Updates on the SEC's Ruling on GHG Reporting

Updates on the SEC's Ruling on GHG Reporting image
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On March 21, 2022, the U.S. Securities and Exchange Commission (SEC) proposed rules to enhance and standardize climate-related disclosures for publicly traded companies to assess and disclose climate-related risks and opportunities.

The proposed regulation comes as investors demand transparency into how tangible risks from changing climate conditions will impact the business operations of publicly traded companies, and what steps those companies are taking to mitigate or capitalize on those changes.

Registrants would be required to disclose scope 1, 2, and 3 greenhouse gas (GHG) emissions. The agency is leaning heavily on guidelines from the Task Force on Climate-Related Financial Disclosures (TFCD) in regard to assessing and disclosing climate-related financial risk. The TCFD website also provides recommendations to facilitate the process of identifying material risk associated with different industries.

GHG Emissions Disclosure

The proposed rules would require companies to disclose their direct (scope 1), indirect (scope 2), and up and downstream (scope 3) GHG emissions. Emissions inventories would need to be verified by a third party to confirm that the inventory was developed in conformance with the GHG protocol, and to ensure that to the extent possible, all emissions are being accounted for correctly. The initial proposal indicates that third party emissions verification would need to be conducted under limited assurance. Limited assurance is the least stringent level of assurance provided by verification services and limits verification activities to the emissions sources with a high risk of containing material discrepancies. 

Established in the early 1930’s subsequent to the Wallstreet Crash of 1929, the Securities and Exchange Commission is a U.S. government agency that has three main objectives: to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The SEC is charged with maintaining a fair and transparent trading landscape. The agency has a long history of requiring public companies to disclose information that is pertinent to investors.  

From the perspective of investors, these climate-related disclosures are a market-driven criterium that will influence investments in public companies. Investors can see the impact that a changing climate will have on the business landscape, and want to know how companies are interpreting climate-related risk for their businesses, as well as what steps are being taken to ensure lasting financial success. Critics of the proposal, on the other hand, have accused the SEC of wading into climate policy with these mandatory disclosures.

Some examples investors may consider when evaluating GHG impacts on a business include: 

  • Increased frequency of severe weather in an area where key facilities are located;
  • Impact of a longer and more intense wildfire season on power transmission companies;
  • Impact of a market transition to electric vehicles on oil and gas companies;
  • Climate change effects on a company's supply chain;
  • Future regulation attaching a cost to CO2 emissions;
  • And CO2 emissions compared with industry competitors.

The Current Status of the Ruling

A public comment period, which provides an opportunity for the public to give input for the SEC’s consideration, ended on June 17, 2022. A review of the comments submitted shows a general concern for scope 3 emissions reporting, and for what specifically defines a climate-related risk and its materiality. The final version of the ruling is expected to be adopted by the end of 2022.

If adopted, large public companies (large accelerated filers) with a market cap greater than $700 million will be required to disclose all 2023 Financial Year (FY) climate-related risk information and verified GHG emissions inventories in 2024. The exception is scope 3 emissions, which won't be required until 2025 for FY2024. Companies with a market cap between $75-$700 million (accelerated and non-accelerated filers) will be required to report FY2024 information in 2025, with the exception of scope 3 emissions not being required until 2026 for FY2025. Companies with a market cap less than $75 million will be required to report in 2026 for FY2025 and will be exempt from scope 3 emissions reporting.

Source: SEC Climate Disclosure Rules for Corporate Sustainability Reporting - Timeline and Standards Overview (brightest.io)
  All disclosures excluding scope 3 emissions Including scope 3 emissions
Large accelerated filers (market cap of $700 million +) FY2023 (filed in 2024) FY2024 (filed in 2025)
Accelerated and non-accelerated filers (market cap between $75-$700 million) FY2024 (filed in 2025) FY2025 (filed in 2026)
Small reporting companies FY2025 (filed in 2026) Exempt

Publicly traded companies may soon be required to track and disclose GHG emissions, and assess and make public a wide range of climate-related risk information. These rules will challenge companies to think critically about their business practices and how they will adapt to the changing climate, undoubtedly sparking a renaissance of climate-related business resilience that will ideally bolster the U.S. economy with improved investor transparency. This framework has the potential to lay the foundation for international businesses to follow suit as the global economy begins to seriously consider the impact of a changing climate on business practices. 


With over 500 GHG verifications completed and more than 40 years of GHG verification and reporting experience, Cameron-Cole helps organizations stay ahead of mandatory reporting deadlines and changing guidance. Contact us for more information.

Blog Author

Cory Tripp
Cory Tripp
Cory is a GHG emissions verifier for Cameron-Cole with expertise in industry-standard GHG programs (CDP, CARB, TCR, WRI/WBCSD). Cory calculates and verifies reported GHG emissions across various sectors for both regulated and voluntary markets.

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