Who does this affect: U.S. Public Companies and Foreign Private Issuers. Note that some of the proposed disclosure requirements would only apply to larger companies, as described below.
Why has it been introduced: This rule was proposed to better meet the informational demands of investors who have expressed the need for more consistent, comparable and reliable climate-related disclosures from the companies in which they invest.
What does the proposal require:
When would the rule come into effect: Proposal provided for reporting beginning in 2024 related to 2023 data, assuming the rule was adopted in 2022. As the rule was not adopted in 2022, presumptive timing is reported to begin in FY2025 based on FY2024 data.
Where is reporting required: Form 10-K, 20-F and registration statements.
Original text: Proposed Rule: The Enhancement and Standardization of Climate-Related Disclosures for Investors
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Who does this affect: United States partnerships, corporations, limited liability companies, and other business entities with total revenues greater than one billion dollars that do business in California.
Why has it been introduced: SB 253 seeks to "inform investors, empower consumers, and activate companies to improve risk management in order to move towards a net-zero carbon economy and is a critical next step that California must take to protect the state and its residents." SB 253 follows closely SB 260, which narrowly failed to be adopted in the 2022 CA legislative session.
What does it require:
When could this proposed law come into effect: If the proposal becomes law, reporting would begin in 2026.
Where is reporting required: Companies will be required to report to a state emissions registry, which will be accessible to the public
Original text: SB 253
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What does this affect: Registered investment companies or business development companies, especially those with “ESG,” “green,” “climate” and similar terms in their names.
Why has it been introduced: According to the proposed amendment, this has been introduced to “prevent potential greenwashing in fund names by requiring a fund’s investment activity to support the investment focus its name communicates so that investors will not be deceived or misled by the fund’s name.”
What does it require: It required funds with terms such as “ESG,” “green, and “climate” would be required to adopt a policy to invest at least 80% of their assets into the type of investment indicated in its name and maintain written records documenting their compliance with the 80% investment policy.
When would these rules come into effect: These proposals were announced in May 2022 and, according to the SEC’s Regulatory Flexibility Agenda, are slated for final action by the SEC in the second half of 2023, however, this could be subject to change.
Where is reporting required: Firms would need to enhance prospectus disclosures and establish record keeping requirements. Additionally, the SEC has proposed additional
requirements for funds to report information on Form N-PORT regarding compliance with the
proposed names-related regulatory requirements.
Original text: Proposed Amendments to the Investment Company Names Rule
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Who does this affect: Registered investment advisors, investment companies, and certain other investment advisors.
Why has it been introduced: To bring "consistent, comparable, and reliable information for investors concerning funds' and advisers' incorporation of environmental, social, and governance 'ESG' factors." The proposal recognizes the significant inflows to ESG-focused funds and other investment products over the last several years and the possibility of investors being misled without proper disclosure.
What does it require:
When would these rules come into effect: These proposals were announced in May 2022 and, according to the SEC’s Regulatory Flexibility Agenda, are slated for final action by the SEC in the final quarter of 2023, however, this could be subject to change.
Where is reporting required: General disclosure requirements for funds, including GHG emissions, would be required in fund prospectuses and annual reports.The requirements for investment advisors will be included in Form ADV brochures.
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