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Chief Compliance Officer Alex Acosta sat down with former Assistant Secretary of the Treasury Tim Massad to find out why investors should be aware of the new SEC Climate Disclosure Rule.
On this special episode of Our Take, Chief Compliance Officer Alex Acosta discusses the recent Securities and Exchange Commission vote to impose Climate Disclosure Requirements for public companies. She covers how it could help investors assess climate and financial risk and what this means for the future of full-information investing. Joining her to talk about what this new rule means is the former chair of the US Commodity Futures Trading Commission and former Assistant Secretary of the Treasury Tim Massad.
Here are some key takeaways from her conversation with Tim:
- Scope Changes: The final SEC rule is significantly altered from the initial proposed language. Greenhouse gas emission disclosure requirements have been scaled back, removing the mandate for scope three emissions while retaining scope one and scope two emissions, albeit with materiality qualifications.
- Expanded Narrative Disclosures: Investors can now expect more detailed narrative disclosures on climate risks, transition plans, mitigation strategies, and scenario modeling, providing greater insight into companies' exposure to climate risk.
- Preemption Considerations: While the SEC rule does not preempt other climate disclosure frameworks, like those in Europe and California, companies may face challenges in complying with multiple regulatory regimes, potentially leading to complexities in disclosures.
- Future Regulatory Landscape: The fate of the rule may be influenced by the upcoming election, with potential changes in SEC leadership or congressional actions impacting enforcement or even the rule's existence. Additionally, ongoing legal challenges could shape the rule's evolution and implementation timeline.
- Recent Updates: There has been such a high volume of challenges to the rule from multiple jurisdictions that there was a lottery draw held by a federal judicial panel to consolidate them into one jurisdiction. The conservative-leaning 8th Circuit was selected as a result. That leaning is expected to impact the final results of the legal challenges to the Climate Disclosure Rule.
Ethic will keep an eye on further developments for investors as the 8th Circuit – and potentially the Supreme Court – weigh in on the rule.
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