New Proposal by U.S. SEC to Follow TCFD Framework

Author – Jessica Di Bartolomeo

The United States Securities and Exchange Commission (U.S. SEC) rule on mandatory climate risk disclosures proposed in March 2022 sets out to make reporting practices consistent and comparable to meet investor demand for decision-useful information. The SEC will finalize all requirements by the end of the year after incorporating extensive feedback on the proposal’s reach.

As with recent standards and regulations aimed at investor needs (such as the ISSB draft standards and Canadian Securities Administrator requirements), the SEC rule is built around the Task Force for Financial Disclosures (TCFD) recommendations across the themes of Governance, Strategy, Risk Management, Metrics and Targets, as well as the Greenhouse Gas (GHG) Protocol for emissions reporting. According to SEC chair Gary Gensler, the SEC selected the TCFD as its basis because of its wide use and implementation across jurisdictions as well as its aligned objectives for investors.

The public comment period on the substantial 510-page notice took place from its release on March 21st until June 17th 2022, extending beyond the original May 20 deadline. The SEC had requested comments on 201 questions in particular.

Mandated climate disclosures is a new area of reporting with far-reaching implications for data gathering, calculation, audit and reporting. Ecometrica has been working in regulated markets helping public businesses comply with climate reporting regulations for over 10 years and can help you prepare for the forward-looking requirements of sustainability and climate risk disclosures.

Key requirements

The proposed rule sets out that SEC registrants would be mandated to include the climate-related disclosures in a separate section of Form 10-K annual reports. The rule would also require disclosures in registration statements such as initial public offerings. The key requirements across the four TCFD themes include the following:

Governance: Describe the oversight of the board and management on climate-related risks, including the competence and the level of third-party consultant expertise brought in.

Strategy: Include a narrative discussion and analysis on how climate-related risks have or are likely to affect the company strategy, business model, and outlook, including the role of renewable energy certificates and offsets, internal carbon prices, and scenario analysis if used.

Risk management: Break down the material impact of climate-related risks on financial statements over short, medium, and long terms, as defined by the registrant. Outline the process for identifying these risks and how they are incorporated into existing risk management frameworks. The risk management will need to describe if the registrant will adapt, mitigate, or avoid physical risks, and any transition plans.

Metrics and targets: Disclose scope 1 and scope 2 emissions disaggregated by greenhouse gas and in total (tonnes of carbon dioxide equivalent), in absolute terms and in intensity per revenue and unit of production. Scope 3 emissions and intensity are required if they are material or if part of the registrant’s reduction target, except for smaller reporting companies which are exempt from scope 3 reporting. The consolidation approach for the organizational boundaries should be consistent with financial statements.

Accelerated and large accelerated filers will additionally be required to provide attestation on scope 1 and scope 2 emissions, with a phase-in of one fiscal year for limited assurance and another two years for reasonable assurance.

Additional metrics include financial statement impacts from severe weather events and physical risks on each line item (if the value is larger than 1%). If the registrant has climate-related targets, they must describe the relevant metrics used. Note that scope 3 emission disclosures would be covered by ‘safe harbor’ provisions that limit liability.

If the rules pass on December 31, 2022, the disclosure requirements would be phased-in according to the table below.

Large Accelerated Filer: Public float of $700 million and greater

Accelerated Filer: Public float of $75 million to less than $700 million and Annual revenues of $100 million or more

Non-accelerated Filer: Public float of $75 million to less than $700 million and Annual revenues of less than $100 million or Public float of less than $75 million

Smaller reporting company: Public float of less than $250 million or less than $100 million in annual revenues and no public float or public float of less than $700 million

Public responses

Following the comment period, the SEC is reviewing responses to the proposed rule with the intention of finalizing the requirements by the end of the calendar year. Feedback ranges from welcoming the enhanced consistency and comparability for information that investors require to questioning the limits of the SEC’s mandate. The proposals have sparked debate on the scope 3 requirements and the costs of compliance.

Steps to address mandatory requirements

The SEC rule ushers in a new phase for climate-related disclosures in North America, where reporting has remained voluntary, while the European Union and United Kingdom have released mandatory requirements in 2018 and 2020, respectively. Keep an eye out for the new body of standards by the International Sustainability Standards Board, which the SEC references in its framework for the climate-disclosure rule. The Canadian Securities Administrators for public companies and the Canadian Office of the Superintendent of Financial Institutions for banks and insurers released have also proposed requirements in the past year.

Ecometrica has years of experience helping companies meet their sustainability data reporting obligations with confidence (e.g. UK Policy Statement 20/17 for premium listed companies). The new phase of mandatory disclosures in North America will require the robust, auditable scope 1, 2 and 3 reporting that the Ecometrica Sustainability Software Platform has been providing for over a decade through hundreds of proven implementations. The Platform has extensive capabilities that can help you report your entire value chain emissions, with the results broken down at the level proposed by the SEC in both absolute and intensity terms, and other material sustainability metrics, as well as TCFD-aligned physical risks. In addition, our expert analysts are on hand to provide assistance throughout the process, including quality assurance and target-setting assistance.

Get in touch for more information on how the platform is future-proof for mandatory requirements in North America.

We have SaaS solutions for:

  • Financial-grade GHG accounting

  • Auditable reporting

  • GHG accounting for financial institutions and investment portfolios

  • Full scope 1, 2 and 3 accounting

  • TCFD-aligned climate change risk assessments

Reading Time: 7 Minutes

Date Published: September 23, 2022



In the US, climate disclosure has been voluntary (for the majority of the market) for years. It looks like things are about to change with the U.S. SEC proposing a rule towards making climate risk disclosures mandatory.


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