On March 6th, 2024, the Securities and Exchange Commission (SEC) released the final version of its long-awaited climate risk disclosure rule. The rule, first proposed in 2022, requires certain climate-related risk disclosures from publicly-traded U.S. companies in annual reports and registration statements. The Center for Climate and Energy Solutions (C2ES) engaged substantially with the SEC and companies in its Business Environmental Leadership Council (BELC) over the course of the rule’s development. Despite the significant changes to the originally proposed rule, C2ES supports the final rule, as it will help create a more standardized and consistent approach for companies to disclose how they are managing their climate-related risks.

A changing climate affects how businesses operate—physical and transition risks drive challenges and the low-carbon transition presents opportunities as companies shift to a clean energy future. Improved disclosure of climate-related risks will protect investors by ensuring they have consistent, comparable, and decision-useful information on which companies are best prepared to adapt to the physical impacts of climate change and which are best insulated against any regulatory and market-based transition risks.

While the final rule is an important step forward, it is narrower in scope than the proposed rule and where most of the disclosures are now required if deemed material by companies. Given the subjectivity of assessing materiality, additional guidance will likely be needed to ensure greater clarity and consistency in reporting across sectors to ensure the maximum benefit to investors as they allocate capital and assess risk.

To help stakeholders identify and track the SEC’s approach to key topics included in the rule, C2ES has prepared the following rapid analysis. This analysis includes a short summary of the substance of the original proposal, C2ES’s feedback on the original proposal, and if/how the final rule changed.