SEC’s Proposed Climate Risk Disclosure Rules: Five Key Elements (Part One of Two)

The SEC recently issued a widely anticipated proposal (Proposal) for rules (Rules) requiring public companies to disclose “information about a registrant’s climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition,” according to the Proposal. If adopted, the Rules would expand both the scope and specificity of climate-related disclosures for both U.S. public companies and foreign private issuers. A recent Sullivan & Cromwell (S&C) program examined the five key elements of the Proposal: the disclosure rules for greenhouse gas emissions; climate-related risk and impact; transition plans and climate-related metrics/targets; climate-related financial metrics; and governance. The program featured S&C partners Catherine M. Clarkin, Robert W. Downes, Sarah P. Payne and Marc Treviño, as well as senior policy advisor and counsel, and former SEC Chair, Jay Clayton. This article, the first in a two-part series, covers the five key elements of the Proposal. The second article will outline the broad implications of the Proposal; key challenges and timing; and the anticipated pushback. For coverage of other recent SEC rulemaking, see our two-part series on the SEC’s proposed private fund rules: “General Observations” (Apr. 7, 2022); and “Rule‑Specific Concerns and Next Steps” (Apr. 14, 2022); as well as “SEC’s Proposed Short Sale Rules Increase Transparency Into Large Short Positions” (Mar. 31, 2022).

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