Climate Risk Disclosure: Expanding Regardless of SEC Rule Implementation

Abstract

The regulatory requirements, frameworks and tools for climate risk disclosure and reporting have been expanding at an exponential pace. Beginning in the early 1970's the Securities and Exchange Commission (SEC) required companies to disclose the financial impact of—and risks associated with—compliance with environmental laws based on the concept of “materiality.” Then in 2010, as a result of investor pressure regarding the financial risks of climate change, the SEC issued voluntary guidance to clarify when the impacts of climate change may trigger disclosure obligations.¹ As a result of the Paris Agreement in 2015 there was an international focus on climate change and a simultaneous increase in pressure on businesses to be more accountable for their climate and environmental policies. This translated into a rise in environmental, social, and governance (ESG) and sustainability reports developed by companies in an to attempt to showcase their green initiatives.