SEC Climate Disclosure: An Executive Primer
The Intent of the SEC Rule

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May 29, 2024
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In the lesson, understand how to address criticisms of the SEC rule, clarifying its focus on investor protection and market efficiency. Learn how to convey that the rule is solely aimed at disclosing climate-related financial risks, not influencing policy, and anticipate upcoming lessons on required disclosures.

Now, let’s look back at those criticisms you’ve been hearing about this rule.

  • “The SEC is pushing a ‘tree hugger’ issue”
  • “This rule is an example of ‘woke’ politics”

In response, you can now explain that the SEC’s intent is rooted not in political motivation, but rather in investor protection and market efficiency.

Even in the introduction of the rule itself, the SEC states clearly:

“While climate-related risks implicate broader concerns—and are subject to various other regulatory schemes—our objective is to advance the Commission’s mission to protect investors, maintain fair, orderly and efficient markets, and promote capital formation, not to address climate-related issues more generally.”

And at last…

  • “The SEC shouldn’t be acting as the EPA”

Note that the SEC rule is solely focused on disclosure of climate-related risks, and does not seek to influence environmental policy or reward or punish companies based on their sustainability activities.  The Commission simply seeks to protect and inform investors through consistent, comparable, and decision-useful information.

In summary, if you encounter challenges as your organization discusses this rule, simply remember: climate risk is financial risk, and your investors deserve to know about the financial risks facing your business and how you are addressing those risks. Climate change can also represent opportunities for companies, and these opportunities can also be included in your disclosures to investors. 

Next up, we’ll walk through specific disclosures you’ll need to provide to comply with the rule.

Up Next
Rule Overview and Timeline
In this lesson, explore the mechanics of the SEC Climate Disclosure Proposal, focusing on the three required disclosure components: narrative disclosures about climate-related financial risks, assurance of Scope 1 and 2 emissions, and a note to consolidated financial statements.