2024 Reports

Shedding Light on Climate Risk in 2025: Upcoming Debates About the SEC's Climate Disclosure Rule

Bernstein, Andrew; Hanawalt, Cynthia; Sachs, Lisa; Field, Chloe

What will happen to the SEC’s March 2024 climate disclosure rule under the new U.S. federal administration? The CCSI and Sabin Center report Shedding Light on Climate Risk in 2025: Upcoming Debates About the SEC’s Climate Disclosure Rule seeks to contribute to the upcoming debates on this question after the 2024 election. Setting aside ideological considerations, this paper contends with novel questions of implementation and enforcement that the SEC will face in 2025, as it establishes climate disclosure policies under anticipated new leadership.

Whatever happens to the SEC rule, companies will continue to provide climate-related information to investors. According to the CCSI / Sabin Center report, many companies already publish much of the information called for by the new SEC rule in sustainability reports they provide to investors on their websites. But the information does not appear in reports filed with the SEC. The question for the SEC is whether it will define the standards for future disclosure, or whether it will stay on the sidelines as US and global standards for corporate climate disclosure are developed elsewhere.

To frame the issues, the report discusses how companies are likely to determine what climate information is and is not material to their businesses and financial performance, and whether some companies might need to go beyond “bare minimum” compliance with the itemized requirements of the SEC rule to ensure their disclosure is complete and not misleading. It also looks at how climate disclosure will fit into the verification processes companies apply to SEC disclosure, a concern of many investors who want to make sure the information is reliable, but also a concern of companies given the potential cost of verification. The paper discusses enforcement of the climate rule, which is likely to occur mainly through SEC staff comments and guidance, and not a wave of abusive litigation.

Whatever position the new administration decides to take on the SEC’s climate disclosure rule, the impacts of climate change on corporations and the economy will remain, and essentially every company will face risks, whether from physical weather events, new domestic or foreign regulations, or changes in market dynamics. How effectively companies communicate these risks to investors as they adapt their businesses and seek to raise capital will be shaped by the disclosure rules to which they are subject, including the SEC’s new rule if it becomes effective. The CCSI / Sabin Center paper offers a framework and analysis to ground these questions as a new context for climate issues emerges in the United States.