The time has finally come. For the first time, the SEC will now require public companies to report ESG metrics along with their annual financial disclosures, further signaling the connection between climate risks to financial outcomes. Out of all of the preexisting ESG frameworks, this TCFD-modeled proposal requires U.S. companies to provide information on the climate risks facing their businesses, their plans to address the risks, and specific GHG emissions metrics.
The impact of the SEC’s ruling will be felt by many. Connecting the impact of climate-related events to financial statement line items will enable investors and the general public to make better-informed decisions about their investments and the associated risks. Disclosing ESG metrics will also shed light on the extent to which companies will be able to manage and adapt to situations brought on by climate change, including severe weather events and risks related to the coming transition to a low-carbon economy.
In this article, we’ll outline the types of information and metrics required for disclosure in the SEC’s proposal. Then, we’ll review the key dates to help you prepare for this 2024 effective disclosure date.
The SEC’s detailed proposal outlines the following 8 disclosure categories:
Below is a list of disclosure and compliance dates to take effect in 2024 for the 2023 FY period and beyond.
Registrant TypeDisclosure Compliance DataDisclosure Compliance DataFinancial Statement Metrics Audit Compliance DateAll Proposed disclosures including GHG emissions metrics: Scope 1, Scope 2, and associated intensity metric, but excluding Scope 3
GHG emissions metrics: Scope 3 and associated intensity MetricsLarge Accelerated FilerFiscal Year 2023 (Filed in 2024)Fiscal year 2024 (filed in 2025)Same as disclosure compliance dateAccelerated Filer and Non-Accelerated FilerFiscal year 2024 (Filed in 2025)Fiscal year 2025 (filed in 2026)Same as disclosure compliance dateSRCFiscal year 2025 (filed in 2026)ExemptedSame as disclosure compliance date
While the SEC’s reporting disclosures may require companies to devote more resources to monitoring their climate-related risks and environmental impact, these investments are likely to prove beneficial in the long term. Investors and the general public will enjoy greater transparency, and companies will gain a new level of certainty about the regulatory expectations they face.
Of course, the SEC’s ruling also represents a huge win for the ESG professionals and climate champions who have been advocating for a single disclosure for many years. In all, the SEC’s ruling – along with many other market dynamics – will continue to help accelerate our transition to a low-carbon economy.