FOCUS on self-study CPE
developed software products that can capture and report an accurate picture of the carbon footprint of companies. A simple Google search furnishes the name of the companies that market software and technology products that can measure and manage carbon footprint.
Qualitative disclosure requirements Te Proposal requires that registrants disclose the material impact of climate- related risks and opportunities on their business and financial outlook. Furthermore, the Proposal requires that registrants disclose their plans and processes to detect and manage climate- related risks.
Te SEC intends to provide GHG
disclosures and reports available in Inline XBRL format to make them more accessible to the public.
Implications of the Proposal Te SEC proposal follows the
recommendations of the Task Force for Climate-related Financial Disclosures (TCFD). TCFD has a framework consisting of guidance for governance (including board’s oversight), strategy, risk management, metrics and targets. Tis framework is the basis of the SEC’s Proposal on climate change and the efforts of international standard-setting bodies. Companies most likely face higher compliance costs and disclosure challenges stemming from this Proposal. Te registrants may need to hire experts to assist with the compliance efforts and tap an engineering and audit firm to attest to the accuracy of their estimates. Te Proposal requires the companies to include independent assurance—typically from a consulting or audit firm—that their greenhouse emission disclosures from electricity, steam, heating or cooling are accurate.
However, challenges remain as
Republicans and some industry groups have geared up to fight the Proposal. Tey argue that the Proposal increases the compliance costs and goes far beyond a strict interpretation of the SEC’s mandate to protect investors. Democrats and the Biden administration, on the other hand, tout the Proposal as a promise of the administration to address the climate- change agenda.
Conclusion Te Proposal requires that companies
provide estimates of their greenhouse emissions and risks to their businesses from climate change. Te SEC’s proposal seeks to remedy the issue of the incomparability of disclosures by compelling the companies to report greenhouse emissions consistently through quantitative and qualitative disclosures. Te stringent requirements of the Proposal for publicly-traded companies mark steps toward creating unified policies for climate-change disclosures that ultimately benefit the public and investors. Because public companies are
responsible for 40% of GHG emissions, it was inevitable that either SEC or FASB initiate guidance for reporting and disclosure requirements of GHG emissions. Te SEC proposal has a narrow scope and splits the greenhouse gas emissions from the rest of the ESG topics; however, the breadth of SEC’s Proposal is startling and challenging. Even though the final rule on climate-change disclosures may be a year away, it is prudent that companies start preparing now by using the Proposal as a framework.
Resources 1
https://www.sec.gov/rules/ proposed/2022/33-11042.pdf
Self-Study CPE Details
Interest Area: Specialized Knowledge Designed for: in industry
Understand the SEC’s Proposal for climate-change disclosures
Intermediate Prerequisite: None
MUST BE COMPLETED AND SUBMITTED BY APRIL 30, 2023 TO QUALIFY.
Earn one hour of CPE credit by reading the completed exam (by April 30, 2023)
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CPAFOCUS
July/August 2022
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