SECURITIES AND EXCHANGE COMMISSION 17 CFR 210, 229, …

1 Conformed to Federal Register version SECURITIES AND EXCHANGE COMMISSION 17 CFR 210, 229, 232, 239, and 249 [Release Nos. 33-11042; 34-94478; File No. S7-10-22] RIN 3235-AM87 The Enhancement and Standardization of Climate-Related Disclosures for Investors AGENCY: SECURITIES and EXCHANGE COMMISSION ACTION: Proposed rule. SUMMARY: The SECURITIES and EXCHANGE COMMISSION ( COMMISSION ) is proposing for public comment amendments to its rules under the SECURITIES Act of 1933 ( SECURITIES Act ) and SECURITIES EXCHANGE Act of 1934 ( EXCHANGE Act ) that would require registrants to provide certain climate-related information in their registration statements and annual reports. The proposed rules would require information about a registrant s climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks would also include disclosure of a registrant s greenhouse gas emissions, which have become a commonly used metric to assess a registrant s exposure to such risks.

2 In addition, under the proposed rules , certain climate-related financial metrics would be required in a registrant s audited financial statements. DATES: Comments should be received on or before May 20, 2022. ADDRESSES: Comments may be submitted by any of the following methods: Electronic comments: Use the COMMISSION s internet comment form ( ). 2 Send an email to Please include File Number S7-10-22 on the subject line. Paper comments: Send paper comments to Vanessa A. Countryman, Secretary, SECURITIES and EXCHANGE COMMISSION , 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number S7-10-22. This file number should be included on the subject line if email is used. To help the COMMISSION process and review your comments more efficiently, please use only one method of submission. The COMMISSION will post all comments on the COMMISSION s website ( ). Comments are also available for website viewing and printing in the COMMISSION s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10 and 3 Operating conditions may limit access to the COMMISSION s Public Reference Room.

3 All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. Studies, memoranda, or other substantive items may be added by the COMMISSION or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials will be made available on our website. To ensure direct electronic receipt of such notifications, sign up through the Stay Connected option at to receive notifications by email. FOR FURTHER INFORMATION CONTACT: Elliot Staffin, Special Counsel, Office of Rulemaking, at (202) 551-3430, in the Division of Corporation Finance; or Anita H. Chan, 3 Professional Accounting Fellow or Shehzad K. Niazi, Acting Deputy Chief Counsel, in the Office of the Chief Accountant, at (202) 551-5300, SECURITIES and EXCHANGE COMMISSION , 100 F Street NE, Washington, DC 20549.

4 SUPPLEMENTARY INFORMATION: We are proposing to add 17 CFR and 14-02 (Article 14 of Regulation S-X) and 17 CFR 17 CFR through 1506 (subpart 1500 of Regulation S-K) under the SECURITIES Act1 and the EXCHANGE Act,2 and amend 17 CFR (Form S-1), 17 CFR (Form S-11), 17 CFR (Form S-4), and 17 CFR (Form F-4) under the SECURITIES Act, and 17 CFR (Form 10), 17 CFR (Form 20-F), 17 CFR (Form 6-K), 17 CFR (Form 10-Q), and 17 CFR (Form 10-K) under the EXCHANGE Act. Table of Contents I. INTRODUCTION .. 7 A. Background .. 15 B. The March 2021 Request for Public Input .. 18 C. The Growing Investor Demand for Climate-Related Risk Disclosure and Related Information .. 24 1. Major Investor Climate-Related Initiatives .. 24 2. Third-Party Data, Voluntary Disclosure Frameworks, and International Disclosure Initiatives .. 28 D. Development of a Climate-Related Reporting Framework .. 34 1. The Task Force on Climate-Related Financial Disclosure.

5 34 2. The Greenhouse Gas Protocol .. 37 E. Summary of the Proposed rules .. 40 1. Content of the Proposed Disclosures .. 41 1 15 77a et seq. 2 15 78a et seq. 4 2. Presentation of the Proposed Disclosures .. 43 3. Attestation for Scope 1 and Scope 2 Emissions Disclosure .. 44 4. Phase-In Periods and Accommodations for the Proposed Disclosures .. 45 II. DISCUSSION .. 46 A. Overview of the Climate-Related Disclosure Framework .. 46 1. Proposed TCFD-Based Disclosure Framework .. 46 2. Location of the Climate-Related Disclosure .. 50 B. Disclosure of Climate-Related Risks .. 55 1. Definitions of Climate-Related Risks and Climate-Related Opportunities .. 56 2. Proposed Time Horizons and the Materiality Determination .. 63 C. Disclosure Regarding Climate-Related Impacts on Strategy, Business Model, and Outlook .. 72 1. Disclosure of Material Impacts .. 72 2. Disclosure of Carbon Offsets or Renewable Energy Credits If Used.

6 77 3. Disclosure of a Maintained Internal Carbon Price .. 79 4. Disclosure of Scenario Analysis, if Used .. 83 D. Governance Disclosure .. 93 1. Board Oversight .. 94 2. Management Oversight .. 96 E. Risk Management Disclosure .. 100 1. Disclosure of Processes for Identifying, Assessing, and Managing Climate-Related Risks .. 100 2. Transition Plan Disclosure .. 102 F. Financial Statement Metrics .. 110 1. Overview .. 110 2. Financial Impact Metrics .. 116 3. Expenditure Metrics .. 132 4. Financial Estimates and Assumptions .. 139 5. Inclusion of Climate-Related Metrics in the Financial Statements .. 144 G. GHG Emissions Metrics Disclosure .. 147 1. GHG Emissions Disclosure Requirement .. 147 2. GHG Emissions Methodology and Related Instructions .. 185 3. The Scope 3 Emissions Disclosure Safe Harbor and Other Accommodations . 208 H. Attestation of Scope 1 and Scope 2 Emissions Disclosure .. 215 5 1. Overview .. 215 2. GHG Emissions Attestation Provider Requirements.

7 239 3. GHG Emissions Attestation Engagement and Report Requirements .. 247 4. Additional Disclosure by the Registrant .. 260 5. Disclosure of Voluntary Attestation .. 263 I. Targets and Goals Disclosure .. 266 J. Registrants Subject to the Climate-Related Disclosure rules and Affected Forms .. 275 K. Structured Data Requirement .. 283 L. Treatment for Purposes of SECURITIES Act and EXCHANGE Act .. 286 M. Compliance Date .. 289 III. GENERAL REQUEST FOR COMMENTS .. 292 IV. ECONOMIC ANALYSIS .. 293 A. Baseline and Affected Parties .. 294 1. Affected Parties .. 295 2. Current Regulatory Framework .. 296 3. Existing State and Federal Laws .. 296 4. International Disclosure Requirements .. 299 5. Current Market Practices .. 302 B. Broad Economic 319 1. Investors Demand for Climate Information .. 319 2. Impediments to voluntary climate-related disclosures .. 322 b. Climate-specific factors that exacerbate impediments to voluntary disclosure 327 C.

8 Benefits and Costs .. 333 1. Benefits .. 334 2. Costs .. 371 D. Anticipated Effects on Efficiency, Competition, and Capital Formation .. 392 1. Efficiency .. 392 2. Competition .. 397 3. Capital formation .. 399 E. Other Economic Effects .. 401 F. Reasonable 405 1. Requirements limited to only certain classes of filers .. 405 2. Require scenario analysis .. 406 6 3. Require specific external protocol for GHG emissions disclosure .. 407 4. Permit GHG emissions disclosures to be furnished instead of filed .. 409 5. Do not require Scope 3 emissions for registrants with a target or goal related to Scope 3 .. 409 6. Exempt EGCs from Scope 3 emissions disclosure requirements .. 410 7. Eliminate exemption for SRCs from Scope 3 reporting .. 411 8. Remove safe harbor for Scope 3 emissions disclosures .. 411 9. Require large accelerated filers and accelerated filers to provide a management assessment and to obtain an attestation report covering the effectiveness of controls over GHG emissions disclosures.

9 411 10. Require reasonable assurance for Scopes 1 and 2 emissions disclosures from all registrants.. 414 11. Require limited, not reasonable, assurance for large accelerated filers and/or accelerated filers and/or other filers.. 414 12. In lieu of requiring assurance, require disclosure about any assurance obtained over GHG emissions disclosures .. 415 13. Permit host country disclosure frameworks .. 416 14. Alternative tagging requirements .. 417 G. Request for Comment .. 418 V. PAPERWORK REDUCTION ACT .. 420 A. Summary of the Collections of Information .. 420 B. Summary of the Proposed Amendments Effects on the Collections of Information .. 422 C. Incremental and Aggregate Burden and Cost Estimates for the Proposed Amendments 437 D. Request for Comment .. 442 VI. INITIAL REGULATORY FLEXIBILITY ACT 443 A. Reasons for, and Objectives of, the Proposed Action .. 443 B. Legal Basis .. 444 C. Small Entities Subject to the Proposed rules .

10 444 D. Reporting, Recordkeeping, and Other Compliance Requirements .. 445 E. Duplicative, Overlapping, or Conflicting Federal rules .. 446 F. Significant Alternatives .. 447 VII. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT .. 449 VIII. STATUTORY AUTHORITY .. 450 7 I. INTRODUCTION We 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. The COMMISSION has broad authority to promulgate disclosure requirements that are necessary or appropriate in the public interest or for the protection of investors.