The Securities and Exchange Commission (SEC) issued non-binding guidance on Sept. 22  on how companies within its jurisdiction should disclose risks related to climate change under current standards. The guidance comes as the SEC is preparing proposed regulations – expected by early next year – on anticipated climate reporting mandates that will likely impact all issuers of securities, including real estate companies. 

Why It Matters 

• The Sept. 22 guidance amplifies the Commission’s 2010 Climate Change Guidance. It explains that companies should include in their formal SEC filings the same kinds of climate and ESG-related disclosures that they provide in their annual corporate social responsibility reports.
   
• The latest guidance advises companies to disclose information (deemed to be “material”) on topics such as:
  
  
  • Whether climate-related local, state, or federal laws or regulations – or international accords – impact the company’s finances or operations;
    
    
  • Past or future capital expenditures for “climate-related projects”;
    
    
  • Increased demands for renewable energy generation and transmission;
    
    
  • Reputational risks from corporate operations that produce greenhouse gas emissions;
    
    
  • Whether floods, fires, hurricanes, and other “extreme weather events” affect thye company; and
    
    
  • Purchases or sales of carbon offsets or credits. 

Guidance Portends New Rule

• The Sept. 22 guidance portends a proposed rule from the Commission that will likely lead to mandated climate change disclosures.
  
  
• SEC Chair Gary Gensler, above, remarked on Sept. 22 that its proposed rule on climate disclosures will be released by early 2022. A proposed rule would then kick-off a process for public comments from industry stakeholders.
   
• Earlier this year, the Commission inquired about what kinds of updated climate and ESG-related information may be “material” to investors – and whether such information should be included in annual reports, proxy statements, and other SEC filings. (SEC’s March 15, 2021 “Public Statement” welcoming input on climate change disclosures.) 

• The Real Estate Roundtable responded in June to the SEC’s “pre-rulemaking” statement.  The Roundtable developed its comments  in close coordination with Nareit, and recommends a “principles-based” approach to corporate climate risk disclosures as opposed to a prescriptive “one size fits all” reporting mandate. (Roundtable Weekly, June 11, 2021) 

A final rule from the SEC on climate risk reporting could be issued by the end of 2022, after conclusion of the public comment process on any forthcoming proposal. 

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