If you haven’t yet heard the news, The U.S. Securities and Exchange Commission (SEC) recently unveiled a game-changer for climate transparency: new disclosure rules for public companies. This is a major step forward in holding corporations accountable for their environmental impact.
As we continue to unpack the U.S. Securities and Exchange Commission’s (SEC) final Climate Disclosure rule, we look to bring you interesting expert perspectives. This week, we’re joined by special guest Mallory Thomas, a risk advisory partner at Baker Tilly, a leading advisory CPA firm, who brings additional perspective for companies looking to get an overview of what it will take to comply with the SEC rules.
Here's a quick breakdown for those unfamiliar with the SEC’s new rules: It will require publicly traded companies to disclose their climate-related risks and opportunities in their annual reports. This means investors will have clearer information about how climate change could affect a company’s bottom line.
Related: The SEC rule ignores scope 3 emissions—does it even matter?
Disclosure requirements per SEC guidelines: What does it mean for businesses?
It's time to get ready for more in-depth reporting. Companies will need to disclose things like greenhouse gas emissions, the financial impact of climate events, and their plans for managing climate risks. This translates to a closer collaboration between finance, sustainability, and ESG teams within a company. Strong data collection, clear documentation, and a focus on audit trails will be crucial.
Why is the SEC climate disclosure rule a big deal?
Increased transparency is a win-win. Investors get a clearer picture of a company’s climate exposure, allowing them to make informed decisions. Companies, meanwhile, are incentivized to take climate action, knowing their impact will be scrutinized. This transparency can also drive innovation in clean technologies and sustainable business practices.
Comparison to TCFD
Like most climate disclosure rules, the SEC rule largely reflects the Task Force on Climate-Related Financial Disclosures (TCFD). While there are some key differences (like mandatory financial impact disclosure in the SEC rules), this consistency makes compliance easier for companies already working with TCFD.
The SEC rule is yet another lens that brings into focus a simple fact: Transparency is critical in paving the road to a sustainable future. The SEC’s new climate disclosure rules are a significant step in the right direction, empowering investors and businesses to make climate-conscious decisions.
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