Getting Ready for the SEC Climate Rule

Learn how Persefoni's AI-driven climate management platform can help your business prepare for the SEC Climate Disclosure Rule.

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The SEC climate rule adoption

Essential Elements of the SEC Climate Rule

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Narrative Disclosures

First, the proposed SEC climate disclosure rule will require companies to provide a narrative disclosure of their governance structures, risk management, strategies, and metrics used to evaluate and manage their climate-related financial risks. This includes disclosure of your emissions footprint. These disclosures track with the Task Force on Climate-Related Financial Disclosures (TCFD).

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Independent Attestation

Second, the SEC’s proposed rule would require companies’ disclosures be independently reviewed. This requirement only applies to accelerated and large accelerated filers, only applies to scope 1-2 emissions, would be phased in over time, and would shift from “limited assurance” to “reasonable assurance” over time.

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Financial Statements

Third, the proposed SEC rule would also require companies to include a note to their financial statements on the quantitative, financial impacts of climate change on their company. This includes the effects of physical and transition risks and the company’s mitigation activities related to both. The provision would only apply to financial impacts that are at least 1% of a line item.

SEC Climate Disclosure: An Executive Primer

To be direct, yes, it’s coming. The proposed SEC Climate Rule requires public companies to disclose their carbon emissions in a standardized way. For large companies, this means new disclosures of scope 1 and 2 emissions for periods as early as 2024 (filed in 2025), with scope 3 emissions a year later. Smaller companies will phase-in shortly after. The exact timing will be announced in the final version of the rule.

Our SEC Executive Primer gives you the knowledge and context you need to navigate the upcoming regulation and prepare for climate disclosure confidently.

4 Steps to Prepare for SEC Climate Disclosure

We recommend you begin preparing for SEC climate disclosure now. Starting early will enable you to establish strong controls over your data and ultimate greenhouse gas (GHG) reporting. Scrambling at the last minute can lead to incomplete data, inaccurate reporting, poor controls, and increased litigation and reputational risk. Here are 4 steps you can take to begin building your climate disclosure capabilities now.

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Educate Your Teams

Calculating your carbon footprint and building your climate reporting and disclosure capabilities is a team effort. While the effort may appear daunting at first, many resources are available to help.
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To get started, we recommend reading our Climate Decoded newsletter, drafted by our team of sustainability, carbon accounting, and regulated reporting experts.

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Start Calculating Your Emissions Footprint

The proposed SEC climate disclosure rule requires disclosing your scopes 1-2 emissions. Scope 3 emissions are also included if they are material or if your company has set reduction targets that include scope 3 emissions. Smaller Reporting Companies would be exempt from this requirement.
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Software like Persefoni can streamline the carbon accounting and reporting process – improving efficiency, reducing errors, and improving auditability and confidence in companies’ GHG data. You can learn more about carbon accounting software solutions here.

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Map Out Your Climate-Related Risks

Climate risk is a key piece of the SEC climate disclosure rule. You will need to identify plans to address both physical risks (such as hurricanes, drought, and sea level rise) and transition risks (such as changing investor and consumer demands).
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Building and executing a risk-informed climate strategy is not a one-time task. You can begin by identifying the teams responsible for assessing company risks and encouraging them to integrate climate risks into their planning. For more on climate risks, check out this article.

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Integrate Your Climate Disclosures Into Your Existing Reporting Workflows

The SEC climate rule requires disclosing climate-related financial risks in your registration statements, as well as in annual reports on Form 10-K or Form 20-F. For most companies, this means climate disclosures will be folded into existing reporting workflows.
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The sooner you start building your climate disclosure capabilities, the sooner you can start to address your climate-related transition risks and opportunities. Starting now also lets you establish and document the controls you’ll need to have confidence in your regulatory disclosures.

Why Persefoni

Built for Accuracy

Persefoni’s GHGP-aligned Calculation Engine and integrated emission factors across scopes 1-3 help you turn your existing business data into an accurate carbon footprint.

Built for Transparency

Persefoni’s Carbon Activity Ledger lets you manage your emissions data with the same rigor, transparency, and granularity as your financial data.

Built with AI

Persefoni’s AI-driven error and anomaly detection and data mapping recommendations increase your data accuracy and streamline your carbon accounting.

Leading Climate Expertise

Our Sustainability Advisory Board members – having founded the CDP, SASB, and TCFD, as well as helping architect climate disclosure at the SEC and EFRAG – are the foremost experts in climate, sustainability, and disclosure. Combined with our leaders in global policy, regulated reporting, and carbon accounting, we’re here to guide you through the new era of climate disclosure.