Please ensure Javascript is enabled for purposes of website accessibility Key Takeaways from the SEC Climate Risk Rules: Greenhouse Gas (GHG) Reporting - Anthesis

Key Takeaways from the SEC Climate Risk Rules: Greenhouse Gas (GHG) Reporting

October 19, 2022 | News,

7 Key Takeaways

The SEC proposed rules clarify GHG reporting in attempt to provide a consistent reporting structure. Below are what we see as seven key takeaways related to the GHG reporting portion within the SEC proposed rules.

1. New federal rules for mandatory climate risk reporting include GHG disclosure

The SEC draft rules require publicly listed companies to include specific climate-related information in their registration statements and periodic reports. Under the proposed rule companies are obligated to disclose GHG emissions in CO2e for all scopes: Scopes 1 and 2, and for material Scope 3 categories. Also, to be required is reporting on a disaggregated basis for certain GHGs, such as methane (CH4) or hydrofluorocarbons (HFCs), (as deemed material).

The first year of reports with GHG emissions metrics are due according to the following schedule


2. Federal reporting requirements for GHG emissions are not new

The SEC’s draft rule is the second federal US requirement for mandatory reporting and disclosure of GHG emissions. Since 2010 GHG emissions reporting has been required by the US Environmental Protection Agency (EPA) for primary GHG emissions from major emitters such as fuel and industrial gas suppliers under their Mandatory Reporting Rule (MRR). Forty-one categories are included in EPA’s GHG reporting requirement (GHGRP) applying to direct emissions by specific process or industry type. There is no emissions reduction requirement associated with the EPA reporting program. About 8,000 industrial facilities reported in 2020 to the USEPA’s GHG Reporting Program, with nine sectors dominating the reported direct GHG emissions (power plants, oil & gas, non-fluorinated/fluorinated chemicals, refineries, minerals, waste metals, paper and electronics manufacturing). In California, GHG emissions for over 800 facilities were reported to the Air Resources Board in CY 2020.

Sixteen states and one territory have implemented statutory GHG reporting requirements. Many states have multiple policies in place, as shown in the included map, States with Comprehensive Greenhouse Gas Reduction Policies.

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3. Current corporate GHG reporting is voluntary

Beyond the existing mandatory GHG reporting under the US EPA’s MRR and state requirements, corporate GHG reporting is voluntary, either disclosed in annual sustainability reports, or through a number of platforms. Companies reporting GHG voluntarily on GHG platforms include nearly 300 organisations on The Climate Registry and over 1,300 of companies disclosed on the CDP (Carbon Disclosure Project), for example. With the new SEC proposed rules, it covers GHG reporting in order to:

  • Provide for mandatory reporting and a consistent reporting structure
  • Cover an entire company rather than a single facility (as the EPA MRR does now)
  • Include companywide GHG emissions allocated to scopes 1, 2 and 3
  • Require third-party independent assurance

4. The SEC’s GHG reporting requirement is aligned to the GHG Protocol

The proposed disclosures of GHG are similar to those that many companies already provide based on broadly accepted disclosure frameworks, such as the Task Force on Climate-Related Financial Disclosures (TCFD) and the GHG Protocol. The SEC’s Rules on GHG disclosure cover Scope 1 and 2, plus Scope 3 (if material).

  • Scope 1 direct GHG emissions from operations that are owned or controlled by a registrant.
  • Scope 2 indirect GHG emissions from the generation of purchased or acquired electricity, steam, heat, or cooling that is consumed by operations owned or controlled by a registrant.
  • Scope 3 indirect value chain emissions not otherwise included in a registrant’s Scope 1 or 2 emissions, which occur in the upstream and downstream activities of a registrant’s value chain:
    • Upstream emission examples include emissions attributable to purchased goods and services, the transportation and distribution of goods, or employee business travel and commuting.
    • Downstream emission examples include the use of the registrant’s products, transportation, and distribution of products (for example, to the registrant’s customers), end of life treatment of sold products, or investments made by the registrant.
    • The proposed rules would provide a safe harbour for liability from Scope 3 emissions disclosure and an exemption from the Scope 3 emissions disclosure requirement for smaller reporting companies (SRCs).

The SEC proposed rules clarify GHG reporting in an attempt to provide a consistent reporting structure


5. No climate policy is included in the SEC rules

The rules focus on the disclosure of carbon emissions and climate risk (physical and financial) and do not include any federal climate policy or objectives such as a GHG emissions reduction goal. Company-wide GHG emissions reduction targets are to be disclosed to the SEC.

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6. Why is it important?

Many investors are concerned about the potential impacts of climate-related risks on businesses. As a result, investors are seeking more information about the effects of climate-related risks on a company’s business to inform their investment decision-making, including GHG inventories. Investors also have expressed a need for more consistent, comparable, and reliable information about how a registrant has addressed climate-related risks when conducting its operations and developing its business strategy and financial plan. The proposed rules are intended to enhance and standardise climate-related disclosures to address these investor needs. The SEC proposed rules clarify GHG reporting in attempt to provide a consistent reporting structure. The draft SEC rules will require a more rigorous GHG monitoring and disclosure process, e.g.  GHG inventories need to be documented and auditable, with required 3rd party verification.

7. What about new companies (registrants) who are planning to be publicly listed?

According to the proposed SEC rules, by limiting the assurance requirements to accelerated filers and large accelerated filers, a new registrant would not be required to provide assurance until it has been subject to the requirements of specific sections of the Exchange Act.


How we can help

  • Anthesis can help you with technical, pre-assurance and support to preparing for reporting GHG emissions, including Scope 1, 2, and 3 emissions to the SEC.
  • Provide help in understanding the resilience of your business and assess climate change risks and opportunities
  • To learn more about the SEC proposed rules and how we can help, please see a related blog and Anthesis plan of action: HERE


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