The Securities and Exchange Commission’s much-anticipated rules on climate-related disclosures are finally here.  On Monday, March 21, 2022, the federal securities regulator announced the release of a proposed rule, broadly referred by the SEC as “The Enhancement and Standardization of Climate-Related Disclosures for Investors.”  The proposed rule comes to the delight of activist investors and others concerned about climate change impacts, while industry actors may fear the increased costs of the proposed mandatory disclosures.
The SEC has proposed rules which would require those registered with the SEC to disclose specific information regarding their climate-related financial risks and climate-related financial metrics.  This information would be disclosed to the SEC through an entity’s typical registration statements or annual reports, which already contain many other required disclosures. 
Importantly, the draft rules require companies registered with the SEC to disclose both their direct and indirect greenhouse gas emissions. These emissions include three discrete categories – Scope 1, Scope 2, and Scope 3.  Scope 1 greenhouse gas emissions are those emitted directly by the company through its operations, while Scope 2 emissions are the “indirect” emissions stemming from a company’s energy usage, such as through electricity generation.