Proposed Scope 3 Reporting Requirements Eliminated, Scope 1 & 2 Reporting Subject to Materiality and May Be Filed on a Delayed Basis, and Disclosures in Audited Financial Statements Narrowed
On March 6, 2024, the SEC (on a 3-to-2 vote) adopted its long-awaited climate-related disclosure rules (the “Final Rules”), which will require U.S. public companies and foreign private issuers (other than Canadian issuers reporting on Form 40-F) to significantly expand the climate-related disclosures in their SEC periodic reports and registration statements. Set forth in an 886-page adopting release, the Final Rules reflect significant changes from those proposed by the SEC in March 2022. These include, among others, meaningful modifications from the Proposed Rules that: (i) qualify many of the disclosure requirements (including Scope 1 and 2 greenhouse gas (GHG) emissions) by materiality and remove several prescriptive and detailed disclosure requirements, (ii) eliminate the proposed requirement to report Scope 3 GHG emissions, and (iii) narrow the climate-related disclosures required to be included in the notes to the audited financial statements. Nevertheless, the Final Rules represent a significant departure from the SEC’s traditional principles-based framework and a move towards a prescriptive climate-related disclosure regime that will meaningfully increase the cost and complexity of public reporting.
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