How boards can prepare for the SEC’s climate-related disclosures

On March 21, the SEC proposed new rules that would significantly increase required disclosures about climate-related risks that are reasonably likely to have a material impact on a company’s business or consolidated financial statements. In voting in favor of issuing the proposal, SEC Chair Gary Gensler highlighted the extent of investor demand for enhanced disclosure in this area. He noted that “the SEC has a role to play when there’s this level of demand for consistent and comparable information that may affect financial performance.”

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Boards may want to consider the following:

  • What are the current structures in place to oversee climate-related risk? Which processes does the board and management rely on? Does the full board oversee the process, or does a committee have responsibility? How is that documented?
  • Does the board or committee have the expertise it needs to oversee climate-related risks and opportunities? What types of educational sessions or courses would be beneficial?
  • How does management’s current risk identification and evaluation process incorporate climate-related risks? What level of detail is shared with the board? Is that reporting robust and frequent enough to enable the board to assess the impact on business strategy, risk management, and financial oversight? more.

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