Enhancing Controls and Procedures for Climate‑Related Disclosures
I. Introduction Earlier this year, the Securities and Exchange Commission (SEC) adopted long-anticipated rules mandating climate-related disclosures in public companies’ annual reports and registration statements (SEC Climate Rules). While the new rules subject many disclosure requirements to a materiality standard, they nevertheless mandate significant climate-related disclosures and disclosure-related determinations for companies. In response to multiple […]
Marc S. Gerber is a Partner and Caroline S. Kim is a Counsel at Skadden, Arps, Slate, Meagher & Flom LLP. Randi Val Morrison is Senior Vice President and General Counsel at the Society for Corporate Governance. This post is based on a Skadden memorandum by Mr. Gerber, Ms. Kim, Ms, Morrison, Jeongu Gim, and Khadija L. Messina.
I. Introduction
Earlier this year, the Securities and Exchange Commission (SEC) adopted long-anticipated rules mandating climate-related disclosures in public companies’ annual reports and registration statements (SEC Climate Rules). [1] While the new rules subject many disclosure requirements to a materiality standard, they nevertheless mandate significant climate-related disclosures and disclosure-related determinations for companies.
In response to multiple legal challenges, however, in April 2024, the SEC voluntarily stayed the effectiveness of the climate disclosure rules pending judicial review. [2]
While the stay and the upcoming change in administration call into question the future of the SEC Climate Rules, these developments do not necessarily mean “pencils down” for companies when it comes to preparing more generally for climate-related disclosures. [3] Even amid uncertainty with respect to the fate of the SEC Climate Rules, the SEC made clear that its 2010 climate guidance, [4] which provided the basis for the sample comment letter issued in September 2021 by the Division of Corporation Finance [5] and subsequent comment letters to companies, remains applicable.
In addition, maintaining the momentum of preparing for compliance aligns with broader investor and other stakeholder expectations for robust voluntary climate-related disclosures.
Against this evolving landscape, companies should proactively consider the need to enhance their disclosure controls and procedures [6] (DCP) and make other preparations for climate-related disclosures regardless of whether the SEC Climate Rules become effective. Even if the SEC Climate Rules are scaled back or overturned, companies are required under existing securities laws to evaluate and disclose in their periodic reports material impacts from climate-related matters, as discussed below.
