Gensler highlights climate reporting challenges for US firms under EU directives


Gary Gensler, the US SEC chair has issued a warning about the implications for thousands of US firms in the absence of domestic climate reporting rules.

According to ESG Today, speaking at a Council on Foreign Relations event, Gensler emphasized that without a U.S. rule, these companies could be subject to stringent climate-related disclosure requirements under the European Union’s Corporate Sustainable Reporting Directive (CSRD).

In March 2022, the SEC proposed climate disclosure rules requiring U.S. companies to report on climate risks, strategies to mitigate these risks, and detailed metrics on their climate impact. Despite the end of the comment period late last year, the final rule is still pending, with a projected Final Action date set for April 2024.

The looming CSRD rules in the EU present a significant challenge, especially with their comprehensive approach to areas like Scope 3 supply chain emissions reporting. These requirements are more extensive than the SEC’s current proposals, which only necessitate disclosure if deemed material or publicly committed by the company. The CSRD’s double materiality approach also demands reporting on the anticipated effects of climate and environmental changes on businesses, as well as their impact on people and the planet. Significantly, the CSRD extends its reach to non-European companies generating over €150m in the EU, potentially encompassing many U.S. firms.

Gensler’s remarks underscored the SEC’s focus on materiality and investor utility in climate reporting, contrasting with the broader climate and environmental goals of other jurisdictions. He noted the criticality of establishing a U.S. rule to negotiate ‘substituted compliance’ with the EU, allowing for some alignment between the different regulatory frameworks.

This development comes alongside California’s new law requiring large U.S. companies operating in the state to disclose their full value chain emissions. The SEC’s challenge now lies in balancing the substantial public feedback on its proposal – over 16,000 comments, a significantly higher number than usual – and establishing a rule that not only aligns with international standards but also satisfies domestic stakeholders.

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