The SEC to Adopt Final Rules for ESG Disclosure

New regulations expected to be adopted in 2023 will result in exponential growth in the amount of environmental, social and governance (ESG) data generated by reporting companies and available to investors. The demand for enhanced ESG disclosure is intense, and the evolution in ESG investing has been accompanied by exponential growth in the amount and types of data available. The U.S. Securities and Exchange Commission (SEC) is expected to adopt final rules requiring detailed disclosure of climate-related risks and opportunities by companies no later than the end of 2023. The SEC proposed the new rules in March 2022, requiring that companies filing reports and securities registration statements with the agency provide detailed information that includes climate-related governance, strategy, risk management, metrics and goals. The new SEC rules will also require companies to measure and disclose greenhouse gas (GHG) emissions in accordance with the GHG Protocol methodologies. 

The International Sustainability Standards Board (ISSB) — formed in  2021 by the International Financial Reporting Standards (IFRS) to develop a comprehensive global baseline of sustainability disclosure standards — is expected to adopt two reporting standards in June. One is on climate-related risks, and the other is on sustainability-related information. Over the next few years, mandatory, standardized reporting by corporations will create a global baseline of sustainability disclosure standards. Currently, there is a rapid consolidation into the ISSB of the most internationally significant global sustainability disclosure frameworks and standards.