Why companies should start implementing the SEC climate disclosure rule

The future of the SEC’s new rule on climate disclosures is uncertain – and just five months after it was introduced. In April, several legal challenges from individual companies, US states and NGOs seeking to overturn it were consolidated into a single lawsuit. In response, the SEC indefinitely delayed the rule, defending its legitimacy while citing an intent to avoid regulatory uncertainty for affected companies.

It could take months – or even years – for a resolution to be reached.

This uncertainty means investors will continue to face gaps in the climate data they need. Companies should consider providing this information to investors with or without the rule in place. 

Do investors support the SEC rule?

Despite the legal delays, the SEC rule is supported by investors across various sizes, asset classes and geographies. This support was evidenced, for example, by an open letter in late 2022, signed by 75 PRI signatories, with over US$1.7 trillion in assets under management, calling for the SEC to finalise its upcoming disclosure rule as “the need for standardised climate-related disclosures has only become more pressing”.

Investors are increasingly looking for comparable and high-quality climate data across their global portfolios. A 2022 survey commissioned by Persefoni and Ceres found that institutional investors spend on average around three times more money to acquire and analyse climate data than companies spend on climate-related disclosure activities. Investors need this data to inform decision-making, stewardship and reporting to regulators, clients and beneficiaries.

What can companies do to help investors?

Companies that choose to implement the SEC rule early – before it may become a regulatory requirement - can proactively demonstrate to investors how they are managing their climate-related risks, a key determinant in investment decisions, while also lowering compliance costs within US states^[1][2] and potentially at the federal level in the future.

US companies with significant operations abroad are likely to face separate jurisdictional disclosure requirements, and therefore they may also consider implementing the IFRS Foundation’s ISSB standards.

Many disclosure requirements around the world are aligned with these standards, which were released in 2023 to provide investors with comparable and high-quality sustainability data at a global level. So far, over 20 jurisdictions have adopted or are adopting them into their sustainability disclosure regulations.

In fact, companies implementing the ISSB standards would meet most requirements within the SEC rule, as demonstrated in our comparative analysis. Both build on the structure and content of the TCFD recommendations, and target investors as primary users of reporting. The main differences stem from additional requirements under ISSB, such as reporting on Scope 3 GHG emissions and climate-related remuneration.

Further, investors urgently need company reporting against the ISSB standards. This is evidenced by a statement we published in May this year with fellow partner organisations, calling for regulatory adoption of the standards, which would require a much larger number of companies to follow suit. The statement collected signatures from 120 investors, companies, industry associations and other organisations.

The bottom line

Despite litigation in the US, investor demand for climate reporting is here to stay and jurisdictions across the globe are reacting accordingly. For US companies, implementing the SEC rule and / or the ISSB standards in the near term allows them to respond to this reality at home and abroad. In this way, companies can prepare for future requirements, better track their climate-related risks and better meet investor needs.

The PRI blog aims to contribute to the debate around topical responsible investment issues. It should not be construed as advice, nor relied upon. The blog is written by PRI staff members and occasionally guest contributors. Blog authors write in their individual capacity – posts do not necessarily represent a PRI view. The inclusion of examples or case studies does not constitute an endorsement by PRI Association or PRI signatories.