SEC to establish a more comprehensive framework on climate-related disclosures

By Nikos Avlonas

President of CSE

Earlier this year, the U.S. Securities and Exchange Commission took the first steps to create a new, more comprehensive framework for consistent, comparable, and reliable climate-related disclosures. SEC focused on the local market expectations following a consultation process that took place last spring, with a growing interest in industry-specific metrics and aiming to boost transparency against greenwashing.

Βy the end of 2021, the new requirements are likely to include the following:

• Mandatory and “decision-useful” disclosures for investors that can be comparable.
• It is possible that these disclosures will be formally included in Form 10-K securities filings.
• More qualitative disclosures, presenting the way that companies manage climate-related risks and opportunities, and their corporate strategy.
• Quantitative disclosures with greenhouse gas emissions metrics (Scope 1, Scope 2, Scope 3 emissions), financial impacts of climate change and the company’s progress towards climate-related goals.

Regarding the industry-specific metrics, requirements are likely to include scenario analyses on how a business might adapt to a range of possible physical, legal, market and economic-related changes. The transparency will be supported with “net-zero” commitments and metrics useful for investors. Finally, in order to cope with greenwashing, the Climate and ESG Task Force has been established to track misstatements and material gaps in climate-risk disclosures under current rules. Additional disclosure proposals for the fund-management industry are likely to be proposed.

As investors are considering climate-related issues as priority when making their investment decisions, it is every company’s responsibility to ensure that they have access to material information. Updating the guidance on climate-related disclosures is taking now the center stage.

CSE was proudly a supporter of SEC’s consultation process and continues to include updates on the upcoming legislation and important sustainability (ESG) developments in its Certified Sustainability ESG Practitioner Programs. During the programs, discussion tackles issues related to acquisitions, talent retention and competitive advantage, circular economy, ESG criteria as part of due diligence for trillions of invested dollars.

Check out the upcoming Digital Certified Sustainability ESG Practitioner Program, Advanced Edition 2021  and reach us at [email protected]