ESG materiality ranges beyond ‘bottom line’: SEC official

Dive Brief:
  • The Securities Exchange Commission (SEC) will look beyond the figures that underlie net income when determining whether a company is in compliance with the agency’s proposed climate risk disclosure rule, an SEC enforcement official said Tuesday.
  • “If the company has really put a lot of emphasis in its marketing around, for example, what it’s doing in the climate space, those are ways that I think it can become material even if you don’t necessarily see that translate to the bottom line,” according to Carolyn Welshhans, associate director of the SEC’s Enforcement Division.
  • “Something can be material to a company — for example specific to that company’s business or its operations — not just as financial statements,” Welshhans said at Securities Enforcement Forum 2022 after noting that her comments did not necessarily reflect the view of the agency. “It’s not just quantitative — it’s not just ‘does something impact the bottom line.’”

Dive Insight:

The SEC is considering public comments on a rule that it proposed in March requiring publicly traded companies to provide detailed disclosures on carbon emissions and climate risk.

The SEC aims to mandate that companies describe on Form 10-K their strategy toward climate risk, including plans to achieve any targets they have set for curbing such risk.

Companies would also need to disclose data on their greenhouse gas emissions, either from their facilities or through their energy purchases, and obtain independent attestation of their data.

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