SEC Proposes Climate Disclosure Rules

The U.S. Security and Exchange Commission (SEC) on March 21 released a proposal that would require publicly traded companies that prepare quarterly and annual reports (10-Q and 10-K) for shareholders to disclose additional climate change related information for investors.  Affected companies would need to quantify what are termed as Scope 1, 2 and 3 emissions.  Scope 1 are those emitted directly by a company’s operations (e.g., from a factory), Scope 2 are indirect emissions (e.g., by truck delivering raw materials to a factory) and Scope 3, the most challenging to account for and measure, are emissions resulting from the use of a product a company produces.  The classic example here would be a car manufacturer quantifying emissions resulting from a car sold being driven by the customer.  Scope 3 is by far the most controversial and will likely generate the most opposition.  The SEC will take comment on the proposal for 60 days following publication in the Federal Register and plans to finalize the rule before the end of 2022, though the reporting requirements would be phased in over a three-four year period.  See SEC

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