SEC Proposal for Greenhouse Gas Emissions Reporting  

Mark D’Antonio, Zondits staff, 4/13/2022

The Securities and Exchange Commission (SEC) has recently released a proposed rule amendment titled “The Enhancement and Standardization of Climate-Related Disclosures for Investors.” The rule changes propose that all publicly traded companies report greenhouse-gas emissions from their own operations, including the energy they consume (known as Scope 1 and Scope 2 emissions) in their SEC filings. In some cases, companies also would be required to report greenhouse-gas output of both their supply chains and consumers, known as Scope 3 emissions. This would be a significant change that would make information publicly available to provide transparency about a firm’s climate risk profile and their progress in meeting climate goals.  

The SEC’s goal is to protect investors by providing standardized information. According to the amendment, they are proposing to require registrants to provide certain climate-related information in their registration statements and annual reports, including certain information about climate-related financial risks and climate-related financial metrics in their financial statements. The disclosure of this information would provide consistent, comparable, and reliable—and therefore decision-useful—information to investors to enable them to make informed judgments about the impact of climate-related risks on current and potential investments.” 

Further, the proposed rule states that “GHG emissions information is important to investment decisions for various reasons, including because GHG emissions data is quantifiable and comparable across industries and can be particularly useful in conducting a transition risk analysis; it can be used to evaluate the progress in meeting net-zero commitments and assessing any associated risks and it may be relevant to investment or voting decisions because GHG emissions could impact the company’s access to financing, as well as its ability to reduce its carbon footprint in the face of regulatory, policy, and market constraints.” 

There are also independent organizations that are surfacing that have taken it upon themselves to assess the progress of large companies and rate them related to their climate practices. The fact that the SEC and these other entities are interested in the progress of corporations is part of a growing movement seeking greater accountability and standardized metric-based reporting on climate governance. Shareholders and the broader investment community are paying attention and seeking results from businesses on their ESG (Environmental, Social and Governance) performance, not just their economic performance.  

The proposed rule will remain open to public comments through at least May 20, 2022. If the rule is adopted in 2022, the SEC would commence implementation of the requirements in 2024 and apply a several-year phase-in period depending on a company’s filer status. This rule is impactful and will likely be challenged legally with respect to the SEC’s authority to enact comprehensive climate disclosure regulations without Congressional approval. 

Further information can be found at the following links: 

SEC Fact Sheet

Links to SEC press releases:  


The full SEC Proposal

General Summary from Kirkland & Ellis Attorneys