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SEC Climate-Related Disclosure Rules: What You Need to Know

SEC Climate-Related Disclosure Rules: What You Need to Know

On March 6, 2024, after digesting more than 24,000 comments on its proposed rules, the Securities and Exchange Commission (SEC) adopted its much anticipated final rules to require registrants to disclose certain climate-related information in registration statements and annual reports. Many companies are already disclosing climate-related information, and investors are already making choices with that data in mind. The SEC.’s new rules intend to meet investors’ demands for better, more comparable data on emissions and risks than what companies voluntarily include in their sustainability reports, which are often difficult to verify.

We have attempted to highlight key takeaways from the almost 900-page final rule into just a few pages. For additional details refer to the FACT Sheet published by the SEC. Stay tuned for additional guidance as the market continues to unpack the new rules. In the meantime, our ESG Solutions practice is on standby should you need any assistance.

Overview of New Disclosure Requirements

Disclosures outside of the financial statements (new subpart 1500 of Regulation S-K)

  • Governance and oversight of material climate-related risks.
  • The material impact of climate risks on the company’s strategy, business model, and outlook.
  • Risk management processes for material climate-related risks.
  • Material climate targets and goals.
  • Material Scope 1 and Scope 2 Greenhouse Gas (GHG) emissions, subject to assurance requirements that will be phased-in. Required for large accelerated filers (LAFs) and accelerated filers (AFs).

Disclosures in the footnotes to the financial statements (new Article 14 of Regulation S-X)

  • Disaggregation of capitalized costs and charges, expenditures expensed and losses incurred as a result of severe weather events and other natural conditions, subject to applicable 1% and de minimis disclosure thresholds.
  • Capitalized costs and charges, expenditures expensed and losses related to carbon offsets and renewable energy credits or certificates (RECs), including a roll forward, if used as a material component of a registrants plans to achieve its disclosed climate-related targets or goals. The final rule also requires a registrant to state its accounting policy.
  • If the estimates and assumptions a registrant uses to produce the financial statements were materially impacted by risks and uncertainties associated with severe weather events and other natural conditions or any disclosed climate-related targets or transition plans, a qualitative description of how the development of such estimates and assumptions were impacted. Examples of financial statement estimates may include salvage value of assets, useful life of assets, projected financial information used in in impairment calculations, loss contingencies, reserves, estimated credit risks, or fair value measurements.

Compliance Dates under the Final Rules1

Registrant Type

Disclosure and Financial Statement Effects Audit

GHG Emissions/Assurance

Electronic Tagging


All Reg. S-K and S-X disclosures, other than as noted in this table

Item 1502(d)(2), Item 1502(e)(2), and Item 1504(c)(2)

Item 1505 (Scopes 1 and 2 GHG emissions)

Item 1506 - Limited Assurance

Item 1506 - Reasonable Assurance

Item 1508 - Inline XBRL tagging for subpart 15002


FYB 2025

FYB 2026

FYB 2026

FYB 2029

FYB 2033

FYB 2026

AFs (other than SRCs and EGCs)

FYB 2026

FYB 2027

FYB 2028

FYB 2031


FYB 2026

SRCs, EGCs, and NAFs

FYB 2027

FYB 2028




FYB 2027


1  As used in this chart, “FYB” refers to any fiscal year beginning in the calendar year listed.

2  Financial statement disclosures under Article 14 will be required to be tagged in accordance with existing rules pertaining to the tagging of financial statements. See Rule 405(b)(1)(i) of Regulation S-T.


5 Key Takeaways

  1. All SEC registrants are impacted, even smaller reporting companies (SRCs) and emerging growth companies (EGCs). All registrants, domestic and foreign filers, US GAAP or IFRS, are subject to the new disclosure requirements. With one exception: GHG emission disclosures.
  2. Major changes to GHG emissions disclosures from the SEC’s original proposal.
    a. Scope 3 emissions are not required
    b. Disclosures and assurance only required for LAFs and AFs
    c. Scope 1 and Scope 2 emissions are subject to a materiality assessment
    d. The boundaries used to determine the operations owned or controlled by a registrant for calculating GHG emissions (also referred to as the “organizational boundaries”) do not need to agree with scope of entities and assets in the consolidated financial statements. However, disclosures of material differences are required
  3. Disclosures are subject to Sarbanes-Oxley compliance. All disclosures, financial and nonfinancial, will be subject to principal executive officer and principal financial officer certifications regarding the maintenance and effectiveness of disclosure controls and procedures (DCP). Furthermore, the new financial statement disclosures will be subject to the registrant’s internal controls over financial reporting (ICFR).
  4. Emphasis on “Financial Materiality”. The final rules reference materiality throughout. The definition used by the SEC is consistent with its traditional notion of financial materiality, “a matter is material if there is a substantial likelihood that a reasonable investor would consider it important when determining whether to buy or sell securities or how to vote or such a reasonable investor would view omission of the disclosure as having significantly altered the total mix of information made available. The materiality determination is fact specific and one that requires both quantitative and qualitative considerations.” To ease the burden on preparers, the SEC has also made revisions to allow more flexibility in adopting the final rules. For example, the placement of the new Regulation S-K disclosures are largely up to the registrant.
  5. Interoperability with other sustainability reporting standards. The SEC requirements are different from those recently adopted in Europe (Corporate Sustainability Reporting Directive) and California (Senate Bills 253 and 261), and those currently being considered in other jurisdictions. Most notably, the differing requirements around Scope 3 emissions and risks related to an entity’s value chain, and the definition of materiality.

Next Steps for CFOs

  1. Start today and remain diligent. The final rules will likely be met with legal and political challenges, but don’t be distracted or you risk not being ready. Adopting these rules will take time and each registrant will need a plan.
  2. Read the rules and understand the organization’s compliance requirements. Many organizations will be subject to multiple sustainability reporting requirements, SEC, CSRD, ISSB, California, etc. Understanding how they overlap will save a company significant time in the long run.
  3. Assess the organization’s internal controls over sustainability reporting (ICSR) . Data will come from various sources throughout the organization and new tools and technologies will likely be needed to aggregate this data. Does the organization have the necessary expertise to identify and manage climate-related risks, and to prepare and review the disclosures? What role will internal audit have? DCPs should be in place before the final rules are effective.
  4. Establish a cross-functional sustainability reporting team. CFOs will need input from parties outside the finance organization along the way; the Company’s legal advisors, external auditors, compliance department, or other external consultants should prove instrumental. CFO’s will likely need guidance on what disclosures are considered material and how they should be presented in filings with the SEC and, as applicable, reports required in other jurisdictions.



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