Suzanne Ogle, the President and CEO of the Southern Gas Association, is at the forefront of the discussion surrounding the Security and Exchange Commission’s new climate-related disclosure requirements for registrants. The SEC’s final rule aims to provide investors with consistent and useful information about companies’ climate-related risks. However, legal challenges have led to a pause in the implementation of the rule as companies navigate the complexity of managing risks in an ever-changing environment.
The SEC’s climate rule requires public companies to provide disclosures on their climate risk governance, including who oversees greenhouse gas emissions strategy at both the board and management levels. The final rule eliminated Scope 3 disclosure requirements, focusing instead on weather-related risks and requiring companies to disclose severe weather events, financial impacts, and carbon offsets. This rule applies to large, accelerated filers, who must comply by the beginning of fiscal year 2026.
The governance structure for managing climate-related risks is crucial under the new rule, with companies required to disclose information about their board of directors’ oversight and management’s role in addressing climate risks. The rule also mandates that companies identify any board committee responsible for overseeing these risks and describe the processes by which the board is informed about them. The final rule eliminated some prescriptive elements, giving companies flexibility in complying with the requirements.
It is essential for companies to assess their readiness to comply with the SEC’s new requirements and address any potential challenges in meeting the disclosure obligations. Private companies are also advised to consider their climate disclosure preparedness, as it can impact their attractiveness in the market. Questions around data tracking, risk management processes, and accountability for identifying and managing climate risks should be considered to ensure compliance with the new rule.
The SEC’s climate rule is likely to face legal challenges and uncertainties, especially in the lead-up to the 2024 election. However, companies, both public and private, should take this time to evaluate their climate strategies and leverage disclosure as a competitive advantage. It is crucial for organizations to stay informed and prepared to meet the evolving regulatory landscape and address climate-related risks effectively.
