas (GHG) emissions and Scope 2 indirect emissions from purchased electricity or other forms of energy (Scope 2).

    Scope 3 emissions from upstream and downstream activities in its value chain would be required if considered material or if the company has set a GHG emissions target or goal that includes Scope 3 emissions.

    Updating the System

    “I am pleased to support today’s proposal because, if adopted, it would provide investors with consistent, comparable, and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers,” Gensler said on the occasion of the announcement.

    “Our core bargain from the 1930s is that investors get to decide which risks to take, as long as public companies provide full and fair disclosure and are truthful in those disclosures,” the SEC Chair continued.

    “Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions,” Gensler added.

    “Today’s proposal would help issuers more efficiently and effectively disclose these risks and meet investor demand, as many issuers already seek to do. Companies and investors alike would benefit from the clear rules of the road proposed in this release,” Gensler explained.

    “I believe the SEC has a role to play when there’s this level of demand for consistent and comparable information that may affect financial performance. Today’s proposal thus is driven by the needs of investors and issuers,” Gensler concluded.

    Image courtesy of SEC
    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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