Navigating the SEC Climate Rule: ESG Experts Advocate Comprehensive Approach to ESG Reporting

Editorial TeamEditorial Team
March 21st, 2024
3:22 PM

Riveron urges companies to enhance climate reporting capabilities following the SEC's new rule, noting the absence of Scope 3 emissions reporting compared to regulations in California and the EU, highlighting a unique regulatory environment for US firms.


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In response to the US Securities and Exchange Commission's (SEC) climate risk disclosure rule released today, Riveron's experts emphasize the critical need for companies to bolster their climate reporting capabilities. The absence of Scope 3 greenhouse gas emissions reporting in the finalized rule diverges notably from regulations in California and the European Union (EU), signaling a distinct regulatory landscape for US businesses.


Urgency in Climate Risk Disclosure

Drew Niehaus, managing director of Riveron’s ESG practice, underscores the urgency for companies to prioritize climate risk disclosure preparations, particularly for the forthcoming mandated discussion in the 10-K reports. While SEC Chair Gary Gensler has clarified the SEC's stance as not primarily a climate policy agency, Ozan Gursel, senior managing director of Riveron’s financial advisory segment, stresses the growing importance of climate-related disclosures for investors seeking informed decision-making.

According to the rule, large accelerated filers and accelerated filers will need to adhere to required disclosures, excluding Scope 1 and Scope 2 greenhouse gas emissions, starting in 2025 and 2026, respectively. This requirement extends to emerging growth companies, smaller reporting companies, and non-accelerated filers in 2027. With the complexity of these disclosure mandates and the timeline for compliance, public companies face a significant journey towards delivering investor-grade climate reporting over several years.


Fostering Multidisciplinary Collaboration: Riveron's Approach to ESG Reporting

Niehaus emphasizes the collaborative effort required, involving financial, accounting, and operational leaders alongside environmental and ESG teams. Riveron stresses the urgency for companies to assemble multidisciplinary teams and prioritize data collection and reporting by the rule. This necessitates expertise in climate data science, financial reporting, and accounting to address both quantitative and qualitative disclosure requirements.

Matt Novak, senior director and head of climate risk and reporting at Riveron, notes the interconnectedness of various climate-related reporting regulations, including recent developments in California. Despite the absence of Scope 3 requirements in the SEC rule, many US companies will eventually need to address them, underlining the importance of a comprehensive approach to ESG reporting.


Embracing Holistic ESG Reporting: Riveron's Call to Strengthen Sustainability Practices

As companies navigate the evolving regulatory landscape, Riveron advises a proactive, long-term strategy aligning climate reporting efforts with broader ESG initiatives. Vini Oliveira, managing director at Riveron, underscores the opportunity for companies to strengthen their ESG foundation and prepare for future environmental and social-related data requirements.

In conclusion, while the SEC's climate rule marks a significant milestone, it represents just one piece of the evolving ESG reporting landscape. Riveron advocates for a holistic approach, urging companies to embrace the opportunity to enhance their sustainability practices and resilience in an increasingly climate-conscious market.