Proposed Securities and Exchange Commission Climate Rules

Among the many changes set out in the U.S. Securities and Exchange Commission’s proposed rules governing climate-related disclosures are attestation requirements1 covering reporting of greenhouse gas (GHG) emissions from declarants. This article provides a general overview of these attestation requirements and identifies some practical consequences that public companies could experience when anticipating compliance with the new rules.

Under the proposed rules, large accelerated filers and accelerated filers would be required to provide an attestation report covering Scope 1 and Scope 2 emissions disclosures in their annual reports and registration statements. Attestation reports would initially be required to provide limited assurance (equivalent to the level of assurance provided for a registrant’s quarterly financial statements in a Form 10-Q) for such emissions disclosures, and would eventually be required to provide reasonable assurance (equivalent to the level of assurance provided for a registrant’s annual audited financial statements in a Form 10-K). The Proposed Rules do not prescribe a particular certification standard to be used. Instead, the SEC proposes that the attestation report be provided in accordance with publicly available standards that have been properly developed under due process, similar to the requirements for determining the framework to be used in the valuation by the department of internal control over financial information. In addition, SOEs should (1) use an attestation provider that meets specified requirements, including minimum standards of expertise and independence; (2) ensure that the report produced by the attester contains certain minimum elements; and (3) provide additional information about the attestation provider and the attestation engagement.

Plan the talent rush

Under the proposed rules, a qualified attestation provider is one that (1) has expertise in GHG emissions based on significant experience in measuring, analyzing, reporting or attesting GHG emissions and ( 2) is independent of the declarant and one of its affiliates, for which it provides the certification report. Although the proposed rules state that an attestation provider need not be a registered accounting firm, few ESG advisory firms are likely to have the environmental knowledge and experience of required to perform the attestation to meet both the SEC standard and the company’s expectations. Essentially, the attestation requirements in the proposed rules will cause a major expansion of the market, with the likely result that the universe of qualified attestation providers will lag behind the demand necessitated by the adoption of these rules.

To mitigate future challenges, public companies should consider recruiting top talent internally to facilitate the company’s engagement with external reviewers or government and compliance personnel. The presence of a reliable internal resource must guarantee access to expertise and associated external professional networks. Due to the independence requirements imposed by SEC rules, companies will not be able to eliminate the need for external resources entirely, but taking proactive steps now should help prevent an undesirable reliance on external advice and to provide a more efficient certification process.

Be intentional in coordinating insurance services

Another unique aspect of the attestation requirements is the integration of climate-related disclosure (particularly GHG emissions) into existing audited financial statements.2 Although the accounting profession believes that CPAs are prepared for the task of providing assurance for sustainability reporting and have published a roadmap to help companies produce voluntary ESG/sustainability reports, these guidelines guidelines may not adequately address the complexities of scoping, measurement, reconciliation and reporting. emissions data across the entire operational and geographic footprint of not only the company itself, but also its Scope 2 suppliers; namely, the complexity of standardizing judgments that will need to be articulated in financial statements regarding certain financial impacts. In most cases (at least in the short term), auditors of financial statements will not have the expertise to provide assurance on emissions data and, conversely, providers of GHG attestations that are not not the auditors of the company’s financial statements will want to avoid everything else in the financial statements. To comply with both emissions attestation requirements and financial statement audit requirements, significant coordination in the form of in-depth discussions and written documentation will be required between company management, suppliers of attestation and the external auditors.

Recognize that there are various certification standards for GHG emissions

While the climate-related disclosure framework in the proposed rules was largely borrowed from the TCFD3 and the GHG Protocol4 In an effort to provide consistent and comparable data, the multiplicity of attestation approaches, developed over the years to verify the validity of emissions data, emissions offsets and other elements of ESG reporting, means that ‘there is no uniform approach to data integrity or data integrity attestation, especially across the operational and geographic range of companies in various industries. Thus, achieving compliance in this incomplete landscape will require strong governance from the start to ensure that data is properly analyzed and classified according to its respective origin and method of production.


1. As proposed, certification requirements would be found in new Rule 1505 of Regulation SK.

2. Additionally, additional integration and consideration may be required for certain industries/companies already required to annually report and certify certain GHG emissions to the EPA under 40 CFR Part 98. To understand the complexity they will face in combining GHG reporting requirements, Covered Companies should consider investigating how to merge the broader SEC Scheme obligations with any pre-existing EPA requirements. Any distinction will additionally require company coordination to successfully report and certify.

3. The TCFD or “Task Force on Climate-Related Financial Disclosures” was created in 2015 by the Financial Stability Board (FSB) to develop consistent information on climate-related financial risks for use by companies, banks and investors to provide information to stakeholders. .

4. The GHG Protocol establishes comprehensive standardized global frameworks for measuring and managing greenhouse gas emissions from private and public sector operations, value chains and mitigation actions. Notably, the GHG Protocol recently announced an initiative to determine the need for additional guidance on its existing corporate GHG accounting and reporting standards.

Aurora J. William