SEC climate disclosures and your company

How you can prepare today for investor-grade, tech-enabled reporting

What happened

In March 2022, the SEC proposed new rules for climate change disclosures. While they are not yet final and are open for public comments, the SEC has proposed to advance rules that require disclosure of:

  • Prospective risks and material impacts on the business, strategy and outlook caused by climate change, generally consistent with the Task Force on Climate-Related Financial Disclosures (TCFD) disclosures (e.g. asset risks at a zip code level)
  • Scope 1 and 2 greenhouse gas (GHG) emissions
  • Scope 3 emissions if material or if the registrant has set a GHG emissions reduction target that includes Scope 3 emissions
  • Additional qualitative and quantitative climate risk disclosures, including the financial impacts of severe weather events and other natural conditions and transition activities on line items of the financial statements
  • Governance of climate-related risks and risk-management processes

The proposal would also require:

  • Support plans to comply with companies’ advertised environmental claims (e.g., net-zero commitments)
  • Assurance on a phased-in period for accelerated filers and large accelerated filers

ESG disclosure key dates at a glance

What does this mean?

All companies are at different points in their sustainability journey, and the forthcoming publication of the SEC’s final disclosure rule should ignite a new sense of urgency across the enterprise. Companies will need to quickly transition to investor-grade reporting by developing an effective controls environment and accelerating their ability to collect, manage and measure ESG data.

Here are three things to consider:

  1. Assess sustainability risk across the business: Make sure everyone involved understands how various climate change scenarios can affect your company’s financial performance and operations. What if global average temperatures are held in check, rising less than two degrees Celsius? What changes if they rise more? This is an area in which it’s particularly important to break down silos and bring a cross-functional approach. It’s no longer sufficient for one function to have a monopoly on climate risk.
  2. Determine impact to the financial footnotes: Companies may need to describe how climate risks impact their financial statements — or are reasonably likely to do so in the future. To meet that mandate, your company should develop “impact pathways” to connect those events to likely accounting entries. From there, it will be important to identify the financial statement line items most likely to be affected.
  3. Get stakeholders aligned and educated: The organizational shifts companies will face to comply with the climate disclosure rule will entail a lot of change. This may include employees taking on new roles, responsibilities moving between functions, new systems and processes and, not least of all, higher stakes and increased expectations around how companies tell their climate stories. Some employees may need upskilling. Others may simply need clear communication about what’s different and why. No matter what, effective communications and change management rooted in trust are critical.

How C-suite roles and responsibilities could be impacted by the new ESG reporting requirements


This business function’s traditional experience in overseeing accounting and controls will be required to help prepare the organization for investor-grade ESG reporting. Working closely with the sustainability group, finance should work to confirm ESG data is robust, complete and auditable. Companies should consider a controllership-led approach that works closely with the sustainability, legal and risk functions, as well as integrating many other facets of your organization. Giving the reins to those in charge of financing rxeporting will help your company be ready once the SEC rule is in place.


The SEC will likely require organizations to clearly articulate their strategic approach and process to identify risks and opportunities. The sustainability function likely has the most historical knowledge of how your company has collected, measured and managed climate data and the progress it has made towards any goals. Now, the Chief Sustainability Officer (CSO) should drive collaboration throughout the company and work closely with various stakeholders to create sustainable advantage and value. They should also lead efforts to address any knowledge gaps through upskilling or hiring to make sure they have the right team in place.


The complexity of collecting and analyzing climate-related data will present new challenges for the risk function. It will be tasked with leading efforts to determine and quantify the physical risks of climate change-related weather events, both acute (floods, storms, wildfires) and chronic (drought and extreme heat), and the potential for physical damage to assets that could lead to business interruptions. The risk function will likely also need to assess transition risks inherent in the large-scale transformation required to shift to a low-carbon economy. Companies should establish effective frameworks and operating models to track and act on diverse data sources both for better risk management as well as a potential competitive advantage.

Internal audit

This function will be tasked with assessing the effectiveness of your company’s internal controls and risk management systems around its climate change. With the possibility of mandatory assurance requirements, it will be important to thoroughly test existing controls and processes and help the organization prepare for third party independent assurance.

ESG disclosure considerations by industry

Banking and capital markets

  • Financial services firms need to transition to investor-grade climate reporting and upgrade current processes and controls that fall short.
  • Particularly thorny is the question of how to measure financed emissions. If Scope 3 emissions are deemed “material” by the firm, or if the company has already set an emissions reduction target that includes Scope 3 emissions, financed emissions will need to be included in regulatory filings. Other Scope 3 challenges are that institutions are taking different approaches to measure financed emissions and existing standards don’t cover all asset classes.
  • Financial firms should expect to have little comparable reporting data from their counter-parties about climate risks and emissions. Some private market clients will not be subject to SEC disclosure requirements presenting an additional data collection challenge. This is an evolving area and standardization will take time.
  • Medium-size banks that may have sidestepped climate reporting now find themselves in the same regulatory bucket as GSIBs. They face a daunting challenge of quickly ramping up the collection, verification and reporting of climate data—plus any methodology used in their simulations—within a limited window of time.

Consumer markets

  • Consumer markets companies function within a value chain ecosystem that may include thousands of suppliers. That supply chain adds complexity to reporting on Scope 3 emissions, and companies subject to the new rules will need to use a combination of estimation approaches and actual data collection. This could be especially challenging because many private sector companies in the supply chain won’t be subject to the disclosure rules and may not be as prepared to respond to customer requests.
  • PwC research finds that a compelling sustainability story can be a competitive advantage. Consumers have told us they make purchasing decisions based on a company’s sustainability metrics.

Learn more

Energy and utilities

  • The industry continually invests in its infrastructure to improve asset resilience and operational reliability. It’s unclear how companies should delineate between routine costs associated with reliably supplying energy to customers or recovering from typical weather events versus the climate-related disclosures required under the SEC proposal.
  • The SEC proposal requires companies to disclose emissions from upstream and downstream activities indirectly connected to their assets (Scope 3), if material, or if its greenhouse gas targets or goals include Scope 3 emissions. Scope 3 will likely be material for energy and utilities regardless of decarbonization commitments in industry-specific, high-emitting categories such as “fuel and energy-related activities” and “use of sold products.” Other Scope 3 categories could also be material for these companies.
  • The need for accurate and reliable data down to the zip code level may provide unique challenges for companies with assets like pipelines, transmission lines, drilling rigs or offshore wind turbines. The expanded disclosures beyond the industry’s already extensive reporting requirements, as well as an accelerated timeline for sustainability reporting, will likely require increased investments and enhancements of existing processes and systems.

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Health services

  • Recent studies indicate that the US healthcare system is responsible for about a quarter of all global healthcare greenhouse gas emissions. Meanwhile, fossil-fuel generated air pollution and climate change generates more than $820 billion in medical costs annually in the US alone.
  • These developments, along with the proposed, new SEC rules for climate change disclosures, will increase pressure on both public and private healthcare organizations to address the effects of climate change. Executives will need to consider where they’re focusing. For example, has their organization adjusted its clinical service line, growth and population health strategies to incorporate the specific climate health effects on the communities it serves? Once an organization has reprioritized its healthcare services accordingly, how does that impact capital plans, clinician recruitment plans and the research portfolio?
  • Patients, communities, regulators and other stakeholders expect healthcare organizations to not only help individuals recover from the health effects of climate change, but to help solve this urgent problem and not add to it. While addressing regulatory requirements are important, the ability to differentiate as a healthcare organization through decarbonization strategies to transform health facilities, supporting operations and the healthcare supply chain can engender trust among all stakeholders and create a sustainable competitive advantage.

Industrial products

  • Industrial products companies will need to consider physical risks posed by climate change to their infrastructure, especially those at risk for flooding, wildfires and hurricanes, and ensure these are managed with the same rigor as other enterprise risks. The quantitative impacts of climate-related risks will soon need to be disclosed in the financials, making scenario-based risk analysis an invaluable tool.
  • Industrial products companies should begin (or accelerate) efforts to track GHG emissions not only for their operations (Scope 1 and 2) but also for the upstream raw materials and intermediary finished goods they source, and the downstream impact from their products (Scope 3).
  • Reporting Scope 3 emissions may prove to be the most challenging task for manufacturers that source from vast networks of suppliers, as many private sector suppliers won’t be subject to the disclosure rules and may not be as prepared to respond to customer requests.
  • For some industrial sectors, such as engineering and construction, net-zero-as-service may open new revenue streams as customer demand for GHG emissions reduction heats up.


  • Insurers, as with all sectors, may need to enhance climate reporting to investor-grade climate reporting, which likely means upgrades to current processes and controls.
  • Of specific relevance to insurers is how to measure financed greenhouse gas emissions. If a company deems Scope 3 emissions “material,” or if it has already set a reduction target that includes Scope 3 emissions, it will need to include financed emissions in regulatory filings. Further challenges include differing approaches to measuring financed emissions and the fact that existing standards don’t cover all asset classes.
  • Proposed rules don’t address “insurance-associated emissions,” but any insurer that has set a net-zero target which includes its underwriting portfolio will need to report insurance-associated Scope 3 emissions. The Partnership for Carbon Accounting Financials is developing a standard methodology and carriers should keep abreast of developments.
  • Climate scenario analysis is not required, but results and methods must be reported in detail if the company conducts a scenario analysis. In addition to the challenge of defining what is climate related, it’s unclear if P&C catastrophe modeling processes will qualify as scenario modeling.
  • Insurers also may need to consider the potential for triggering of liability coverages because of an insured’s past emissions.

Pharmaceutical and life sciences

  • Given the prevalence of climate action commitments in the pharmaceutical and life sciences sector, many companies will be subject to the proposed SEC rules requiring disclosure of plans and progress for meeting those commitments, including for Scope 3 emissions.
  • Reporting Scope 3 emissions may prove to be the most challenging task for pharma companies that source from a complex, international network of suppliers. That will likely mean rethinking suppliers based on the size of their carbon footprints.
  • Providers also need to consider the physical risks posed by climate change to their infrastructure as well as their operations (for example, pharmaceutical production is a water-intensive process, greatly contributing to a company’s carbon footprint). The quantitative impacts of climate-related risks will soon need to be disclosed in financials, making scenario-based risk analysis an invaluable tool.

Private equity

  • The first step for portcos and funds is to determine the applicability of guidance (filing requirements, exit plans and strategies in the public market, etc.), and focus on those where applicable. Of note, the proposal rules would provide no, or very limited, relief for IPOs.
  • Many portcos that are (or may be) subject to this disclosure guidance are likely in the process of collecting data that would satisfy Scope 1 and 2 requirements, but may not have the sophistication needed to satisfy the SEC. Few are working on assessing their Scope 3 emissions requirements, but may find their banks and larger investors (who would be subject to the SEC requirements) requesting this data from them.
  • For many funds, Scope 3 is a relatively new concept as few have tried to calculate downstream emissions. Leaders in this space are coordinating their efforts across their portfolio companies by baselining Scope 1 and 2. We would expect the change in the disclosure rules to accelerate this process.
  • We encourage both funds and portcos to determine which data the company can consistently receive and from there conduct a diagnostic to target priority issues.

Technology, media and telecommunications

  • Given the prevalence of climate action commitments in the technology, media and telecommunications sector, many companies will be subject to proposed SEC rules requiring disclosure of supporting plans and progress for meeting those commitments, including for Scope 3 emissions.
  • Telecommunications providers will need to consider physical risks posed by climate change to their infrastructure, especially those at risk for flooding, wildfires and hurricanes, and ensure these are managed with the same rigor as other enterprise risks. The quantitative impacts of climate-related risks will soon need to be disclosed in the financials, making scenario-based risk analysis an invaluable tool.
  • Many technology companies are leading the way in the transition to a low carbon future. From smart buildings to smart grids, the path to decarbonization is digital. However, the growing demand for cloud computing and cloud services also places a burden on tech companies to manage their data centers’ energy efficiency and power their operations with renewable energy.
  • Technology providers have a critical role to play in the climate transition, from carbon accounting solutions to enabling smarter supply chains, factories, cities and energy grids. The SEC’s proposal, and other global requirements, represent an opportunity for providers to double-down on developing these technologies to support ESG reporting requirements.

Six steps to transition to investor-grade, tech-enabled reporting

How can you prepare for the new SEC climate regulations?

Determine climate reporting strategy

What will you report? How does it relate to your company narrative? How will you resource it? 

  • Understand the SEC’s proposed new requirements for climate change disclosures
  • Begin preparing your climate strategy. Assess potential risks from climate change including physical climate risks, transition risks, and Scope 1 and 2 and potentially Scope 3 emissions
  • Understand what process and organizational changes can be made in order to help increase the speed, quality and reliability of climate reporting in order to include these metrics in your 10-K filing
  • Consider the resources needed to execute on your strategy 
  • Develop an operating model to sustain executive engagement and create accountability
  • Assess ongoing progress and solicit investor and stakeholder feedback

For a reproduction of the SEC’s proposed climate disclosure rule, with the ability to review the proposal at a citation level, click here.

Choose standards and metrics

What’s the current guidance? How will you disclose?

  • Align on standard(s) and framework(s) to use in reporting and what that includes - e.g., TCFD recommends a broad analysis encompassing both physical and transition risks of climate change

  • Identify the climate measures that are most relevant for your organization

  • Link your strategy, metrics and stakeholder communications across multiple channels (e.g. 10-K, ESG report, Carbon Disclosure Project response)

  • Conduct a gap assessment on current disclosures and whether processes are SEC-ready to identify focus areas

Collect the data

How will you collect the data? How will you optimize processes?

  • Start gathering data on what is in the SEC proposal. There is limited time between when it would be finalized (Dec 22) and when it would become effective (Jan 23).
  • Align data collection with stakeholder expectations and reporting standards
  • Consider enhancing the underlying data and process infrastructure for your climate data
  • Refine data collection templates, instructions and analysis
  • Collect data with robust controls and confirm it is complete, accurate and timely
  • Implement or use an existing certification process to confirm trust in the data

Address risk, controls and information governance

How will you handle risk assessments, controls and data quality? What information governance will you put in place?  

  • Consider the overall control environment, including, designing and implementing appropriate controls to to support timely and reliable reporting

  • Identify key controls for data quality and disclosure

  • Create and document program-level information governance standards

  • Set formal policies and procedures to enable consistency

Tech-enable and automate

How will you tech-enable reporting to streamline and get insights faster? How will you use a digital platform? 

  • Understand that accelerated ESG reporting timelines will require automation to improve process efficiency

  • Select tools and technology for non-financial data with the same rigor as for your financial reporting

  • Consider how to collect and report data using a trusted, controlled technology platform

  • Engage finance and finance technology in ESG reporting planning

Publish investor-grade reporting

How will you confirm your reporting is 10-K ready? 

  • Make company narrative and metrics readily available for investors 

  • Integrate ESG reporting through the enterprise reporting system architecture and process

  • Consider/obtain independent third-party assurance to provide investors with additional confidence in the quality of climate information and enhance its credibility

  • Provide real-time reporting of public disclosures to help inform decision-making and consumer choices

Contact us

Brigham McNaughton

Brigham McNaughton

Sustainability Partner, PwC US

Heather Horn

Heather Horn

National Professional Services Partner, PwC US

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