Regulatory Developments

During the past several weeks, there have been a couple of notable developments in connection with the SEC’s proposed climate disclosures rule, “The Enhancement and Standardization of Climate-Related Disclosures for Investors.” (This proposed rule (released in March 2022), which is one of the most far-reaching and significant changes to the SEC’s disclosure regime in recent years, mandates a series of climate-related financial disclosures for all registrants in the U.S. securities markets, focusing on GHG emissions, material risks related to climate change, and corporate governance.) First, there have been a number of media reports suggesting that the SEC was considering adjusting the proposed 1% threshold that would trigger a reporting requirement for climate-related information under the draft rule, specifically that the SEC would relax this particular requirement. These reports indicate that the SEC was likely floating a “trial balloon” to gauge the reaction to this proposed change, similar to the media reports this past fall concerning whether disclosing Scope 3 GHG emissions might be omitted from the final rule. Second, a bill was recently introduced in the California state legislature that would compel the disclosure of Scope 3 GHG emissions by all companies doing business in California (which would effectively apply to most large U.S. corporations). So, even if certain disclosure requirements are ultimately dropped by the SEC in response to public and political pressure, it is altogether possible that certain progressive states may adopt similar policies that will contribute to the same ultimate effect with respect to corporate America.