4.7 Climate-Related Disclosures
On March 6, 2024, the SEC issued a final rule that requires registrants to provide climate
disclosures in their annual reports and registration statements, including IPOs. In
the footnotes to the financial statements, registrants must provide information
about (1) specified financial statement effects of severe weather events and other
natural conditions, (2) certain carbon offsets and renewable energy certificates
(RECs), and (3) material impacts on financial estimates and assumptions that are due
to severe weather events and other natural conditions or disclosed climate-related
targets or transition plans. These disclosures will be subject to existing audit
requirements for financial statements.
Disclosures required outside of the financial statements include:
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Governance and oversight of material climate-related risks.
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The material impact of climate risks on the company’s strategy, business model, and outlook.
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Risk management processes for material climate-related risks.
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Material climate targets and goals.
The final rule also requires large accelerated filers or accelerated
filers (other than SRCs and EGCs) to disclose Scope 1 or Scope 2 greenhouse gas
(GHG) emission metrics, or both, if they are material, and provide an assurance
report. Because companies undertaking an IPO are generally nonaccelerated filers,
GHG emission metrics will not be required as part of the IPO but would be required
once the registrant becomes a large accelerated filer or accelerated filer (other
than SRCs and EGCs).
The final rule was scheduled to become effective on May 28, 2024;
however, the SEC has voluntarily stayed the rule’s effective date pending judicial
review. If the original compliance dates in the final rule are upheld,
nonaccelerated filers (companies undertaking an IPO are generally nonaccelerated
filers) would be required to include these disclosures in registration statements
that include financial statements for the fiscal year beginning in calendar year
2027. Registrants must include the disclosures discussed above for the same periods
presented within the audited financial statements reflected in the filing. However,
they do not need to provide them for comparative periods if such information was not
disclosed or required in a previous SEC filing. Accordingly, in an IPO, disclosures
would only be required for the most recent fiscal year.
For more information about the final rule on climate disclosures,
see Deloitte’s March 15, 2024 (updated April 8, 2024), Heads Up.