SEC Will Vote On Climate Rule In October, With Potential To Implement From January 2024

SEC Will Vote On Climate Rule In October, With Potential To Implement From January 2024

Following several months of silence, the SEC’s Spring 2023 Agency Rule List has revealed that the final vote on the Climate Change Disclosure rule will take place on October 31^st – at the latest. If the final rule is adopted and published in October 2023, the rule could come into effect on January 1, 2024, following the minimum 60-day gap between publication in the Federal Register and enactment. If the SEC follows this timeline – and it is a big if – listed US firms would need to file their climate disclosures for fiscal year 2024.

Assuming the climate disclosure rule comes into effect on January 1, how should issuers regulated by the SEC spend the next 180 days to prepare?

Step one is clearly the need to assemble an internal project team covering sustainability, finance, risk and legal. More mature firms can follow recommendations such as the net zero programme governance toolkit. Others may simply want to task the head of compliance with leading a special climate disclosure project.

Step two will be triggered by a realization that there is insufficient internal expertise and bandwidth to successfully report on climate-related metrics in 2024. In which case, firms covered by the SEC climate disclosure rule should reach out to a proven climate change consulting provider. The recently-published Verdantix benchmark of the 15 most prominent climate change consulting firms offers insight into the wide variety of capabilities available. Listed industrial organizations may want to tilt their shortlisting towards vendors like AECOM, Arcadis and WSP, which all feature in the Leaders' Quadrant. Services firms impacted by the 2024 SEC climate disclosure rule should consider offerings from Deloitte, EY, PwC and SLR.

In step three, firms will focus on automating carbon footprint calculations and digitizing workflows for climate disclosures. It is essential to develop a five year digital strategy before selecting a vendor, and the market is awash with different digital solution providers. The range of options runs from big players – such as ServiceNow and Workiva – to vendors with a long-term industrial emissions pedigree – such as Intelex and Sphera – to recent arrivals with chunky funding – like Persefoni and Sweep. Chief Sustainability Officers struggling to make the right choice should check out the Verdantix benchmark of 15 carbon management software providers.

Packing all of this activity into 180 days will be challenging. Even if the rule is delayed until FY 2025, international organizations with multiple divisions will need to get cracking after the summer. The big mistake is to view climate disclosures as a mere compliance requirement. Industry-specific climate benchmark studies from Verdantix have found that 80% of climate disclosures from Fortune 500 firms are voluntary and just 20% defined by regulations.