How to Prepare for New SEC Climate Change Disclosure Filing and Reporting Rules

By Roxane Peyser

The massive international impacts of climate change in the form of wildfires, drought, rising temperatures, flooding, hurricanes, tornadoes and more have created billions of dollars of costs and wreaked havoc on the financial stability of both government and private industry. The destabilizing impacts of climate change on the economy and financial stability have led to greater SEC involvement including newly proposed climate disclosure rules expected to be finalized by Dec. 2022 and take effect in 2023.

In the SEC’s statement about the new rules, SEC Chair Gary Gensler said, “Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions.”

Per the new rules, public companies and other entities must soon begin reporting measurable, accurate climate-related disclosures or face serious penalties, fines and mounting potential shareholder litigation.

The SEC’s proposed climate financial disclosures are expected to fit within a reporting structure similar to those of the Task Force on Climate-Related Financial Disclosures (TCFD) and the Greenhouse Gas Protocol frameworks, which many companies already utilize and are widely recognized as the gold standard for climate-related financial reporting.

At Fortis, we are already receiving many questions about the new SEC rules from clients and are committed to helping you comply with this rapidly evolving reporting and regulatory landscape.

The SEC has published a robust fact sheet outlining the specific climate-related disclosures and requirements and the phase-in schedule, and a list of some of the most commonly asked questions we have received follows:

Who will be required to report? US 10-K filers and foreign private issuers who file 20-F forms with the SEC.

Who should have oversight of reporting? Because it encompasses both operational and financial issues, the company’s Chief Operating Officer best oversees this type of reporting, not the Chief Marketing Officer. When marketing leads ESG reporting, it often leads to speculation about potential greenwashing. In addition, board members should be debriefed and aligned with the company’s ESG business strategy, SEC reporting requirements and their responsibilities related to corporate governance oversight.

What do I have to report? The specifics can vary by industry, but there are three main categories of disclosures:

  • Material climate impacts: These include risks from physical climate-related hazards such as fires or floods by location and by share of assets exposed, as well as the accompanying governance and risk management processes.
  • Greenhouse-gas emissions: This encompasses the reporting of emissions generated by a company’s own operations (Scope 1), those generated through the energy it purchases (Scope 2), and emissions from a company’s supply chain and other indirect activities (e.g., leased assets, end-of-life treatment of sold products, waste from operations, business travels and employee commutes to name a few) (Scope 3).
  • Any targets or transition plans: Including existing climate reporting goals or targets, as well as plans to achieve those targets, through the use of renewable energy credits, carbon offset or other avenues.

When do I have to report? Depending on the size of your company, you may be required to disclose information as early as 2024 using data gathered during the fiscal year 2023. Please reach out to determine when your company needs to start reporting metrics in order to remain compliant.

How do I report? Begin with the information gathering and organizing process quickly, which is the most crucial first step towards SEC compliance. An ESG consultant and an attorney experienced in ESG reporting and SEC regulations can assist with gathering the required metrics, scope and boundaries and help establish how and from where to collect the baseline data.

At Fortis, we are uniquely positioned to help clients in all industries and of all sizes prepare for and navigate ESG reporting and SEC compliance. We can advise on the full spectrum of reporting obligations and due diligence requirements and offer counsel on protecting against violations that could cause significant reputational and financial damage to a company.

The benefits of compliance extend well beyond the potential risks of violating SEC rules. Tackling these issues will leave companies better positioned to manage climate risks, improve resiliency and send a powerful signal to investors, shareholders and consumers that companies are taking the issue of climate change seriously.

Please contact us today for personalized legal advice related to your specific industry and company.


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