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SEC asks companies for details on impact of climate change

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Dive Quick:

  • The Securities and Trade Commission (SEC) has questioned companies throughout a selection of industries to provide much more element on the influence of climate change on their money ailment and functions.
  • The agency’s division of company finance has sent CFOs requests for a range of local weather adjust data, together with its physical impact and the direct and oblique consequences of local weather-related laws and regulation. The SEC unveiled a sample of its letter on Wednesday, while not specifying the extent of its distribution.
  • Facts similar to local climate modify-linked dangers and alternatives may perhaps be essential in disclosures linked to a company’s description of enterprise, lawful proceedings, possibility elements and management’s dialogue and assessment of fiscal situation and benefits of operations,” the SEC said.

Dive Insight:

SEC Chair Gary Gensler explained in July he has questioned agency workers to submit a proposal for necessary weather hazard disclosures for company thought by the close of 2021. These kinds of experiences may possibly be required in an expanded Kind 10-K and explain a company’s direct and indirect carbon emissions, together with those by suppliers and partners in its “value chain.”

Companies may well need to report on metrics this kind of as greenhouse gas emissions, financial impacts of weather improve and progress in the direction of weather-associated objectives, Gensler claimed, including that he aims to ensure investor entry to “consistent, similar, and final decision-handy disclosures.”

The proposed disclosure rule might not be prepared for general public release right until early 2022, Gensler claimed Wednesday.

“Whether it is late this calendar year or early future yr, I believe so,” he said in a webcast sponsored by the Council of Institutional Investors. “But it nonetheless has to go to the five member [SEC] commissioners and the discussions amid the five of us to vote it out.”

The recently despatched SEC letter stems from the agency’s direction on local weather alter disclosure unveiled in 2010. The agency identifies several opportunity ambiguities or omissions in a climate-modify disclosure document, like:

  • any discrepancy involving a company’s SEC filing and a corporate social duty report

  • threat variables, such as from litigation linked to climate modify or when switching absent from fossil fuels

  • particulars on earlier or upcoming capital expenses for local climate-relevant projects

  • indirect effect from local climate-associated regulation or business developments this kind of as declining demand from customers for products or solutions that crank out important greenhouse fuel emissions

  • actual physical impression from fires or intense climate, this kind of as hurricanes, floods, or drought

  • an increase in compliance charges

  • order or sale of carbon credits or offsets.

“The sample remarks do not represent an exhaustive record of the difficulties that businesses must contemplate,” the SEC reported. “Any feedback issued would be appropriately customized to the certain firm and field.”

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