On March 21, 2022, the U.S. Securities and Exchange Commission (the “SEC”) proposed far-reaching amendments to Regulation S-K and Regulation S-X that would mandate significant additional climate-related disclosures for public companies. A summary of the new disclosure requirements is available in our Clients & Friends Memo dated March 23, 2022. In brief, the proposed rules would require a public company to make significant additional disclosures regarding, among other things, its board and management’s oversight of climate-related risks; its processes for identifying, assessing and managing climate-related risks; and its climate-related targets and goals. In addition, a company would be required to disclose how climate-related risks have had or are likely to have an impact on its business and consolidated financial statements, as well as on its strategy, business model and outlook. A company also would be required to disclose its greenhouse gas emissions and provide an attestation report to provide reasonable assurance, after a phase-in period, covering certain disclosed emissions.

Although the SEC’s proposal made clear that asset-backed securities issuers are not covered by the proposed rules, the SEC indicated that it is continuing to consider whether and how to apply this type of regulation to asset-backed securities issuers.

If adopted as proposed, the amendments would impose significant reporting requirements on registrants, which in turn would increase compliance costs and require additional managerial time and attention. Although the proposed rules contain various phase-in periods dependent upon filer status, there are steps, discussed below, that public companies can act on today to prepare for the new rules.

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