Governance Briefing — March 21, 2022
The SEC proposed climate-related disclosure rules on March 21, 2022, requiring public companies to report governance, risk management, and emissions data consistent with TCFD and the GHG Protocol.
Executive briefing: On 21 March 2022 the SEC issued Release 33-11042 proposing amendments to Regulation S-K and Regulation S-X that would mandate climate-related disclosures in registration statements and periodic reports. The proposal requires governance disclosures on board and management oversight, climate risk impacts on strategy and outlook, Scope 1 and Scope 2 greenhouse gas emissions, and assurance for accelerated and large accelerated filers.
Key elements
- Governance reporting. Companies must describe board oversight, committee responsibilities, and management’s role in assessing and managing climate-related risks.
- Risk and strategy disclosures. The proposal requires discussion of climate-related impacts on the business, including transition and physical risks, scenario analysis, internal carbon pricing, and climate targets or goals.
- Emissions and assurance. Registrants must disclose Scope 1 and Scope 2 emissions, with Scope 3 reporting required if material or included in targets. Larger issuers must obtain third-party assurance for Scope 1 and Scope 2 data.
Implications for boards
- US issuers. Boards need to oversee cross-functional disclosure controls integrating sustainability data, finance systems, and risk management.
- Foreign private issuers. Companies listed in the US must align global reporting frameworks with SEC requirements, ensuring governance narratives reconcile with CSRD and ISSB disclosures.
- Nonprofit and municipal issuers. Entities tapping public markets should monitor the proposal to anticipate investor expectations around climate governance.
Action checklist
- Perform readiness assessments on greenhouse gas data, scenario analysis, and governance documentation.
- Enhance disclosure committee charters to cover sustainability data sources, assumptions, and assurance planning.
- Develop phased implementation roadmaps for potential Scope 3 reporting and assurance requirements.
Sources
- The Enhancement and Standardization of Climate-Related Disclosures for Investors
- SEC proposes rules to enhance and standardize climate-related disclosures
Zeph Tech steers issuers through climate disclosure governance, emissions data controls, and assurance preparation aligned with the SEC’s proposal.