Issue link: https://resources.tangoanalytics.com/i/1507481
Under the new rule, companies are required to disclose the material risks posed by climate change to their business and their consolidated financial statements, including physical risks (such as sea level rise and extreme weather events) and transition risks (such as changes in regulations and market trends). Companies must also disclose the scenario analysis results (if utilized) that assess the potential impact of different climate scenarios on their business. This may involve extensive scenario analysis and calculating modeled average annual loss attributed to climate-related physical risks Understand How to Model Climate Risks: The final rule limits the reporting of greenhouse gas (GHG) emissions to scope 1 emissions (direct emissions) and scope 2 emissions (indirect emissions from purchased electricity, heating, or cooling) from large accelerated filers (LAF) and accelerated filers (AF) that are not smaller reporting companies (SRC) or emerging growth companies (EGC) but only if those GHG emissions are material. Companies will need to be able to calculate carbon footprints that quantify GHG emissions across the company's operational footprint. Being able to count on an automated platform with clear metrics, defensible reporting, robust modeling, and identifiable risk and reduction targets is key. Accurately Calculate and Track Emissions: Sustainability is becoming less of an optional, segregated department within a larger operational strategy and instead requires cross-functional roles and business units. Complying with SEC regulations will require the cooperation of all company teams to cross data silos and collect the necessary sustainability information for financial reports. Companies should take inventory of which departments will be involved to comply with the new requirements and define their roles. Reduce Data Silos: If you've reported to CDP, or created internal sustainability reports in line with TCFD, SASB, or GRI you are at least part of the way there. Because the SEC ruling is in part based on guidance from the TCFD, reviewing this framework and all the resources they have to offer is a great place to start. In the final rule, the SEC wrote that its reporting framework has elements in common with the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations, calling it "an appropriate reference point for the final rules." The TCFD framework is also the common denominator in shaping other major climate standards (e.g., the EU and ISSB Standards). Companies should also utilize the Greenhouse Gas Protocol for guidance on carbon accounting. Lean on Voluntary Disclosures: Sustainability & Energy Management Simplified Sustainability & Energy Management Simplified