We congratulate the SEC on this important step forward to bring the U.S. closer in line with its global counterparts (see Ceres statement). The rule mandates the disclosure of consistent, comparable, and material information on physical- and transition-related climate risks vital to investment decision-making. Climate information in SEC filings requires a level of scrutiny and diligence from companies that is lacking in most voluntary reporting. While it is disappointing that the rule does not include several key provisions from the 2022 proposal, including Scope 3 greenhouse gas (GHG) emissions disclosure, investor demand for that information continues to grow and many companies will be required to disclose this data in other jurisdictions.  

See Ceres’ multiple comments on the proposed rule:  

• April 6, 2023: Joint letter with Persefoni on additional details related to costs to issuers and investors, as well as counterarguments to misleading arguments related to the cost-benefit analysis 

• March 28, 2023: Joint letter with Center for Audit Quality on alternatives to proposed Regulation S-X financial statement requirements 

• February 1, 2023: Evidence regarding increased disclosures of emissions data & TCFD-aligned information 

• December 12, 2022: Joint business coalition letter with recommendations on key provisions plus possible amendments 

• December 2, 2022: Data on support for rulemaking, investor use cases, issuers’ support for Scope 1 and 2 disclosure, link to letter by 86 Chief Financial Officers to the International Sustainability Standards Board 

• November 10, 2022: Articles on businesses leading on Scope 3 emissions disclosure/management and risks to investors 

• June 17, 2022: Main comments on proposed rule 

• June 10, 2021: Recommendations for a strong proposed rule 

The rule covers both domestic registrants and foreign private issuers. It applies to large accelerated filers and accelerated filers, which are subject to all of the final rule's provisions. The rule also applies to non-accelerated filers, smaller reporting companies, and emerging growth companies, and these groups are exempt from the emissions disclosure requirements.  

The SEC categorizes registrants into different filer types based on the size of the company and how long the company has been public, as follows: 

• Accelerated filers (AFs) have a public float between $75 million and $700 million and have been public for at least one year. A company’s float is its outstanding shares that are not restricted—essentially the publicly tradeable portion of a company’s market capitalization.

• Large accelerated filers (LAFs) are accelerated filers with a float of more than $700 million.  

• A smaller reporting company (SRC) has a float of less than $250 million, or: (a) less than $100 million in annual revenues, and (b) a public float of less than $700 million (or no float).  

• An emerging growth company (EGC) has less than $1.235 billion in annual revenues and has not sold common stock under a registration statement. A company continues to be an EGC for the first five fiscal years after it completes an initial public offering (IPO), unless one of the following occurs: its total annual gross revenues are $1.235 billion or more; it has issued more than $1 billion in non-convertible debt in the past three years; or it becomes an LAF.  

The SEC’s final rule was set to take effect on May 28, 2024, but SEC commissioners stayed the rule on April 4, 2024, pending completion of the proceeding in the U.S. Court of Appeals for the Eighth Circuit. The Commission stated it would continue vigorously defending the rule’s validity in court. The Commission noted the stay will facilitate the orderly judicial resolution of those challenges and allow the court of appeals to focus on deciding the merits, and it avoids potential regulatory uncertainty if registrants were subject to the rule’s requirements while challenges continue in the court. 

The compliance dates described herein are based on the final rule adopted by the Commission on March 6, 2024. Note that the SEC's stay of the final rule pending resolution of the litigation may impact these dates. Disclosure compliance dates range from fiscal year beginning (FYB) 2025 to FYB 2028, and assurance compliance dates range from FYB 2029 to FYB 2033.

While the SEC’s rule is currently stayed, there is a clear trend toward climate risk disclosure rules from financial regulators worldwide. The EU Corporate Sustainability Reporting Directive (CSRD) and California’s climate disclosure laws will impact thousands of U.S. companies. Companies should ensure they have systems in place to collect, analyze and disclose climate risk information, paying particular attention to developments in the areas of assurance and GHG emissions disclosure. 

The CSRD has the most extensive climate disclosure requirements because it requires reporting of both financial impacts to the company from sustainability risks, as well as the company’s impacts on its stakeholders and the broader society, known as double materiality. The CSRD also spans a range of sustainability topics beyond just climate. Aspects of the ISSB standards are more robust than the SEC’s rule, although there is good interoperability between the two. Fifteen countries so far have publicly expressed their intention to align with ISSB standards for mandatory climate disclosure.   

The California laws focus on Scopes 1-3 GHG emissions (SB 253) and TCFD-aligned climate risk reporting (SB 261). There is significant overlap between the California laws and the SEC’s final rule, which is similarly underpinned by the TCFD framework and Greenhouse Gas Protocol-aligned emissions reporting. Aspects of the SEC rule, including the disclosure of climate-related financial statement metrics, go beyond the requirements of the California laws. Meanwhile, California’s emissions disclosure law includes Scope 3 emissions, while the SEC rule does not. 

Important CSRD requirements, such as sector-specific standards, will not be finalized for some time, and the California laws require regulatory implementation before companies begin disclosing. The California disclosure laws are also being challenged in court. The ISSB standards are only effective through legislation or rulemaking on a country-by-country basis. We expect some variations in the specific rules each country chooses to adopt, as well as variance in the applicability of those rules to U.S.- and other non-EU companies. Finally, both the CSRD and ISSB frameworks encompass issues beyond climate change, which will factor into many companies’ decisions about which sustainability issues they assess and disclose. 

Because aspects of these climate disclosure requirements are in flux, we recommend monitoring the requirements and seeking additional advice. The requirements are being assessed by accountants, lawyers and others.  For example, Deloitte provides resources on the ISSB, CSRD and related requirements. The ISSB’s climate disclosure educational materials and sustainability knowledge hub are helpful resources, and their Transition Implementation Group fields questions from preparers and stakeholders about climate risk and sustainability disclosure.  

Ceres has analyzed what has stayed the same and what has changed related to GHG emissions, financial statement footnote disclosure, assurance, timing of disclosures, governance, physical risk disclosure, strategy, business model, and outlook, liability safe harbors, and substituted compliance. See Ceres’ comparison of the proposed and final rule. 

Many companies will continue to use voluntary climate risk disclosure to communicate with their full range of stakeholders. Ceres’ vision for corporate sustainability transparency and disclosure (including climate risks) is included in our Roadmap 2030. We encourage companies to recognize the value of sustainability disclosure and its ability to stimulate ingenuity and strategic thinking, improve sustainability performance, increase competitiveness in a resource-constrained economy and create value for shareholders. We encourage companies to deliver both quantitative and qualitative information in ways that are consistent, decision-useful and comparable, ensuring disclosures are accessible and relevant to shareholders and other stakeholders. For more information, see Ceres Roadmap 2030, Transparency and Disclosure. 

If you would like to learn more about the rules, check out these external resources. 

• Amicus brief filled by institutional investors

• Amicus brief filed by the Center for Climate and Energy Solutions, Inc., We Mean Business Coalition, and World Business Council for Sustainable Development

• North America Columbia Law School Blue Sky Blog: Materiality Under the SEC’s Climate Risk Rule

• GreenBiz 2024: A New Era of Corporate Climate Disclosure with Mindy Lubber of Ceres 

• Comment: The new U.S. federal disclosure rule is an important step towards a water-secure future by Kirsten James

• Witness Testimony at the U.S. Senate Meeting of the Senate Climate Change Task Force June 12, 2024 

• Webinar: From Data to Dialogue: Mastering the SEC Climate Rule & Climate Risk Communication  

• Witness Testimony at the U.S. Senate Meeting of the Senate Climate Change Task Force June 12, 2024

• Project Frame Community Meeting: How does the SEC’s climate disclosure rule impact early-stage investors? 

• Volts Podcast “What’s the Deal With “Scope 3” Emissions?” 

• Davis Polk, “Amid Storm of Controversy, SEC Adopts Final Climate Disclosure Rules” 

• Debevoise & Plimpton 

  • (Analysis) “An In-depth Analysis Of The Sec’s Climate Related Disclosure Rule” 

  • (Webinar Recording) “SEC Climate Rule and What Comes Next” 

• Deloitte 

  • (Analysis) “Comprehensive Analysis Of The Sec’s Landmark Climate Disclosure Rule” 

  • (Webinar Recording) “Demystifying the Sec’s New Climate Disclosure Rule” 

• EY,“To The Point - SEC Adopts Rules Requiring Registrants to Disclose Certain Climate-related Information” 

• Holland & Knight, “SEC Adopts Landmark Climate Disclosure Rules” 

• KPMG,  “SEC Mandates Climate Reporting And Assurance” 

• PwC, “Navigating the SEC Climate-related Disclosure Requirements” 

• Sullivan Cromwell, “Key Implications of Sec’s Climate-related Disclosure Rules For Public Companies”