The SEC’s Final Rules on Climate Disclosures: A Paradigm Shift for Corporate Transparency


On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) took a long-anticipated step towards addressing the urgent need for climate-related information in financial markets. The adoption of rules requiring publicly traded U.S. companies to disclose their climate-related risks represents a pivotal moment in corporate climate reporting, bridging the gap between financial performance and environmental impact.

The final rules are intended to balance investors’ needs, such as how a company assesses its climate risks while reducing its compliance costs, by giving them discretion on what information is material and therefore reported annually.

While some of the provisions included in the final rules were anticipated, the omission of Scope 3 reporting and emphasis on materiality as a threshold for climate-related disclosures stand out as the most significant shifts from the proposed rules.

In a comprehensive 886-page rule, the SEC adopts several key provisions, including:

1. Material Climate-Related Risks: SEC registrants must disclose climate-related risks – both physical and transition – that have had or are reasonably likely to have a material impact on their business strategy, results of operations, or financial condition.

2. Mitigation Efforts and Risk Management: If a company has undertaken activities to mitigate or adapt to such risks, it must supply its risk management process and a quantitative and qualitative description of the impacts resulting from such risks.

3. Transition Plans and Company Goals and Targets: Registrants are required to state transition plans on an ongoing basis, as well as their company’s use of climate goals and targets, provided with safe harbors as described below.

4. Greenhouse Gas (GHG) Data Reporting: Large accelerated and accelerated filers are subject to scopes 1 and 2 GHG disclosures when established as material, and are subject to an attestation requirement. Smaller companies are excluded from the GHG reporting and attestation requirements. In a departure from the original proposal, the final rules notably exclude Scope 3 reporting requirements. While the final rules require that companies with material Scope 3 goals qualitatively state them and their plans for meeting them, companies would not be required to disclose Scope 3 metrics demonstrating progress towards those goals.

5. Safe Harbors: As noted above, the final rules remove disclosure requirements for Scope 3. In addition, some forward-looking disclosures are eligible for safe harbor protections, such as scenario analysis, transition plans and climate goals and targets.

6. Carbon Offsets and Internal Carbon Price: SEC registrants are required to disclose the use of carbon offsets and RECs as they relate to a registrant’s climate goals and targets. Registrants are also required to disclose internal carbon pricing information, including the total price used and the price per metric ton in carbon dioxide equivalent.

7. Board Oversight and Strategy: Registrants must disclose climate risk governance and strategy, including board engagement, when applicable.

8. Specific Reporting Requirements and Timeline: As expected, the final rules specify that climate risk disclosures should be included in a company’s annual reports and registration statements, rather than solely on company websites. The final rules follow a phased-in approach to reporting, with specific compliance periods for material expenditures and GHG emissions and assurance disclosures (shown below in Table 1).


The Impact

The SEC’s final rules build on similar regulations already adopted by the European Union and California. For publicly traded U.S. companies with a footprint in either the EU or California, most – if not all – of the SEC disclosure requirements may already be required under the more stringent EU Corporate Sustainability Reporting Directive (CSRD) and/or California’s forthcoming suite of disclosure requirements (SB253, SB261, and AB1305). Companies with reporting obligations across multiple jurisdictions will need to plan to meet the most stringent of those standards.

For companies that voluntarily disclose climate-related metrics following the Task Force for Climate-Related Financial Disclosures (TCFD) and/or International Sustainability Standards Board’s (ISSB) IFRS S1 and S2 frameworks, these requirements are already business-as-usual. These companies can look to leverage existing efforts to fulfill the new SEC requirements.

Despite anticipated litigation by states and stakeholders and the potential impacts of these actions to the final rules, companies that are proactive in aligning reporting practices with current regulations will be well-positioned for the future of corporate transparency. The bottom line is that these rules are workable, especially for companies that align their partnerships, internal resources, and sustainability goals with these provisions.

Trio is here to support our clients in navigating new and upcoming climate disclosure regulations and can serve as a trusted advisor to answer the challenging questions:

  • What are my company’s obligations under the new disclosure requirements?
  • What does “material” mean, what is material to my company, and how can it be measured?
  • How can my company ensure accurate reporting while balancing operational efficiency?
  • Is my company subject to the disclosure requirements of multiple jurisdictions and how can we best manage this?
  • How can my company efficiently collect data to monitor and track year-over-year performance in line with reporting requirements and internal sustainability priorities?
  • How can benchmarking of my competitors’ and customers’ climate-related risk disclosures inform and advance my own sustainability strategy going forward?

We meet our clients wherever they are on their sustainability journeys and can help establish robust climate governance, decarbonization strategies, and implementation frameworks. We work with clients to measure scopes 1, 2, and 3 emissions; set climate-related targets (including science-based targets); devise and implement decarbonization strategies and transition plans; and identify, evaluate, and disclose climate-related risks and opportunities in alignment with mandatory and voluntary reporting frameworks.

The SEC’s final rules underscore the interconnectedness of business and climate. As investors demand greater accountability and sustainability, companies must accept this new era of transparency. The path forward is clear: climate disclosures are no longer optional—they are critical for a resilient and responsible global economy.