The new rule will raise key questions for publicly listed companies, including:
- How does the company’s board and management provide oversight and governance of climate-related financial risks?
- How will climate-related risks impact the company’s business and financial statements over time?
- How have climate-related financial risks affected or how are these risks likely to affect the company’s strategy, business model and outlook?
- What are the company’s processes for identifying, assessing and managing climate-related financial risks and are these processes integrated into the firm’s overall risk management system or processes?
- If the company uses scenario analysis to assess the resilience of its business strategy to climate-related risks, what scenarios were used, and what were the parameters, assumptions and projected principal financial impacts?
- If a company uses an internal carbon price, what is the price and how is it set?
- What would be the impact of climate-related events (severe weather events and other natural conditions) and transition activities on the company’s consolidated financial statements, as well as the financial estimates and assumptions used in the financial statements?
- What are the company’s direct GHG emissions (Scope 1) and indirect GHG emissions from purchased electricity and other forms of energy (Scope 2), expressed both by disaggregated constituent greenhouse gases and in the aggregate, and in absolute terms, not including offsets, and in terms of intensity (per unit of economic value or production)?
- What are the company’s indirect emissions from upstream and downstream activities (Scope 3), if material, or if the registrant has set a GHG emissions target or goal that includes Scope 3 emissions, in absolute terms, not including offsets, and in terms of intensity?
- If the company has publicly set climate-related targets or goals, such as a net-zero goal, what is the scope of activities and emissions included in the target, the timeframe to achieve the target and interim targets? Companies will need to explain how they intend to meet climate-related targets or goals, provide data to indicate if progress is being made toward meeting the target or goal and how such progress has been achieved, and whether carbon offsets or renewable energy certificates are part of the company’s plan to achieve climate-related targets or goals.
Return to main article: New Proposed SEC Rule on Climate Disclosure Will Focus Investors and Publicly Listed Companies on Climate Risks