If you missed the "How to Prepare for the SEC’s New Climate Disclosure Proposed Rules" webinar we hosted with Bank of the West on August 3rd, 2022, don’t worry - we have you covered! Here are five key takeaways:
1. Climate has moved from a tree-hugging environmentalist problem to a mainstream business issue.
For many years climate change was purely the fight of environmental activists. Since Larry Fink, CEO of BlackRock, the world’s largest asset manager, stated that “climate risk is investment risk,” in his annual letter to CEOs, it has moved into the mainstream business world. Organizations now see climate change's physical and transitional risks as material to their business and climate disclosure rules like the SEC Proposal trending. Climate disclosures and emissions reductions are now at the top of business agendas.
2. In the last year, there has been convergence on climate change frameworks and standards.
What used to be a confusing alphabet soup of climate disclosure frameworks and standards has now begun to converge around the Task Force for Climate-related Financial Disclosures (TCFD) and the Greenhouse Gas (GHG) Protocol. The SEC’s climate proposals, the EU’s Corporate Sustainability Reporting Directive (CSRD), and the International Sustainability Standards Board (ISSB) have whittled down dozens of climate standards to align with the core of TCFD and the GHG Protocol.
3. Climate disclosure regulations have been anchored in the TCFD, and that is where compliance should begin.
Support for the TCFD has grown exponentially in recent years, with a 410% increase in supporters since 2018, now totaling 2,616. To get started on your disclosure journey with the SEC, join the growing number of supporters that have aligned their data collection and reporting to the TCFD. As the lynchpin framework, the TCFD links together all global climate disclosure regulations. To learn more about how the TCFD aligns with the SEC climate disclosure proposals, the CSRD, and the ISSB, read our free e-book “The TCFD’s role in emerging climate regulations.”
4. The majority of companies are just starting to formulate their climate disclosures.
Most companies are at a very low level of maturity for climate disclosures. A poll taken during the webinar revealed that around a third of participants were just starting to formulate their climate disclosure. This rings true with the wider market for voluntary climate disclosures. Recent S&P data shows that in spite of a significant jump in recent years, less than 50% of companies across most industries disclosed their carbon emissions and climate risks in 2020. Therefore, there are still a significant number of companies that have a short period to comply with the SEC Proposal.
5. Measurement of Scope 3 will be the most challenging, but it’s also a great opportunity.
Disclosing Scope 3 under the SEC climate disclosure rules will be necessary when material or for companies that have set a carbon reduction target that includes Scope 3 (small reporting companies are excluded). Scope 3 is often considered the most important to measure as, on average, companies’ supply chain emissions are 5.5 times greater than their Scope 1 and 2 combined. They are also the most difficult to accurately measure as they are out of the company's direct control, and data can be challenging to collect. However, disclosure of Scope 3 can increase transparency and engagement with suppliers, resulting in discovering efficiencies, cost reductions, and energy savings.
If you want to learn more on how to prepare for the SEC climate disclosure proposals, watch the full version of the free webinar here. Or, as the Bank of the West’s Ela Eskinazi said, one of the key takeaways from the webinar should be to schedule some time with Persefoni to understand how to comply with the SEC climate disclosure proposals.