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SEC Adopts Final Climate Disclosures Rule

By Sydney Novoa posted 03-14-2024 11:20 AM

  
On March 6, the U.S. Securities and Exchange Commission (SEC) adopted a final rule on climate disclosures. 
 
While APGA is still reviewing this to better understand any potential impacts to public gas systems, we are encouraged that this final rule is different than the initial March 2022 proposal.  Recall that the rule as proposed would have required SEC-regulated companies to report Scope 1, 2, and 3 greenhouse gas (GHG) emissions.  Scope 1 emissions include direct emissions from owned or controlled sources. Scope 2 emissions include indirect emissions from generation of purchased energy. Scope 3 emissions include all other indirect emissions that occur in the value chain, including both upstream and downstream emissions. For further reference, APGA has worked with Deloitte on research in the past, and they offer a good definition of Scope 1, 2, and 3 emissions here.
While APGA's members are not directly regulated by the SEC, all APGA members are within the value chain of publicly traded companies.  This means that the emissions from APGA members systems and their customers are considered Scope 3 emissions that would have had to be reported by the SEC-regulated company under the initial proposal, which would have been burdensome on APGA’s members.  This final rule does not require publicly-traded companies to disclose Scope 3 GHG emissions at this time, of which APGA is supportive.
 
Generally, the goal of this SEC rule is to enhance and standardize climate-related disclosures by public companies and in public offerings by requiring public companies to provide climate-related disclosures in their annual reports and registration statements. Given the changes from the proposal, public companies now will be required to disclose just material Scope 1 and Scope 2 GHG emissions. 
 
Following the rule issuance, 10 states led by West Virginia Attorney General Patrick Morrisey have sued to block the final rule, arguing that the rule still exceeds the Commission’s statutory authority. According to Attorney General Morrisey, this rule marks the first time the SEC has tried to require public companies to report on their environmental impact.
 
To read the final SEC climate disclosures rule, click here.

APGA will continue to monitor this issue and will inform members of any future actions. For questions on this article, please contact Sydney Novoa of APGA by phone at 202-464-0834 or email at snovoa@apga.org.

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