April 12, 2024

Climate Disclosure: Comparison of Reporting Regimes

With so many different jurisdictions imposing climate disclosure and reporting obligations, it’s very hard to keep track of what must be disclosed and to whom it must be disclosed. That’s why I think those of you who are struggling to deal with the brave new world of multiple climate disclosure regimes will find this Freshfields memo to be a helpful resource.

The memo includes a chart comparing the requirements under the SEC’s final rules, the ISSB standards, the EU’s CSRD & ESRS rules, and California’s SB 253 and SB 261 legislation. That chart is accompanied by a narrative discussion highlighting some of the differences between the regimes. This excerpt discusses the differences in the way each of these regulatory schemes approaches disclosures about transition plans and targets and goals:

Under the Final Rules, companies are only required to disclose climate-related targets that have materially affected or are reasonably likely to materially affect the company’s business, results of operations or financial condition as well as information necessary to understand the material impact or reasonably likely material impact of the target or goals and provide annual updates on actions taken to achieve such targets or goals.

Companies subject to the CSRD are required to disclose their climate-related targets and transition plans, if any, to ensure their business model is compatible with, among other things, the objectives of limiting global warming to 1.5°C in line with the Paris Agreement. The California Rules’ broader standard only requires disclosure of a company’s measures adopted to reduce and adapt to climate-related financial risk disclosed.

The memo says that companies developing transition plans and targets and goals need to consider the disclosure implications under each of these regimes and consider the potential liability, reputational and other risks arising out of the need to comply with differing disclosure requirements.

John Jenkins