Overview

In a stated desire to standardize company ESG disclosures and provide investors with comparable information, the U.S. Securities & Exchange Commission (“SEC”) has proposed its climate-related disclosure rule for U.S. publicly-traded companies and certain foreign issuers.

A brief summary of the proposed rule is provided below. We have also analyzed how some of the SEC’s proposed disclosure requirements compare to the two other major global initiatives that are also seeking to standardize company environmental, social and governance (“ESG”) disclosures—the International Sustainability Standards Board (“ISSB”) and the European Union’s Corporate Sustainability Reporting Directive (“CSRD”). While the SEC’s decision to utilize existing climate disclosure standards may be welcomed by some companies, companies will still be faced with many questions as to how to respond to the SEC’s proposed rule in the context of the other two global initiatives. We contemplate some of those questions and offer some practical suggestions for your consideration below.

A Summary of the SEC’s Proposed Rule on Climate-related Disclosures

 Qualitative disclosure requirements would include a description of:

• board and management team oversight of a company’s climate-related risks;
• how climate-related risks and events may impact a company’s strategy, business model and financial statements;
• any processes to identify and manage climate-related risks; and (iv) any climate transition plan and scenario analysis.

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