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Registered companies must disclose 2024 climate-related information in registration statements and annual reports they file with the Securities and Exchange Commission (“SEC”). Pursuant to final rules adopted by the SEC earlier this year, registrants will be required to disclose 2025 climate related impacts in their 2026 statements. Specifically, registered companies must disclose information in three key areas: (1) climate-related financial risks, (2) greenhouse gas (“GHG”) emissions, and (3) any climate-related targets or transition plans.

Registrants must identify and disclose climate-related risks that have had or are likely to have a material impact on their business strategy, results of operations, or financial condition. Disclosure of climate-related risks should specify the nature of the risks presented and describe the extent of the registrant’s exposure to the risk, including 1) if a physical risk, whether it may be categorized as an acute or chronic risk, and the geographic location and nature of the properties, processes, or operations subject to the physical risk; and 2) if a transition risk, whether it relates to regulatory, technological, market (including changing consumer, business counterparty, and investor preferences), or other transition-related factors, and how those factors impact the registrant.

Registered companies must disclose how their boards and management oversee and govern climate-related risks posed by GHG emissions, including Scope 1 emissions directly emitted from sources owned or controlled by the company and Scope 2 emissions emitted from energy purchased by the company. Notably, registrants are not required to disclose their Scope 3 GHGs, or emissions arising from supply chain operations. These disclosures include information regarding the company’s processes for identifying, assessing, and managing such risks, and such processes’ relation to the company's overall risk management system.

Finally, registrants must disclose activities they are undertaking to mitigate or adapt to a material climate-related risk, including quantitative and qualitative descriptions of material expenditures incurred, and material impacts on financial estimates that are the direct result of such activities, as well as the use of any transition plans, scenario analysis or internal carbon prices.

Except to the extent they provide historical facts, required climate-related disclosures regarding transition plans, scenario analyses, internal carbon prices, and targets and goals are generally considered forward-looking statements for the purposes of the existing statutory safe harbors provided in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These safe harbors allow certain issuers and other persons to make written or oral statements of beliefs, projections, and similar matters, which can be useful to investors, with little fear of securities law liability to private parties, as long as specified conditions are met. However, the SEC declined to extend these safe harbors to financial statements or disclosures of Scope 1 and Scope 2 emissions.

For more information regarding how these new requirements may impact your company or when these disclosures will be required, please contact our Environmental Practice Group team.

Special thanks to Varronika Siryon for her contributions to this piece.