The Securities and Exchange Commission’s
The upshot is that the embattled rule is still in play and may yet be enacted. And if it is, financial firms will need to be prepared for what will follow.
The SEC’s final rule takes concepts from both the
Specified disclosures required per the new rule include Scope 1 and 2 greenhouse gas emissions (if deemed material by the company), climate-related risks that have, or are expected to, materially impact the business and disclosures related to severe weather events and other natural phenomena. Also required per the rule is the disclosure of the firm’s compliance processes to manage material climate risk and disclosures related to board oversight of material climate risks.
READ MORE:
Finally, emissions disclosures will be required to have a certain level of third-party assurance, depending on the firm’s filing status.
Major changes from the initial proposed rules include dropping disclosure of Scope 3 emissions and scaling back Scope 1 and 2 emissions disclosures to only apply to
The SEC is the latest regulator/supervisor to issue disclosure requirements as part of what amounts to a complicated global jigsaw puzzle. Several other jurisdictions have already set requirements for such reporting — most notably the European Union and the California legislature. Likewise, firms that have made
While the new SEC rules therefore do not present extensive new requirements beyond those which were already upcoming, firms will still have significant work to do to meet them: Just 34% of U.S. financial firms voluntarily made Scope 1 and 2 disclosures as of 2022, and even fewer have any third-party assurance of their numbers.
Likewise, for firms without a presence in California or the EU (e.g. many publicly traded U.S. regional banks), the SEC rules may mark the first mandatory reporting obligation. Additionally, firms that are — or soon will be — reporting emissions and risks in other jurisdictions may have incremental reporting obligations found in the SEC requirements, for example costs related to
READ MORE:
To respond effectively to the SEC’s regulation, firms will need to develop several components of climate infrastructure. They will need clear accountability for climate reporting, which will likely require the creation of cross-functional teams within finance, legal and other units for comprehensive reporting. Many firms are hiring specialized ESG controllers to manage this process with roles similar to financial controllers but specifically designed for ESG-reporting integrity.
Given that the SEC’s rules are partially based on the TCFD framework, firms already reporting via TCFD should be well-positioned, as they will have in place governance and risk management frameworks similar to those required by the SEC rules. Since the release of the TCFD, many firms have already updated their governance structures to embed climate-related oversight.
However, it has been noted that firms have had difficulty with quantitative disclosure of scenario analysis. Given that firms have had much more time to comply with TCFD regulations, it stands to reason that some of this ambiguity will transfer to the world of SEC rules.
READ MORE:
Currently, very few firms have
Once these systems are in place, the next steps will be for these teams to do materiality current state analysis, which will help with mandatory reporting and to identify gaps in their systems. Scenario analyses used to mitigate
The climate-related disclosures bring complexities that will require both short- and long-term action by financial institutions, with the first reporting potentially beginning for the 2025 fiscal year.
READ MORE:
Firms will have to be comprehensive in their analyses to appropriately identify and manage climate-related risk and remain compliant. Given the nature of ESG data, reporting processes will change over time, and best practices for addressing the new SEC rules will likewise continue to evolve.
The latest legal challenge to the firm’s “cash sweeps” policies argues advisors violated their fiduciary duties by not procuring higher yields for clients.
The trailblazers who have found success in challenging circumstances shared key lessons and best practices as part of what will become an annual event.
Financial advisors can create welcoming spaces, understand family structures, be thorough with paperwork and maximize savings.
The latest legal challenge to the firm’s “cash sweeps” policies argues advisors violated their fiduciary duties by not procuring higher yields for clients.
The trailblazers who have found success in challenging circumstances shared key lessons and best practices as part of what will become an annual event.
Financial advisors can create welcoming spaces, understand family structures, be thorough with paperwork and maximize savings.
This year’s Greenbook proposals contain some greatest hits, including a higher corporate minimum tax.
There are times when vendor contracts must come to an end, particularly as new technology providers enter the market. CEOs offer tips for ending a vendor relationship and what to put in contracts to protect data in a breakup.
An industry recruiter notes that many wealth managers who switch firms receive money from their new employer to cover forfeited deferred compensation.
Advisors are faced with cutting-edge tech that will shape the industry, as well as questions about its reliability.