A Significant New Development!
Have you read the latest news form the SEC (US Securities and Exchange Commission)? On Monday, March 21, the SEC published a press release announcing a proposal to change the rules that would require certain climate-related disclosures to be reported in company statements and periodic reports.
This is huge news! For those who are based in Europe, this is old hat by now. The EU has been requiring companies to publish their climate-related disclosures for a while now. But in the US, this sort of regulation is lagging. The Europeans are definitely years ahead of what is happening in the US, and this is no exception.
According to the press release, which you can read here https://www.sec.gov/news/press-release/2022-46, companies will be required to disclose climate-based information in Scope 1, 2, and 3. Scope 1 covers of the direct greenhouse gases (GHG) of the operation. Scope 2 covers off the indirect emissions from purchase energy used in the business. Scope 3 covers off the upstream and downstream value chain.
These rule changes will have an extensive impact on how companies handle climate-related issues in their governance, risk management and its material impact on the business, how these risks may impact the concerns strategy and outlook, as well as the impact climate-related risks have on the registrants financial statements.
An open comment period will allow interested parties to make statements. And there are plenty of details to work out, but this is huge news!
Through a consistent and comparable disclosure method, investors will be much more informed in their decision-making. I believe it will drive organizations towards integrating climate-related issues into their ongoing business planning and strategies. We know that private equity firms are already keen on this sort of thinking as part of their investments.
The next level of impact will happen when customers demand the same requirement from those small to mid-sized companies out there.
This is huge news!
